Are you a new or an experienced real estate investor? In either case, it is always good to keep your eyes open for new potential markets for your next purchase. Here is why you should consider a Minneapolis investment property now.
What Are the Recent Trends in Minneapolis Real Estate?
In sum, the Minneapolis real estate market has been doing very well in recent months. It gained a lot of strength in 2016 and in many indicators outperformed the national averages. Following are some of the most important facts you would like to know before investing in Minneapolis real estate:
- Property prices are on the rise: Over the course of one year – between September 2015 and September 2016 – the median property sale price increased by 5.5%.
- Property inventory is going down: Over the same period, total inventory for all properties in Minneapolis and Saint Paul (the Twin Cities) decreased by 15.5%.
- Closing times are shorter: Buyers have been in a hurry to close sales fast.
- Single-family homes are outperforming multi-family homes: They have experienced a price increase of 6.5% and an inventory drop of 16.5%, to a total of 11,180. Meanwhile, the number of available condos fell down by 14.4%.
- Sales of expensive homes are lagging behind: While the overall Minneapolis real estate market is thriving, gains have been much smaller for relatively more expensive properties. Such properties attract fewer buyers, stay on the market for longer, and appreciate more slowly.
- Real estate appreciation is excellent: The appreciation rate for Minneapolis real estate investments exceeded the national average.
- Affordability is a definite plus: Despite recent rises, property prices in Minneapolis remain significantly more affordable than in other hot markets.
Related: 6 Real Estate Market Trends of 2017
All in all, we can easily conclude that at the moment, Minneapolis is a seller’s market. This doesn’t, however, mean that you should give up any intentions of investing in Minneapolis real estate. To the contrary, hurry up with your decision to go for a Minneapolis investment property before prices increase even more.
What Factors Affect Minneapolis Real Estate?
Minneapolis is a truly global city, which is having an undoubtedly positive effect on the city’s real estate market. Together with Saint Paul, Minneapolis is the second largest economic center in the Midwest, after Chicago. Minneapolis has a strong economy based on commerce, finance, health, industry (computers, electronics, medical instruments and devices, metal and automotive products, chemical and agricultural products, and plastics), and rail and trucking services. All these are relatively well paying economic sectors, producing a lot of jobs. Thus, the unemployment rate of 3.7% is below the national average, the expected job growth in the next 10 years (38.8%) exceeds the national, and the family median income ($68,500) is above this for the entire US. These all are very positive signals for anyone interested in investing in Minneapolis real estate. But before you start your search for a potential Minneapolis investment property, you should have a look at the numbers for the market.
How Do the Numbers for a Minneapolis Investment Property Look Like?
Now you think you have to perform a real estate market analysis, right? Well, not exactly. Thanks to Mashvisor’s investment property calculator, you don’t need to spend days collecting data and working with spreadsheets to get good comps. Below are the figures for Minneapolis real estate investments, obtained within a few seconds after the beginning of your search.
- Median Property Price: $270,000
- Traditional Rental Income: $1,570
- Airbnb Rental Income: $1,950
- Traditional CoC Return: 2.9%
- AirbnbCoC Return: 4.3%
- Traditional Cap Rate: 6.7%
- Airbnb Cap Rate: 8.2%
- Airbnb Occupancy Rate: 37.0%
Once again, affordability is key in Minneapolis. The median property price is still remaining well below the levels in many other hot markets such as Los Angeles ($939,000), San Diego ($828,000), New York ($494,000), Miami ($494,000), Chicago ($366,000), and Philadelphia ($344,000). The expected rental income for a Minneapolis investment property is very good, taking into consideration the low property price, particularly in the case of an Airbnb renting strategy. Profitability in terms of CoC return and cap rate is also good. Airbnb is generally the most profitable strategy for Minneapolis real estate investments.
Is an Airbnb Minneapolis Investment Property Legal?
Even though Airbnb is the most gainful form of renting in Minneapolis, you should make sure to check out the existing legislation on short-term rentals before buying a Minneapolis investment property for this purpose. Good news! Airbnb activities are currently not being regulated in Minneapolis, and the City Council confirmed that they do not have intentions of introducing laws governing Airbnb Minneapolis real estate investments as this business is not causing troubles. So, if you are willing to try out this relatively new but increasingly popular mode of renting, a Minneapolis investment property might be the right choice for you.
Which Neighborhoods Are the Best for a Minneapolis Investment Property?
The next big question you have to answer is: What is the right neighborhood for your Minneapolis real estate investments? Let’s look at some of the most profitable options according to Mashvisor’s investment property calculator:
Related: Investing in the Right Neighborhood
1. Lyndale
- Median Property Price: $185,000
- Traditional Rental Income: $1,460
- Airbnb Rental Income: $1,710
- Traditional CoC Return: 4.9%
- AirbnbCoC Return: 5.4%
- Traditional Cap Rate: 9.4%
- Airbnb Cap Rate: 9.9%
- Airbnb Occupancy Rate: 34.9%
Lyndale is a predominantly residential neighborhood in south Minneapolis. It is even more affordable than overall Minneapolis as the median property price comes at $185,000. Airbnb is the slightly more profitable strategy here, though the difference with traditional in terms of both CoC return and cap rate is minimal.
2. Powderhorn Park
- Median Property Price: $175,000
- Traditional Rental Income: $1,180
- Airbnb Rental Income: $2,000
- Traditional CoC Return: 3.6%
- AirbnbCoC Return: 8.9%
- Traditional Cap Rate: 7.9%
- Airbnb Cap Rate: 13.6%
- Airbnb Occupancy Rate: 45.5%
Powderhorn Park neighborhood is another top area for buying a Minneapolis investment property. It hosts the Powderhorn Park, which hosts the annual Powderhorn Art Fair. This year the Fair will be held on 5-6 August, so any Airbnb hosts should mark this date on their calendar. This is particularly important since Airbnb is the better strategy here anyway.
3. Whittier
- Median Property Price: $130,000
- Traditional Rental Income: $1,040
- Airbnb Rental Income: $1,400
- Traditional CoC Return: 3.7%
- AirbnbCoC Return: 6.8%
- Traditional Cap Rate: 8.4%
- Airbnb Cap Rate: 11.8%
- Airbnb Occupancy Rate: 43.9%
Another top option for investing in Minneapolis real estate is Whittier, a neighborhood famous for its restaurant, cafes, and Asian markets. It hosts the Minneapolis Institute of Art, the Minneapolis College of Art and Design, and the Children’s Theatre Company. This neighborhood is highly affordable and is most appropriate for Airbnb income properties.
4. Seward
- Median Property Price: $90,000
- Traditional Rental Income: $1,340
- Airbnb Rental Income: $1,220
- Traditional CoC Return: 4.6%
- AirbnbCoC Return: 3.9%
- Traditional Cap Rate: 9.0%
- Airbnb Cap Rate: 8.2%
- Airbnb Occupancy Rate: 30.1%
If you are looking for a really affordable Minneapolis investment property, then Seward is the right place for you. This neighborhood is a mix of residential, commercial, and industrial areas and offers a diverse, vibrant lifestyle. The median property price here is only $90,000, while traditional is the optimal rental strategy.
In your next search of an income property, don’t forget to check out Minneapolis. This real estate market is still affordable. However, hurry up as prices are set to go up. Look up a potential Minneapolis investment property at Mashvisor.