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What Kind Of MN Investment Property Is Best For You? February 11, 2008

Posted by minnesotarealty in MN Realty.
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Part of learning how to invest in Minnesota real estate is figuring out what type of property to look for. There are many different choices. The investor can purchase houses, duplexes, condominiums or apartment buildings – and that’s just the beginning. He/she can purchase lots and build investment property or buy lots and rent them out to people who build on them. They can make “in really good condition” a part of their research criteria, or he/she can look for something that seems to be in rougher condition than it is, in order to get a good deal. They can hunt for properties with absentee owners in the hope that he/she finds someone who’s hoping to put their property out of their mind so that they can just be rid of it.

There are many possibilities. The question is, which property is the right property for you?

Ultimately, the best investment property is the one that will make the most money while costing the least amount to get up to speed and run. Getting a property ready to rent may involve renovation to bring a building up to code – adding up-to-date appliances and so on. It might involve a new coat of paint, or even getting rid of some unwanted tenants. What the potential new owner has to determine is, if the building’s problems are fixable.

For example, in his book “The ABCs of Investing,” Ken McElroy writes about someone who purchased a building without ever viewing the site, and found himself stuck with some tenants who were not just bad. These people were dangerous. The property was in a poor area of town in which the owner should never have purchased a property. When he finally got around to hiring Ken’s property management company, he had lost a bunch of potential income due to delinquency.

McElroy’s team repaired what they could. They got rid of the undesirable tenants and contracted for the building, but they could do nothing about the quality of the neighborhood. The building would never be one that people with a lot of choices would choose to live it, simply based on its location. It would never get the rent that it could have if it had simply been situated somewhere else. Most of the building’s problems were simply unfixable.

The well known saying, “Location, location, location” is important for a reason. Location may be the single biggest factor the Minnesota real estate investor needs to think about when checking out potential properties to invest in.

Besides basic viability, the investor needs to think about how they want to manage their properties. McElroy advises investors to hire a property management company for the experience and to free the real estate investor to search for additional investments, but some investors just prefer managing their property by themselves. That type of investor might want to think about buying something that is small enough to manage on his/her own. Other investors are unwilling having partners or investors and will be restricted by that as well. In that case, smaller and less expensive is usually the best option for them.

In the end, Mr. McElroy also recommends the investor not assume that he/she should start small. If they have learned enough to invest in the 1st, he/she can learn how to use OPM (other peoples’ money). They should remember, however, what they are comfortable doing – or what they would regard as the most enjoyable way to move forward. The opportunities are nearly endless.