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.

It never fails….the State Fair is over, Labor day was here and gone, the kids are back in school and within days the high temperature is not getting above 70 degrees!  Here in Minnesota it seems like the seasons change fast and the snow is just around the corner. 

Time to get your investment properties ready for the winter.  Every year I say I am going to do it earlier in the fall and I end up waiting until November (and do it when it is an emergency).  Why not tackle those projects and prep items when the weather is still relatively nice and you have time.  Even if you don’t live in Minnesota, here are some items to review at your investment properties before the weather turns any worse:

Inside the building:

• Remove all window air conditioners.  Take a hose and clean out the inside and outside condenser fins.  A/C units should be cleaned every single season as a clogged condenser can increase power consumption by 150%
• Close all storm windows.  Close and lock all interior windows to insure tight weather proofing.
• Start the furnace or boiler.  If it has been more than 3 years or there has been construction or pets in the unit, consider having the furnace or boiler professionally cleaned.  Confirm it is working correctly.  Check the unit for any corrosion or damage.
• Buy a large supply of furnace filters and leave them at building.  Ask the tenants to replace them for you.
• Make sure your smoke detectors have new batteries in them.  Consider installing carbon monoxide detectors in each unit.
• Test all exterior doors and make sure you can’t see light around the edge of the door.  If you can, add necessary weather stripping.

Outside the building: 

• Confirm who is responsible for removing snow at each of your properties.  If you have driveways, make sure your snow plow guy/company is still around and planning to do your building.  Who is responsible for shoveling the sidewalks?  Do you have a shovel and salt ready at each building?
• Clean out any gutters on your properties (best left until the majority of the leaves have fallen).  Make sure the down spouts point away from the building and hopefully away from any walking areas.
• Turn off the inside valves to any outside faucets.  Drain them down and remind the tenants to not use them until spring.  Remove the hoses from the faucets, blow the water out of them if possible, and put into storage.
• Trim shrubs and cut the grass one last time.  Remember now is also a great time to plant new shrubs and grass (and those items are generally on clearance at the hardware store).

These easy items can be done now at your leisure over the course of the next couple week.  They should save you having to go out to light a furnace on the first cold night of the fall or having a frozen outside spicket.

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.

The Minneapolis & St. Paul real estate market continues to be in a slump.  Here are the new numbers released for July 2007:

• Closed sales are down 2.7% over July 2006.
• For the year to date, closed sales are actually down 14.4%.
• Percent of original list price received at sale is down 1.9% over July 2006 and is down 2.1% year to date.

A few bright spots to be conservatively excited about are.

• The average sale price was up 2.4% from July 2006 versus July 2007.
• Year to date the average sale price is down 0.1%.  Although negative, it is considerable stronger than other areas of the country, which are seeing considerable deflation.
• The average days on market until sale is a staggering 127 days, but is actually down from 137 days year to date.
• New listings are down 2.5% year to date.

These numbers confirm what we have been saying:  the market continues to be a very strong buyers market.  A few positive notes for sellers are that average sale prices were up in July (hopefully they will continue that trend).  Lower listings year to date means that inventories of unsold properties are actually declining which will help sellers with both time on market and price.

This information was gleened from a report published by The Minneapolis Area Association of Realtors.  S

There are so many resources in the real estate market today to find and buy investment properties, how do you know which is the best?  I can’t speak to any other states, but I will give you my (probably biased) opinion on how to find investment properties in Minnesota.

1. Initially, spend time figuring out what type of investment property you want to own.  Are you more comfortable with single family homes or do you like more traditional duplexes and 4-plexes? 
2. Read my August 9th post about “Where Should I buy Investment Property?”
3. Drive around the neighborhoods that you would like to own property in.  Make sure you feel comfortable with the area both for safety and for the confidence that you understand the market.
4. Use the Internet to familiarize yourself with investment property prices in the neighborhood you have chosen.  My website (http://www.mnirea.com/) has an excellent MLS Search capability for Minnesota investment properties.
5. After you have done your homework and feel comfortable with your selection of neighborhoods and property types, contact a Realtor that specializes in working with investment property buyers.  Most residential real estate agents do not work with investment property on a regular basis.  This is a special area of expertise and experience (just like general practitioner doctors don’t often do brain surgery).  Additonally, Realtors are traditionally paid by the seller of the property.  Therefore, you are able to use a Realtor to help you find the properties that you want for FREE. 

Give me a call if you want to discuss your options further.