All Forum Posts by: Matt Vohnoutka

Just here to give this a quick bump in the forums - so cool to see a podcast that's highlighting investors and other real estate pros doing work in the Twin Cities!

Hey @Jack Gardner, congrats on the property in Northeast! I have an up-down duplex a few blocks to the west in the Sheridan neighborhood - both units are 1+Den/1BA apartments. I fully renovated the upper unit with well-above-average finishes, and it's been averaging ~$2,850/month in gross rental income over the past 12 months as an STR on Airbnb. If I wanted to transition it to an LTR in the future, my best guess is that I could probably find a tenant for around $1,700-1,800/month without too much issue. It's an 860sf unit, so it would be right around the $2.00/sf mark as a LTR, if not a bit higher.

I inherited an existing long-term tenant in the first floor apartment, so that unit isn't in nearly as good shape as the fully renovated upstairs unit.  For an unrenovated 1+Den/1BA LTR in our section of Northeast though, $1,300-1,400/month is certainly in the ballpark of what I could comfortably get with some very minor improvements to the space between tenants.

So all that being said, I think your target of $1,500-1,600/month for your 2BR units would be more than doable.  @Bryon Andrews was spot on in his advice too - do some Zillow and FB Marketplace surfing every few weeks to see what rents in the blocks near your property have been renting for recently, and track how those fluctuate over time for a few months.  Aside from the standard BR/BA count and square footage, I always focus heavily on the listing pictures for any comps I pull in my area - finding a comp that's as close to your property's condition and finishes will give you the best apples-to-apples comparison possible.

I also wanted to second @Tim Swierczek's input: nobody in Minnesota likes moving in the middle of winter.  Demand for February/March move-ins should see a notable uptick sometime in January, but you'll for sure see your strongest rental demand in late spring/summer.

Your most recent post mentioned that you were going to look for someone for a 6-month lease - I think this is a great way to approach it to minimize vacancy loss while biding your time until we get into the higher demand summer months.

Getting creative with your lease term and credits/concessions could also be a good way to solve a few potential problems in one shot.  For example, instead of an initial 6-month lease at $1,200/month, and then re-renting it in the summer with a higher rental rate, you could market it as a 16-18 month lease term (again, great suggestion by Tim) at $1,600/month with a "1 Month of Free Rent" special which you could either divide evenly across just the first 4-6 months of the lease, or prorate over the entirety of their lease term.  Structuring your lease in this way would benefit you by 1) locking in a longer term contract to avoid turnover costs and vacancy loss; 2) it moves your lease end date out of the winter season and into spring/summer of 2026 so it can be more easily marketed and re-rented to match the seasonal demand cycle; and 3) it avoids any upset/angry tenants who may have been incorrectly assuming their rent was going to stay in the $1,200 range after their first 6-month lease term.

Would love to hear any updates you have on how this one shakes out for you though!

Awesome, congrats on the first rental property!  I really like the Nokomis area a lot - if you're looking at holding onto this one as a rental for a while, I'm sure you'll see some nice appreciation in the coming years too.

Just curious, but did you do the full renovation after closing on it, or did it come pretty much turnkey for you? Would love to hear more about your plans for it as well (LTR, MTR, STR, etc)!

Hi @Harley Kendall, welcome to BP! Depending on your goals and strengths/weaknesses, there are a thousand different directions you can go with your REI journey. As long as you put in the time to learn as much as you can up front and put that knowledge to work by taking action, you'll be just fine!

I didn't start with a ton of capital to work with either, so I was kind of in the same boat as you.  My journey started by listening to literally hundreds of episodes of the BP podcast, and taking notes on which guests had investment strategies that I could see myself trying.  From there, I decided that house hacking a single-family home was the best use of my resources at the time.  You might very well gravitate towards a different RE niche.  With time as your main deployable resource right now though, take that time to learn as much as you can until you find a path that sounds both realistically achievable with your current resources, as well as something that sounds interesting to you.

I'm always happy to connect with other investor folks around the Twin Cities, so feel free to shoot me a message on here if you want to chat directly!  Best of luck!

Hey @Jacob Carroll, exciting to hear you're getting into the STR game! I come from the multifamily property management world and currently have a STR in the upstairs unit of a Northeast Minneapolis duplex (along with a couple LTR units), so I'm happy to connect and chat more about STR's in the Twin Cities and see if I might be able to help get you pointed in the right direction!

Hi @Ran Fridman, congrats on the new property!  I'll definitely second @Nicholas L.'s advice to consult a local attorney for guidance on this.  That being said, here are a few other items that might be worth considering.

First and foremost, as you're changing out the locks on the doors, install doorbell cameras on the exterior to cover entrances in/out of the property.  Saying there are three people living there when only one is on the lease is good to know, but hard to prove; getting video documentation of three people consistently entering/exiting the property substantially alleviates that difficulty.

During your due diligence process, you probably obtained a copy of the existing tenant's lease to review.  If your lease contract is much more thorough and comprehensive than the lease they're on now, you may want to try having the current residents sign a new lease using your contract (you would probably need a mutual termination agreement as well to void out the existing lease; again, I'm not a lawyer, so definitely worth consulting one!).

Getting a new lease contract signed has a few key benefits.  First, it's your lease, so you likely know it inside and out, giving you a level of comfortability which no inherited lease ever quite has regardless of how well it's written.  Second, you can take this opportunity to have a conversation with the current occupants and make sure you get all of the people living at the property screened and added onto the lease.  If they actually live there and aren't up to anything too sketchy, they shouldn't have any issues with you screening them.  If they put up any sort of resistance, that could be a cue to start digging a little deeper and documenting a bit more thoroughly (hence the doorbell camera coverage tip I put first - installing the cameras right away and then having the new lease conversation with the tenants afterward is very easy to frame as "I'm just a new owner putting some TLC into the property and doing my due diligence on the leases/tenants"; talking to your residents first, finding out they have extra people living there who aren't on the lease, and then installing cameras around the property could set you up for a very adversarial relationship with your inherited tenants).  And third, you can make sure your lease's guest policy and non-smoking clauses are beefed up and made extremely clear to the tenants.

Lastly, you probably inspected the property at least once or twice before closing, so you would have likely been able to determine if there was any significant smoke damage or cigarette smell inside.  If you didn't notice anything inside, then a friendly conversation along the lines of "Hey, I noticed you smoking outside the last time I stopped by - I just wanted to thank you for doing that outside, and as long as you keep it outdoors, we'll be all good!" will let them know that you know they smoke, and that you're keeping an eye on them.  If you didn't notice anything during the inspection process pre-closing, or just weren't looking for any smoke smells/damage, try to get over there ASAP to check for it (changing out the furnace filter is always an easy and valid business reason to stop by).

All that being said, I can't stress enough the importance of getting off on the right foot with inherited tenants.  As the new owner, showing them that you care about both the property and their experience as residents while they're living there, and building a solid rapport with them on the front end, it will pay so many dividends as you move forward.

Hope this info helps a bit, and best of luck with the new property/tenants!

Hey @Anthony F., you're quite welcome!  Having those neighbors and family members nearby to help handle the cleaning, renovations, and maintenance is definitely super helpful.  I would still check on the availability and pricing of a secondary cleaner in the area though - always want to make sure mom can take a reservation or two off if schedules don't line up for some reason!

I like the pontoon boat rental idea as an add-on service for your STR - on decent-sized lakes, pontoon boat rentals can easily bring in $200-250 for a half day rental or $400-500 for a full day rental, so you could make a tidy little profit off of this kind of add-on amenity. You'll definitely want to make sure you have some waivers put together if you go that route though, as well as getting the appropriate additional insurance coverage for using the boat as a rental. For the kayaks and paddle boats, I would just keep those available free of charge for guests to use if they want; those are definitely great to have as an available amenity though.

The garage loft could be a really interesting opportunity for setting your cabin apart from other STR's in the area as well. Turning the pool table loft area into a full-on game room, or maybe even doing a projector screen with a home theater or video gaming set-up there - that could be a huge selling point for families looking to book a stay with amenities and spaces that will help keep their kids occupied and entertained.

One note on the existing hot tub: having an awesome, well-running, clean hot tub can definitely help you command a nice premium on your STR bookings. Having an older, mostly reliable but starting to show its age hot tub can easily become a liability. If the hot tub you have is hard to keep clean (and keep in mind: the hot tub looking clean is equally as important as it actually being clean), or if it breaks down in the middle of a guest's stay, it can easily cost you in the form refunding part/all of a booked reservation, or lead to your listing getting bad reviews. And in the STR game, reviews are pretty much everything.

Assuming you have the hot tub up and running smoothly though, I'd also take some time to focus on what cold weather amenities you can offer to guests to entice them to visit during the colder months when ADR's drop and occupancy falls off a cliff.  Some common ones that come to mind in addition to a hot tub are a cedar sauna (gotta lean into that Minnesota sauna culture - check out Cedar and Stone out of Duluth for some really cool sauna ideas), snow shoes or cross country skis, or even just a nice outdoor firepit area with tons of firewood (you could also include complementary s'mores supplies for every reservation). As I mentioned in my original post on here, the warmer summer months will take care of themselves, but if you want to have the STR operating all year round, the winter months require much more effort to make your property a place people will want to visit and stay even when the weather gets nasty.

Nothing against VRBO, but I would also take a few minutes to check out what listings are available on Airbnb as well. I forget which guest/episode on the BP podcast it was who I heard say this a while back, but in most of the STR world, Airbnb is Google and VRBO is Bing; there are way more people out in the world googling stuff, and not nearly as many binging their search results. Airbnb is also exceedingly easy to get an idea on what 3BR comps in the area are getting for their weekday/weekend ADR, cleaning fees, as well as seeing if there are common check-in/check-out times, minimum stay restrictions, and how booked up their calendars are, especially right now heading into the back half of the busy summer season.

As far as the what kind of legal structures to use for this property, there's so much noise on social media about stuff that just doesn't matter or apply to most people, so I wouldn't worry about overcomplicating your purchase with trusts and holding companies at the beginning. Set up an LLC on the front end and make sure your lender knows your intentions to purchase the property using the LLC, and you'll be in good shape. Having a solid insurance policy which covers your property being used as a short-term rental will be the other important piece to keep in mind.

Hope this advice all helps - can't wait to hear how this project turns out for you!

Hey @Anthony F., very cool to hear you've got a line on a lakefront property for significantly under ARV! A verbal agreement is fine to get the deal figured out on the front end, but definitely try getting that deal down on paper sooner rather than later!

If this property is a lakefront cabin in Minnesota, my default advice would be to go the STR route. Since you mentioned the property needs a lot of work, if you could put in some higher end finishes into the cabin (kitchens and bathrooms), there would almost certainly be a pretty solid base of STR guests wanting to stay there - almost without exception, every modern STR cabin in Minnesota and Wisconsin that I've seen are all doing tremendous numbers. Without knowing more about the location though, if this cabin has direct water views and is able to sleep at least 6 people, a fully renovated version of your cabin could probably pull in at least $600/night in the summer without much effort. If you could configure the bedrooms to be able to sleep 8-10+ people, your ADR could increase even further from there.

However, if you go the STR route, make sure you factor in the time commitment it will take to manage the property. Being active duty military, if you wanted to remove yourself from the day-to-day operations, a vacation rental management company would probably take 25-30% of your revenue. Also check to see what kind of third-party management companies exist in the area. If yours is the only STR within 20 miles and there aren't any cities or larger towns within a 20-30 minute drive, you could easily run into trouble even finding a reliable cleaning person, let alone a full-service STR management company.

I would also definitely take the time to find some comps on Airbnb in the same area as yours, with as close to the same bed/bath count as yours, and with the same finishes and amenities as you are planning to put in yours. See what they're charging for weeknights versus weekends, what their cleaning fees are, and how booked up their calendars are for these summer months. This will help you get a feel for how saturated the STR market is, as well as what opportunities you might have for setting yourself apart in your market. For example, if every lake cabin within 20 miles of yours listed on Airbnb seems super rustic and dated and "northwoodsy" (for lack of a better term), is there an opportunity for you to skew more modern in your STR design/style to help capture bookings with guests who are looking for that kind of aesthetic?

Since STR cabin rentals in Minnesota and Wisconsin are super seasonal, I would also strongly encourage you to look at what amenities you could add to help boost bookings during the colder months. Memorial Day to Labor Day will pretty much take care of itself, but adding in amenities like a hot tub and a sauna will help you draw in more traffic and bookings even when there's a foot of snow on the ground.

Just to touch on the LTR option, I don't know if this would get you the kind of returns you'd be looking for to even cover your mortgage, let alone cover any maintenance/capex/management costs the property might require. And that's not even touching on getting you into positive cash flow territory and the passive income you mentioned that you'd be looking for. Check on Zillow to see what other long-term rentals are going for in the same area - if the monthly rent you could get would be worth it for you to achieve your longer-term investment goals, then it might be an option worth considering. But just generically speaking, STR returns are almost almost always going to blow the LTR returns out of the water for lakefront cabins in Minnesota.

For financing, the two options that come to mind would be a 10% down second/vacation home loan, or a DSCR loan at 20%+ down. Without knowing how much of the renovations you were planning on doing yourself over time versus how much you were wanting/needing to finance up front, you would also want to talk with potential lenders about what loan products they have which could incorporate both the purchase price as well as the reno costs into the loan package.

Hope this info helps get you pointed in the right direction - definitely keep us updated as you move forward with this project though!

Hey @Brett Riemensnider, definitely been there with the first wave of overwhelm heading into a project!  From your past posts, as well as what work you've mentioned being comfortable taking on yourself, I think you definitely have the requisite knowledge to act as your own GC and sub out any work you don't feel like taking on yourself.  In case it's helpful, here are the companies around the twin cities which I've had the best experiences with subbing out different projects at my properties:

For any electric work, I've had good luck with Stafford Home Services.  Really competitive pricing, and their electricians are super knowledgeable and do great work.

For HVAC, Standard Heating and AC have done quality work on an AC installation, as well as servicing multiple furnaces at my properties.

I don't have a good rec on a plumber in the area - all of the outfits in the twin cities I've contacted that have more than 2 employees seem to not want to touch small/medium-sized jobs, and overbid pretty aggressively as a result.  For example, on what I thought was a relatively simple project in a bathroom reno which was fully gutted down to the studs already, I had more than one quote for over $7k to run pex supply lines and rough in a shower drain and toilet drain off of an existing main stack, all of which ended up costing me about $200 in pex lines, PVC fittings, and sawzall blades.

If you need any hardwood flooring repaired, patched, or refinished, you can't beat Dave's Hardwood Flooring out of Blaine - $3k spent with them fully brought one of my duplex unit's original 100+ year old maple floors back to life.

If you're putting in any stone counters in your kitchens or for bathroom vanities, Twin City Discount Granite have been awesome to work with, and consistently have the best pricing I've found in the area on fully installed granite and quartz.

I also have a great drywall guy, as well as a really good carpet install guy - feel free to DM me if you want either of their contact info!

Hi @Fil Ahmad, cool to hear you're looking at investing in the twin cities!  Each of those surrounding metro area cities have a lot going for them, and the numbers can definitely work in any of those areas for a long-term rental or short-term rental.

That being said, knowing more about your investing buy box, goals, timeframe, and preferred strategy would definitely help narrow down the best areas to invest in.  Here are some questions that might help open up the guidance you receive:

*What is your budget for buying a property?

*Do you want something turnkey, or are you looking for a project that involves some level of renovation/rehab?

*Are you looking to buy and hold this property indefinitely, or do you have an exit timeline in mind?

*Do you want this property to be a long-term, mid-term, or short-term rental?

*Are you looking to self-manage the property yourself, or outsource the management to a property manager/management company?

*Is there any reason you want to stay in the suburbs (Plymouth, Woodbury, Edina, and Eden Prairie) versus going closer to Minneapolis and St. Paul directly?