Thanks folks. This has been helpful.
I hadn't considered furnished until you mentioned it @Sukhbir Grewal and talked it out with my partner and property manager. It was an interesting conversation and might merit an experiment in one of the units and provides another angle.
I also talked out the user type of studios and my PM said the same thing @Joseph Sherer. No big parties happen in studios. Typically it is a quieter cut of student and so far he has not had a hard time leasing them in the neighborhood.
@Account Closed - I'm looking at 2-3 years to stabilize and a 7-10 year hold (or longer is fine). The local bank I have been working with likes the location and building enough that they were willing to offer me interest only on the first year to help offset the cost of improvements, then 4 more years fixed and 5 floating.
Strategy is to operate it well and hold. It provides some diversity to our portfolio (different area, sizes, and demographic) and it is more of a cash focused investment than an equity play like my bay area and seattle properties (which are cash flow healthy but not overflowing).
The area is going through a renaissance right now. Hennepin is booming and Como is getting some serious infill. I'm seeing a number of large developers gathering parcells. I can't imagine the high end party will continue forever (although as @scott noted, it has some serious momentum), which is why I am focused on mid-century solid apartments. For some reason, I'm not seeing investors updating these B class properties in the twin cities in the way they are on the west coast. They have solid shells and provide a very affordable way to live in a heavily desired neighborhood. So, I force equity with strategic improvements & good management moving rents to market. Once the next bottom hits and we work through it, I'll take the equity and either refi out or 1031 to the next opportunity.
I also have some secondary income generation strategies. e.g. The building has a large parcel and enough unused open space to set up a couple containers to rent as affordable storage for students.
The property also has a house next door that I've got my eye on. Putting a few properties together, and in a decade clearing the lots and putting up a 7 story apt could make a great deal of sense.
