Minnesota’s Red-Hot Rental Market
The housing market in twin cities certainly seems to be heading in the right direction. The number of new buyers hitting the market is on the rise. And the corresponding increase in demand, combined with a dwindling supply of inventory, has helped boost the area’s median sales price of single family homes to roughly 6.5% over the last year.
There has also been a spike in the number of new apartment buildings going up around town. In 2014, the metro area saw an increase of nearly 5,000 new units added to the apartment market. The forecast for 2015 predicts that we’ll likely see another 2,000 – 3,000 before it’s all said and done.
Yet despite these two key economic factors, the twin cities rental market remains red hot, with no signs of slowing down anytime soon. This may seem contradictory to the previously cited statistics. But the demand for rentals continues to climb. In fact, even with the increase in supply, the overall vacancy rate for the twin cities is right around 5.6%. The apartment sector alone is even more impressive, boasting a ridiculously low rate of roughly 2.5%.
As it is with most economic upturns, job growth is the key cog for fueling the rental demand. The Minnesota market was one of the least affected areas following the nation’s recession of recent years. And a steady job growth rate since then has helped the local economy to bounce back nicely. While the national unemployment rate sits right around 5.5%, Minnesota is sitting pretty with a rate of 3.7% – the lowest it’s been in 13 years.
And as the job growth rate continues to steadily grow, so too does the state’s population. New jobs attract more people, which in turn drives the demand for housing. So as long as these trends keep trending upward, the Minnesota rental market will remain rock solid.
Call the trusted source for Sales, Leasing and Property Management in the twin cities. Please contact Tradewind Properties today for a FREE consultation and home rental or sales analysis.
So, you’re living the American Dream. You’ve got a great job, a wonderful family, and a beautiful home. All the puzzle pieces of your life seem to be falling perfectly into place.
And now, you’re looking to broaden your horizons a bit. You want to expand your investment portfolio by purchasing a rental property. After doing your due diligence, you’ve determined that now is the perfect time to put this prudent plan into action. You figure that the positive monthly cash flow you’ll be able to generate, combined with the property’s inevitable increase in value, will help shave a good 10 years off the target date of your eventual retirement.
Purchasing and owning rental properties can be a very worthwhile and rewarding experience. The potential benefits are undeniable:
- Monthly Cash Flow / Addition Stream of Revenue
- Long-Term Appreciation
- Tax Deductions
But imagine this scenario, if you will:
It’s 2am on an artic evening in January. The winter winds are whipping around outside, while you’re nestled all nicely inside the toasty-warmth of your bed. All of a sudden, you’re jolted from your restful slumber by the sound of your cell phone ringing. You answer it to find a frantic tenant on the other end. After a long weekend away, they’ve just returned home to find their furnace on the fritz and a massive water leak in the basement. And if you don’t get over there to fix the problem fast, the entire lower level will soon be sitting under six inches of ice-cold H2O.
Too many somber scenarios like this one can transform your American Dream into a nightmare in the blink of an eye. And unfortunately, that’s just the tip of the iceberg when it comes to the potential pitfalls of being a landlord.
Here are a few more examples of things people tend to overlook when considering the purchase of a rental property:
Finding Quality Tenants
Every intelligent owner out there strives to keep their vacancies to an absolute minimum. A vacant rental property can really take its toll on your finances fast. However, not waiting for the right tenant can end up being even more costly. Whether a renter routinely stiffs you on rent – or they happen to have a penchant for destroying things – a bad tenant can turn your picture-perfect life into a horror movie marathon.
And if that ‘perfect tenant’ of yours turns out to be anything but, you will likely have to allocate a lot of time – and money – to remedy the situation. The eviction process is usually an ugly and agonizing experience. It can also be a very costly one, as well. Plus – even if the court rules in your favor – there’s no guarantee that you’ll ever see a dime in return for your troubles.
Knowing the Rules
The rules and regulations regarding real estate are ever changing. So, it’s of vital importance that you stay abreast of the latest laws and legislation affecting landlords. Otherwise, you might find yourself in a whole heap of trouble. An accidental act of discrimination toward a tenant, or a failure to follow the Fair Housing Act, could land you on the wrong side of a not-so-civil court case. And if you’re not using an air-tight rental agreement, a judge may deem your document as worthless as the paper it’s printed on.
Maintenance and Repairs
It’s inevitable. Structures deteriorate. Appliances and mechanicals break down. It’s not a matter of if, but when. And if you’re not prepared to deal with such situations, the landlord lifestyle may prove to be a painful one for you.
Now, not every issue that arises will be a catastrophe. You will likely field a few phone calls for much lesser concerns. Certain tenants may even feel the need to call you for every microscopic imperfection they can find. And while some of these issues will warrant a phone call, others might seem a bit trivial. However, you must also consider the consequences of dismissing the request. Too many of these unresolved issues might leave you with a disgruntled tenant on your hands.
There is, however, a surefire way to deal with each of these dilemmas in an effective and efficient manner. And that is to hire a property management company to manage your property for you. It’s their job to handle your headaches and to do the ‘dirty work’ necessary to ensure that your investment keeps working for you for years to come.
Now, while there is a cost involved in utilizing such a service, it is usually quite reasonable and can provide you with the peace of mind in knowing that your property is in good hands. If you would like to find out more about how a home rental service could benefit you, please contact Tradewind Properties today for a FREE consultation and home rental analysis.
So, you’ve found the home of your dreams. You’re finally ready to stop renting and start building toward your future. And after crunching the numbers, you determine that the monthly mortgage payments fall within your affordable range. However – before you go signing on the dotted line – there are a number of hidden expenses that many first-time homebuyers tend to overlook:
1. Home Inspection
It’s always a wise decision to have your home inspected prior to purchasing it. After all, this is likely the largest investment of your life. Paying a professional several hundred dollars to assess the property may save you from a hundred-thousand-dollar disaster down the road.
An important part of the process in obtaining a home mortgage is to have the property appraised by a professional. Residential real estate appraisals typically cost around $350 to $400.
3. Closing Costs
Unless you’ve mastered the art of negotiating and have talked the seller into paying for your closing costs, you’re going to have to come to the closing table with some cash. Typical closing costs can be anywhere from 2% to 4% of the mortgage loan amount.
4. Property Taxes and Homeowners Insurance
The mortgage company will want to ensure that the home is insured and that the property taxes are being paid. So unless you plan on putting more than 20% down, your lender will likely require you to have your taxes and insurance escrowed, which will significantly add to the monthly mortgage payment.
5. Moving Expenses
Another cost to consider is the transportation of your belongings. Depending on the amount of stuff you have, the distance traveled, and the level of help needed, such expenses can run you anywhere from a couple bucks to several thousand dollars.
6. Snow Removal
In the great state Minnesota, we all know how unpredictable Mother Nature can be. Waking up to a foot of snow in your driveway is never a pleasant way to start the day. However, you still have to get to work. So unless you’ve got a shovel and a really strong back, you’ll either have to purchase a snow blower clear it yourself, or pay someone else to do it.
7. Lawn Care
Unless your home is part of an association, another cost to consider is lawn care. Whether you’re a DIY’er or you prefer to pay someone else to do your dirty work, it’s your responsibility to ensure your property is maintained (mowing the lawn, raking leaves, cleaning gutters, trimming trees, etc.).
8. HOA and Condo fees
If you purchase a home that’s part of a Homeowners Association, you won’t be saddled with snow removal or lawn care. However, the conveniences that come with living in a HOA development usually come at a pretty hefty price. You’re likely to spend another two-hundred dollars or more each month for these luxuries as part of your HOA dues.
If you’re purchasing a new-construction home, you likely won’t have a lot to worry about initially. But if the home is somewhat older, it’s always a good idea to set aside a cash reserve for maintenance and repairs, such as replacing an old appliance or repairing the furnace. These types of emergencies usually seem to happen at the most inopportune times. So, having a plan in place can save you from major headaches down the road.
Depending on where you live now, your monthly utility bills will likely be much higher when you move into your own home. You may also have to account for additional bills, such as City water and sewer, as well as garbage/trash collection.
Are You Ready to be a Landlord for a Minnesota Rental?
If you have a home in Minnesota and have recently moved, gotten married, or inherited another property, you have two options. You could either sell the property, though that can be difficult depending on the market, or you can rent out the property to tenants and become a landlord.
There are some questions you should ask yourself before you put out an ad for your home rental, however. Are you really ready to become a landlord?
As someone who recently moved I realized why a lot of people hate moving so much. After moving I took some time to think of some things that would make a move that much easier and less stressful.
1) Make a plan.
As with anything in life having a plan typically makes things go much smoother and moving is no different. Included in this plan should be the following: What day are you going to move? Who is going to help you move? Do you need to rent a moving truck or hire movers?
What is the weather supposed to be like? Do you have enough space at your new place for all of your stuff? If you plan these things out in advance you can avoid many of the hassles of moving; like moving in the rain and hail all day, like I did.
As the real estate market recovers in the wake of the recession, there are many new opportunities available for investors with some unique advantages. The demand for rental properties is at a nearly 20 year high, so if you’re considering investing in a rental here are a few added benefits to keep in mind.
Owning your own home used to be a centerpiece of the American dream, but is that still the case? Demographics are changing in the real estate market. The recession has displaced millions of homeowners and scared an entire generation of young buyers out of the market. At least for now.
Homeownership in the U.S. hit a nearly 18-year low in the second quarter of 2013, according to the Department of Commerce. Homeownership rates declined to 65.1 percent, the lowest level since 1995.
We’ve redesigned our site to be a resource for Twin Cities homeowners, renters and investors to make the most informed decisions for navigating our real estate market.
We’ll be posting new tips and information, investment opportunities and industry trends to help our readers take full advantage of the latest developments in the real estate and housing market. The Twin Cities rental economy is more active than ever, and we’re here to bring you the latest from the front lines.