Minnesota

Minnesota Investment Properties in the Suburbs

Check out our Investment Property Seminars under upcoming events or click the button to search the MLS. ScottIn my post “I Know You Have Questions”, I asked the readers to send me questions or topics that they are confronted with often. John Gall asked two questions which I can answer together: “1. Are any [...]

In my post “I Know You Have Questions”, I asked the readers to send me questions or topics that they are confronted with often. John Gall asked two questions which I can answer together: “1. Are any suburbs in particular gold mines for rentals? 2. Are outer suburbs with inexpensive newer housing stock like Otsego and St Michael, Albertville still viable for rentals for single family homes?”

Investment property in the suburbs must be analyzed just like any other property in the metro Twin Cities, MN. There are several key points to consider before buying any property (especially ones in the suburbs):

1. Is the property financially a good purchase for price, cash flow, and potential capital appreciation?
2. Are there other rentals in the area? Competition can be helpful in attracting new tenants. If you are a rental island in the sea of single family houses, it may be difficult to get anyone to be interested in your apartments. Also, setting your rent may be more difficult without other rentals in the area.
3. When it is time to sell, it may be difficult to find comparable investment properties for the mortgage company to use when getting an appraisal. This in turn could deflate the price you can sell your property at.
4. Newer housing can appear on the surface to be a nice alternative to the worn-hard properties in Minneapolis or St. Paul. Often, though, these properties are priced higher than older buildings in the city, thereby reducing or eliminating any cash flow.
5. As I have wrote before, you should also consider where those suburban properties are relative to your own home. They may look appealing, but if they are 45 minutes from your house, you will not anxious to drive there often.
6. Lastly, the price of gas has doubled over the last couple of years and housing starts are at record lows. Most experts agree that the suburbs are the worst hit, as people contract back into the city, wanting to be closer to their jobs and not able to afford that bigger, new house in the suburbs. Consequently, the retail businesses in those suburban areas close, do not expand, or reduce their work force. Because renters generally live close to where they work and renters most often fill retail positions, those prospective tenants will not move into the area where the job market is tight or shrinking. Logically, this reduces the need for apartments in those areas, thereby making suburban investment property more vulnerable in a down market.

I encourage you to evaluate each one of these points before buying MN investment property. I believe that suburban investment properties need extra scrutiny to insure you make the right purchase decision.

Tenants Witholding Rent until Repairs are Completed

This is a strategy that some tenants will use to forgo or delay paying rent. Although this is a legal maneuver in the state of Minnesota, the tenant must follow strict guidelines or be subject to eviction. As a landlord, it is good to understand what items the court will be looking for so you [...]

This is a strategy that some tenants will use to forgo or delay paying rent. Although this is a legal maneuver in the state of Minnesota, the tenant must follow strict guidelines or be subject to eviction. As a landlord, it is good to understand what items the court will be looking for so you can decide whether to proceed with eviction or to meet the tenant’s demands.

If you go to court, here are some items the judge will be looking for:

• Did the tenants have a copy of a written notice they gave you that outlines what repairs they believe are needed?
• Have the tenants given you enough time to complete your repairs?
• Does the tenant actually have all the rent money? If so,the judge may require them to prove the funds availability.

What you should bring to eviction proceedings:

• Pictures of the areas/items that the tenants claim need to be repaired.
• If the work has been completed, receipts from the contractors or suppliers to repair items (and pictures).
• If the repairs are needed because of damage caused by tenants, pictures previously taken of area may help.
• If the repairs are scheduled, but not completed, bring a time line with you to court to show the judge you are working on the problem(s).

The judge can make several rulings:

1. S/He can order the landlord to make the repairs immediately and have the tenant hold the money until completed.
2. Order the tenant to pay the court or landlord until the facts are proven against the landlord.
3. Require the landlord to accept less for the apartment as a remedy to the tenant.
4. Pay the outstanding rent to the court for safekeeping until the landlord makes the needed repairs.
5. Rule that the tenants request(s) or reasoning for withholding the rent is baseless and order the tenants to pay immediately (including eviction filing fees), or be removed from the premises.

Exception: If the property has been condemned by a government agency or department, the tenant typically can not be required to pay rent and typically the damage deposit must be returned.

Written documentation is your best defense against a tenant that is trying to avoid paying rent.  If you are maintaining your properties and feel that your tenant is trying to take advantage of you, I recommend that you process an eviction against them and let the court decide who is right.

Why Buying Properties at Sheriff Sales in Minnesota is a Bad Idea

There is so much information out there in books, television, and seminars about buying properties going into foreclosure. Many “experts” recommend that you buy the properties at the sheriff sale or “on the courthouse steps”. There may be great opportunities in other states, but in Minnesota, buying properties at the Sheriff sales is typically not [...]

There is so much information out there in books, television, and seminars about buying properties going into foreclosure. Many “experts” recommend that you buy the properties at the sheriff sale or “on the courthouse steps”. There may be great opportunities in other states, but in Minnesota, buying properties at the Sheriff sales is typically not a good idea and it can turn out to be a terrible situation. Here’s why:

At the Sheriff Sale:
You, as the investor, would need to show up at the Sheriff sale with the entire amount of the outstanding mortgage amount to “buy” the house. The foreclosing bank would be excited! Unfortunately, you do not receive the deed at the sheriff sale (and therefore do not own it). You will receive a certificate of redemption. After the sheriff sale, you will enter the next phase, which is:

The Redemption Period:
In Minnesota, the owner of a house in foreclosure has 6 months after the sheriff sale to “redeem” the property by securing new financing and paying off the bank that foreclosed on the property. This is not the area of concern, because if the owner secured new financing, you would simply receive your investment back. The concern is that during the redemption period, the owner still has full use of the house. They can remove all the cabinets, the furnace, and even plumbing pipes. They could kick holes in all the walls and doors. At the end of the redemption period, the bank (or the investor) receives the deed to the house AS-IS. That cute house could now be a rehab nightmare. You just overpaid for a destroyed house.

Alternatives:
1. Wait for the house to go into foreclosure and for the bank to own it. In Minnesota, 99% of all bank-owned property listed through real estate brokers and can be found on the MLS.  Buy it then.
2. Contact the homeowner directly and work with them to sell the house to you in a short sale. You way want to work with a qualified Realtor that is experienced in handling short sales as there can be many speed bumps along the way.

Minnesota Investment Property Search

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 [...]

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.

Flipping Houses Training

I have been asked to do the featured seminar at the upcoming Construction Expo in Minneapolis on October 31 and November 1 about Flipping Properties 101.  If you are interested in learning about Flipping Houses, it will be a great opportunity to get a lot of information in a short 2 hour training.  And best of all, [...]

I have been asked to do the featured seminar at the upcoming Construction Expo in Minneapolis on October 31 and November 1 about Flipping Properties 101.  If you are interested in learning about Flipping Houses, it will be a great opportunity to get a lot of information in a short 2 hour training.  And best of all, the Expo and seminar are FREE!

Some of the topics we will be covering are:

• Can you flip?
• What type of flip are you doing?
• Before you flip!
• Financing your flip
• Developing your flipping budget
• Finding your flips
• Setting your offer price
• During your flip
• Exit strategies
• Plus 30+ minutes of Q&A to answer your questions.

I look forward to meeting you there.

Why Buy Investment Property anywhere but Minnesota?

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 [...]

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.