Perhaps one of the biggest secrets in the real estate investment industry is that Minneapolis is a hidden gold mine. With one of the lowest vacancy rates in the US, home to 19 Fortune 500 companies and a slow, yet steady year-over-year growth, the Minneapolis housing market is (and will continue to be) an investment haven for real estate investors.
The Twin Cities metropolitan area, which consists of Minneapolis and St. Paul, ranks 1st in the Midwest for real estate investment opportunities in the PwC’s Emerging Trends in Real Estate Report 2019. So, if you want to invest in rental property for a reliable return, Minneapolis is definitely a top market to consider. Here are the top factors making the Minneapolis housing market 2019 lucrative for real estate investors.
High Demand for Rental Properties
According to a report by CNBC, nearly 65% of Minnesotans reside in the Twin Cities metropolitan area. Both cities are highly livable areas and have repeatedly appeared in annual rankings of the 10 best places to live in the US by U.S. News & World Report.
In addition to the already large population, the Minneapolis housing market is benefiting from positive net migration as new residents are moving into the city. The Emerging Trends report projects that the Twin Cities will see a higher than average population growth in 2019. The percentage of the Minneapolis population under the age of 44 is also higher than the national average. As every real estate investor knows, all these factors suggest that the rental demand will continue to be strong in the city in 2019.
According to the Beracha, Hardin & Johnson Buy vs. Rent Index, it’s now better to rent a home than own one in Minneapolis/St. Paul. The index predicts that Minneapolis, along with 15 other big cities in the US, is now in the rent territory and will experience a downward demand for ownership. This is good news for real estate investors of residential properties, especially multifamily homes. In fact, 72% of the PwC’s survey respondents recommend buying multifamily property in the Minneapolis housing market 2019.
To start looking for and analyzing the best investment properties in Minneapolis, click here.
Strong Economy and Labor Force
Savvy real estate investors look to invest in cities experiencing a growing population as it’s typically linked to growth in the job market as well. The Twin Cities serve as Minnesota’s main economic driver and are quickly becoming one of the most business-friendly regions in the US thanks to the thriving labor force, higher wages, and lower living costs.
According to the same report by CNBC, the Twin Cities’ labor force has grown by 4.6% over the last five years – far greater than the 4.1% national growth over the same period. Moreover, future job growth over the next ten years is predicted to be 38.8%, which is higher than the US average of 38.0%. Naturally, this has a positive impact on the Minneapolis housing market as it’s attracting a high volume of new residents, making it one of the best places to invest in real estate in 2019.
Related: 10 Best Places to Invest in Real Estate in 2019
Property Prices and Appreciation
According to data from Zillow, the median price for Minneapolis homes for sale is $300,000 which is above the US national average. As for home values in the city, they have gone up 6.4% over the past year and Zillow predicts they will rise 5.2% in 2019. This could explain why many residents in Minneapolis will continue to live in rental properties rather than buy their own homes.
In addition, remember that the Minneapolis housing market is predicted to have stronger rental demand this year. In effect, this will drive up rental prices and, thus, make your real estate investment even more profitable. In fact, the median rent price in Minneapolis is $1,795 – higher than the Minneapolis-St. Paul-Bloomington Metro median of $1,700 according to Zillow.
Furthermore, investment properties in the Twin Cities are projected to see real estate appreciation in the long-term. Housing market trends show that property values will continue to grow, which goes hand in hand with the strong economy, low unemployment rate, and shortage in the housing inventory. This further makes buying investment property in Minneapolis a smart investment in 2019.
Is It a Seller’s Market or a Buyer’s Market?
The 2018 Minneapolis housing market was marked by low inventory, bidding wars, and rising prices, making it a seller’s market. However, there were signs in the second half of 2018 that indicated a return to a more balanced housing market, according to the Minneapolis Area Association of Realtors’ latest report. The report’s data shows that home prices are increasing at a much slower rate than this time last year. That’s accompanied by a gradual increase in new listings. This could potentially bring some relief to real estate buyers in 2019.
Related: The 2019 US Housing Market: A Seller’s Market or Buyer’s Market?
Nonetheless, Midwest brokers project Minnesota’s seller’s market will continue in most areas of the state in 2019. That is according to the latest RE/MAX Midwest Housing Market Outlook Report. While some parts in the state may start to balance out, the market is still tight especially for first-time buyers due to limited supply and high competition. The report’s data shows that:
- Home inventory fell 4.4% from a year ago
- The number of home sales dropped by 5.8%
- Housing affordability was down 13.5%
Even though buying property in a seller’s market is challenging, you can still invest in real estate! In fact, dropping home sales show that it’s becoming more and more challenging for residents to own, hence the increasing demand for rental properties. That’s why buying an investment property to rent out in Minneapolis is profitable in 2019.
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Best Neighborhoods in the Minneapolis Housing Market
Bottineau
- Median Property Price: $120,000
- Price Per Sq/Ft: $120
- Traditional Rental Income: $1,590
- Price-to-Rent Ratio: 6
- Cash on Cash Return: 8%
Logan Park
- Median Property Price: $219,900
- Price Per Sq/Ft: $169
- Traditional Rental Income: $2,390
- Price-to-Rent Ratio: 8
- Cash on Cash Return: 5%
Ventura Village
- Median Property Price: $134,900
- Price Per Sq/Ft: $129
- Traditional Rental Income: $1,650
- Price-to-Rent Ratio: 7
- Cash on Cash Return: 4%
Central
- Median Property Price: $247,417
- Price Per Sq/Ft: $168
- Traditional Rental Income: $1,610
- Price-to-Rent Ratio: 13
- Cash on Cash Return: 3%
Willard Hay
- Median Property Price: $224,950
- Price Per Sq/Ft: $128
- Traditional Rental Income: $1,529
- Price-to-Rent Ratio: 12
- Cash on Cash Return: 3%
What About Airbnb in the Minneapolis Housing Market?
Renting out on Airbnb has quickly become the optimal strategy for making money in real estate investing. However, many big cities in the US housing market have legal issues or strict regulations on short-term rental properties. For Minneapolis real estate investors, this is not something to worry about! While Airbnb rentals are regulated in the city, it’s not as strict as in other cities like San Francisco or New York.
Related: Which Are the US Cities with the Most Airbnb Legal Issues at the Beginning of 2018?
In addition, data from Mashvisor’s Investment Property Calculator shows that you’ll certainly make a great return on investment when renting out on Airbnb in the Minneapolis housing market. Just make sure to check the local zoning laws and other regulations that may apply to you before listing your rental property on Airbnb.
Best Neighborhoods in Minneapolis for Airbnb Investments
Holland
- Median Property Price: $268,300
- Price Per Sq/Ft: $171
- Airbnb Rental Income: $4,271
- Airbnb Occupancy Rate: 65%
- Cash on Cash Return: 14%
Ventura Village
- Median Property Price: $134,900
- Price Per Sq/Ft: $129
- Airbnb Rental Income: $3,514
- Airbnb Occupancy Rate: 57%
- Cash on Cash Return: 13%
Bottineau
- Median Property Price: $120,000
- Price Per Sq/Ft: $120
- Airbnb Rental Income: $2,422
- Airbnb Occupancy Rate: 58%
- Cash on Cash Return: 10%
Bancroft
- Median Property Price: $242,786
- Price Per Sq/Ft: $200
- Airbnb Rental Income: $3,438
- Airbnb Occupancy Rate: 52%
- Cash on Cash Return: 8%
Central
- Median Property Price: $247,417
- Price Per Sq/Ft: $168
- Airbnb Rental Income: $2,961
- Airbnb Occupancy Rate: 67%
- Cash on Cash Return: 7%
Note: The data above is provided by Mashvisor’s Investment Property Calculator. To learn more about our tool and how we will help you make faster and smarter real estate investment decisions, click here.
