The City of Minneapolis, the Minneapolis Police Department’s Community Crime Prevention, and the Minneapolis Housing Inspections department are working together to put on a Rental Property Owners workshop in Minneapolis on Thursday, October 25, 2007.  I have attended these events and found them to be a great resource even if you don’t own property in Minneapolis.

Investment Property owners will learn ways to keep their properties free of drug dealing and other illegal activity.  Other topics presented include:

• Working with the Minneapolis Police Department
• Working with Minneapolis Housing Inspections
• Tenant issues
• Hennepin County Housing Court
• Arbitration as an altermative to Eviction

This event is also a great opportunity to network with other Minneapolis Investment Property owners.  To get a registration form, click here.  The cost is $20 and includes a box lunch.  The details and location for the event are:

Thursday, October 25, 2007
5-9 PM
St. Mary’s Greek Orthodox Church
3450 Irving Ave S
Minneapolis, MN

You must RSVP by Friday, Oct 19 by emailing ccpsafe@ci.minneapolis.mn.us or calling the message line at 612-673-2812.  Plan to attend.

I continue to be amazed by the quality of the investment properties that are for sale in Minneapolis.  Many of these are priced 10-20% below what they would have been priced at just 12-18 months ago. 

Here are some examples:

• 30xx 3rd Ave South, Minneapolis, $324,000.  4-plex building, each unit has 3 bedrooms, 1 bath.  It has updated kitchens, hardwood floors and bathrooms.  All utilities are separated with newer furnaces and water heaters.  This building should cash flow over $1500/month for a well qualified borrower!
• 27xx Blaisdell Ave South, Minneapolis, $499,000.  7-unit building.  Most units have 1 bedroom, 1 bath.  It has been exceptionally well maintained building by a caretaker that has lived there for 14 years!  Even with owner-paid heat, this property cash flows almost $1000 per month.
• 36xx Elliot Ave South, Minneapolis, $300,000.  4 unit building that is currently bank-owned and vacant.  It needs light renovation, but could be a gem as it has 2 bedroom units and all utilities are paid by tenants (4 boilers).  Once repaired and rented, it could generate over $1100 per month.

These are just a couple of the outstanding opportunities in the investment property market right now.  Don’t wait, call me now and discuss how you can get started.

I know I am going to get some comments from readers in other parts of the country about this title!  My point is not that anywhere BUT Minnesota is bad.  It is just that I often get the question from new investors that ask:  “I read investment property in [insert any state here] is a great buy, should jump in?”.  My answer is always NO.

Buying and owning investment properties take time and work.  Obviously, how much work is dependent upon how many properties you have, their age and condition, and even the type (single family versus multi-family).  In the end, there is some time and work required to own investment property.  Owning property in another state is probably 10 times more work and I would argue not as great of a buy as you have been told.

• When buying investment property, you should be familiar with the market and even the neighborhood you are buying in.  How familiar are you with that out of state neighborhood?
• You will need to find a Realtor and potentially a new mortgage broker.  Where will you find them?
• How are you going to show the property to potential tenants?
• Who will fix anything that needs repair?
• Who will you call in an emergency at the property?
• Can you get to the property at least quarterly to check on the tenants and condition?

The only answer to owning out of state is to use a management company, but that is not an excuse to simply forget about the property:

• They will typically charge 7-15% of your monthly rent and then charge 1 month of rent to find a new tenant.  Is that factored into your cash flow equation of this “great buy”?
• Even with a management company, you should plan to check on your property at least every quarter to make sure the management company is keeping the property maintained and the tenants are not destroying the place.
• If the property becomes vacant, how do you gauge how hard your management company is working to get your property filled?

Lastly, there are plenty of amazing investment properties for sale in Minnesota.  Whether you want to do a flip, a short term hold, or a long term hold, we have all the “great buys” you would ever need, right here.

The Minnesota Department of Transportation and the Minneapolis Public Works Department are presenting plans to create a new off ramp from I-35W South exiting onto East Hennepin Avenue via either Lincoln Street or Buchanan Street.  These ramps are in response to the 35W bridge collapse and are said to be temporary.  Buchanan is a narrow neighborhood streets with single family and rental homes.  As I have a rental property in this immediate area, I know that there are many children on these blocks that play outside.  The additional traffic through this neighborhood will be dangerous. 

Unfortunately, I am told that despite the city holding “Neighborhood Impact meetings”, they have all but decided to push forward with the plan.  I understand that making adjustments and compromises in light of the traffic congestion caused by the 35W bridge collapse is necessary.  I am concerned that these “temporary” exits will become permanent and forever change this otherwise quiet neighborhood.   

The meeting will be held:

Tuesday, September 4, 2007
5:00 p.m. to 7:00 p.m.
983 Hennepin Avenue East, Minneapolis
Intelligent Nutrients Building; 612-617-2000

Last week I toured several duplexes in NE Minneapolis with a client.  All of them were bank owned (foreclosures) and all needed some rehab.  I was amazed at how low the prices had gone for otherwise decent buildings in decent neighborhoods. 

Two of the three buildings needed around $20k to rehab the bathrooms and kitchens  One was priced at $165k and the other was priced at $115k.  They were located about 4 blocks from each other.  The lower priced building needed some additional work, but I would not say it was NOT $50k worth.  It was a typical investment property in NE Minneapolis that had been neglected and the repairs had been deferred for many years.  It was an otherwise solid building.

The third duplex that looked at was definitely a find.  It was 2 bedrooms up and 2 bedrooms down.  Both units needed cleaning and paint, and the upstairs needed carpet.  We estimate that if you wanted to get by with the least amount of money invested (in rehab), you could spend less than $5k to get the building rentable again.  Best of all, this property was listed for $137k.  It had sold 2 years previously for $225k and the owner went into foreclosure recently. 

There are amazing deals in all parts of the Twin Cities and even the greater Minnesota area.  Now is the time to be a buyer.

I understand that most people are concerned about how the economy is doing, the price of gasoline, and all the real estate foreclosures.  Just as you are supposed to buy stock low and sell high, the same principle applies to investment real estate. 

As I tour properties in Minneapolis and surrounding areas, with my customers, I am seeing the following vicious circle:

1. Many real estate investors are simply walking away from their investment properties and letting them go into foreclosure.  Single family homeowners are working with their banks to do “short sales”.  This is creating a large inventory of houses that are sitting vacant for up to 1 year as the owners and banks go through the foreclosure process.  Unfortunately, these are perfect targets for vandals.  Additionally, these vacant properties are not being maintained and most fall into disrepair. 
2. The large foreclosure inventory (and the discount prices these properties are listed for) are forcing homeowners that want to sell to also discount their home to compete.  Some will not be able to sell, as they owe more on the property than it is worth.  Many will be forced into short sales or worse; into foreclosure as their only option.
3. The overbuilt Minneapolis condo market has also taken many would-be buyers out of the market for first time homes.  It has also pulled many renters out of the market with the inexpensive road to home ownership (potentially leaving the tenants that are not as financially sound).
4. All of the recent changes (legislative and market related) that have happened in the mortgage industry within the last 6 months has made some buyers nervous, some buyers now do not qualify to buy a house, and some sellers are now finding their ARMs adjusting out of control (again potentially making them candidates for foreclosure or short sale).

As bad as this sounds to be a seller in this market, it is the best time in years to be a buyer.  Here is what we are finding when we are making offers on properties:

1. We are able to negotiate deep discounts on homes, especially Minneapolis investment properties.  Some foreclosure properties are selling for 50% of their value.  There are $99k duplexes and $200k 4-plexs on the market in nice neighborhoods!
2. Sellers are willing to sell at our terms.  We are seeing more seller paid closing costs, less negotiations about prices and terms, and sellers willing to repair items to finalize the deal. 
3. We are buying nice properties in nice neighborhoods that may just need TLC to get them back on their feet.  Some of the properties are selling for $75-100k below value simply because they need $20-40k worth of work.

Historically, home values in Minnesota have appreciated 6% per year.  The Minnesota housing market will turn around.  If you have ever thought about Investment Real Estate, now is the time to start.  The market is better than it has ever been to buy Minnesota investment real estate.  Buy low today and sell high later.