(If you have an unlicensed rental property in Minneapolis)

Maybe I am last to know, but I just heard that Minneapolis has hired two “unlicensed property finders”. These inspectors will drive up and down the streets, search Craig’s list, and Rentals.com looking for properties for rent. They will then check their lists and see if that property has a rental license.

If the property does not have a current Minneapolis rental license, the City will:

1. Send the owner a letter stating they are in violation of city codes as you can not even “offer” the property for rent before you obtain a Minneapolis rental license.
2. Fine the owner $250 for not obtaining a license prior to putting the property up for rent.
3. Mostly likely you will be subject to the $1000 Minneapolis Rental Conversion Fee.
4. Confirm the owner does not have any outstanding code violations, no delinquent property taxes or assessments on the rental dwelling, nor shall any licensee be delinquent on any financial
   obligations owing to the city under any action instituted pursuant to Chapter 2, Administrative Enforcement and Hearing Process.
5. Require a full property rental inspection where the city may require changes and upgrades to “encourage” property owners to maintain the City’s housing stock.
6. Possibly charge a flagrant or multiple violator with a misdemeanor.

Keep those licenses up to date and obtain them as soon as you buy those Minneapolis properties!

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For those of you buying single family houses in Minneapolis, this may affect you, please read on. On March 18, the Minneapolis City Council enacted a new rental license fee called a “Rental Dwelling Conversion Fee“. This new fee is a one-time fee of $1000 when you convert a property from homestead to non-homestead. You will pay it the first time you apply for a rental license. Here is the definition from the Minneapolis Rental License website:

Dwellings Converted to Rental: Whenever a dwelling is converted to rental usage, the dwelling shall be promptly inspected for compliance with minimum housing standards. The fee for this required inspection is one thousand dollars ($1000.00). This fee shall be in addition to the annual license fee. Exemptions: buildings containing 6 or more units; dwellings owned by nonprofit entity (as defined); new construction.

Recently, there are a significant number of single family houses in Minneapolis being purchased by investors and converted into rentals. This new fee will affect some of those purchases. Be prepared for it.

I have attended this event in the past and it is fantastic for any new landlord in Minneapolis. It is a great place to meet the Minneapolis Police, inspectors, and other Minneapolis landlords and talk about any issues your are having with your investment property, your tenants or neighbors.

Community Crime Prevention/SAFE of the Minneapolis Police Department and Minneapolis Housing Inspections are providing this workshop. Attending the workshop provides owners and managers with valuable information, resources and opportunities to network with other property owners. Workshop topics:

• The ABCs of property management
• Working with the Minneapolis Police Department
• Working with Housing Inspections
• Tenant behavior issues
• The risk of lead poisoning
• Hennepin County Housing Court / mediation
• Networking opportunities

The training and landlord guide provided by Community Crime Prevention/SAFE is intended to foster healthy and safe neighborhoods through property owner/manager involvement to reduce drug dealing and other illegal activity in the community. The materials and training should not be regarded as legal advice or considered a replacement for the property owner/manager’s responsibility to be familiar with the law.  If you register and do not attend, you will receive the materials and a DVD on Hennepin County Housing Court instead of a refund.

Rental Property Owners Workshop
DATE: Thursday, April 10
WHEN: 5 p.m. to 9 p.m.
(Registration at 4:30 p.m.)

PLACE: St. Mary’s Greek
Orthodox Church
3450 Irving Ave. S.
Minneapolis, MN 55408

Registration Form can be found online at http://www.ci.minneapolis.mn.us/police/outreach/docs/RPOW.pdf
Please be sure to bring your check to the workshop. Please register by April 3 to ensure your space.

Cost: $20.00 — checks payable to City of Minneapolis
(Includes cost of workshop, materials, DVD on Hennepin County Housing Court, and box meal.)

Pre-registration is required. RSVP by email to ccsafe@ci.minneapolis.mn.us or 612-673-2812, and bring the registration form with your check for $20 to the workshop.

Have you always wanted to buy investment property, but never knew where to start? Don’t Wait! Get Started now.

Even though I have looked at 100s of houses in my career, I still get excited about finding an Investment Property that could be beautiful after a rehab. Maybe I am still stuck in 2002 when you could flip houses and sell them as fast as you could buy them. I suppose some would say it is because I am passionate about MN Investment Properties.

About 5 days ago, I was out with a customer looking at bank-owned properties in Minneapolis. We looked at about 15 houses and found 3 properties that looked like good candidates to “flip and hold” (rehab and rent). Our contractor was with us reviewing the houses and preparing estimates. Most of these investment properties required $30-40k worth of work, including bathrooms, kitchens, plumbing, windows, and general repairs. The three finalist REO properties were priced under $50k.

Both my customer and I were excited about Investment Property #1. It was a large 4 bedroom house (in Minneapolis) with beautiful hardwood floors throughout, large pictures windows on each side of the house, original dark woodwork, and the leaded glass windows were intact. After discussing the type of flip we wanted to do on each property, I was crushed when our contractor told us Investment Property #1 was the worst rehab deal of the three.

As we went through his estimate, I agreed with all his numbers and rehab suggestions. Despite being almost move-in ready cosmetically, the house needed 20 windows @ $400 each, all new plumbing @ $8000, the heating system reconnected @ $2500, new kitchen @ $4000, etc.

I forgot all my school of hard knocks training, my years of experience with flips and rehabs, and all my preaching to my customers to analyze the property’s financial numbers. I tried to argue with him about the value of the neighborhood, the number of bedrooms, the size of the backyard, the fact that it was a 1/2 block from the school, etc. Despite my best efforts, he whipped me back into reality like a freshman on the school yard with the following comment: “I don’t get emotional about properties, its all about the numbers”. Ouch! I was hearing my own words coming back to haunt me.

So here I sit licking my [ego] wounds. He is right, though. You must stay unemotional when analyzing investment properties. You can get excited about them when the numbers check out and you put in the offer. Analyze the numbers, use conservative estimates, get good quality bids from trusted contractors, and if necessary, bounce the deal off a trusted advisor. When you fall in love with a house, it make it difficult to stop thinking about it (even when it is wrong for you)! Staying emotionally detached will allow you to walk away from a property or deal when it doesn’t make sense.

When I am looking for Investment Property for customers, I am not only looking for properties that have the best prices, I am also looking for investment properties that have certain features.  Some of those features are:

• Tenant paid utilities:  Almost always, each apartment will have separate electrical, but in Minnesota, many investment properties have one heat source.  Whenever possible I pass on those buildings and find the ones where they have separate heat for each apartment.  If you have lived in Minnesota in January, you understand why!
• On-site laundry:  This may be free or paid laundry.  Even if it is free, it will help sell the unit when you are renting.  Most tenants do not want to haul their laundry to a laundromat in the snow in Minnesota.
• Near bus-line:  I frequently am asked about the nearest bus line when renting properties in Minneapolis.  The closer you are to a central bus line the more attractive your apartments will be to prospective tenants. 
• Large rooms and architectural details:  There are many properties that have hardwood floor and old woodwork, especially in Minneapolis.  Many tenants are looking for that old-world charm and will pay a small rent premium for it.
• Good or updated windows:  Many of the properties that I look at in Minneapolis have windows that are 75+ years old.  I am especially excited when I see they have replace some or all of them with newer vinyl or aluminum units to keep out the Minnesota wind!

Although this is not an exhaustive list of features, many of these are important when searching for investment property in Minnesota.

No, we have not gone through a time warp and are back in the 1970s!  There really are houses on the market in Minneapolis today for $50k, $40k, and even $30k.  As you expect, most of them are in North Minneapolis, but they are not all in rough neighborhoods.  Many investors/rehabbers are reaping amazing profits and cash flows by doing ”flip and holds” (as I like to call them).

There are properties available in decent neighborhoods that have simply been neglected for years and with the stigma of North Minneapolis, have been on the market for a long time.  Most of these are 2-3 bedroom, 1 bath houses with 2 car garages.  Some have hardwood floors and they were built in the 1930s-1950s.

Assuming you will need to do full kitchen and bath remodels and some other significant repair such as a roof, windows, or furnace, let’s run the numbers on how a $30,000 house may flip:

Purchase Price:	$30,000
Closing Costs:	$1,000
Repair Costs:	$30,000
Total Cost:	$61,000

Many of these house are then appraising for $90k-110k.  Truthfully, they are difficult to sell [today] because of the glut of properties in North Minneapolis and the apprehension of many to buy in North.  We do expect a turn around in a several years.

These are perfect properties to buy, fix up and put in your portfolio (“flip and hold”).  Most investors will take out 90% loans on the properties, potentially pulling out $10-20k (more than they put in for a down payment!).  With a 90% LTV loan on $90k ($81k loan value at 7.5%, 30 year conventional), your monthly loan payment (before PMI) is going to be:  $563.  Add in PMI, water/sewer/garbage, taxes, insurance and you have a monthly cost of approximately $675.

Prospective tenants are very excited to lease these newly remodelled single family houses.  This allows you, as a landlord, to be very picky on who you rent to.  Most of these tenants are paying $1000 for a 2 bedroom and $1200+ for a 3 bedroom.  Your cash flow is $300-500 per month!  And because the property was just completely renovated, your annual repair bills are very low.

These deals can be arranged in many ways with you participating by doing the flip or letting our seasoned investors do it for you.  We even have a very successful property management company that can take the day to day part of being a landlord off your plate.  If you may be interested in an opportunity like this, I encourage you to contact me so we can discuss it further.