When our daughter Tifini shared with us that she was looking for a new place to rent in Minneapolis, we thought this would be a great time to buy a rental property, preferably a Minneapolis Condo foreclosure, fix it up, and rent to her! After all, who better to rent to than someone you know and love? It’s a baby step into the process, for sure, but the market conditions made it an easy decision. In this situation, we looked at it more like an investment than an instant cash-flowing property, because it was not our intention to “make money” from our daughter. Down the road if she decides to move on, we can either sell it, or rent it to someone else.
Jimmy took Tifini out to look at homes initially, but when they brought me out to view a 100 year old duplex with no plumbing or electrical fixtures (even the bathtub was missing!) I knew I had to step in. We ended up finding a two bedroom, one bath condo in a nice building near Lyndale and Franklin Ave, two blocks from where she was already living. The perfect location, and at $59,900, a great price! We offered the bank $50,000. They countered, and after just a little bit of back and forth, we ended up at $53,000 with the bank paying $1,500 towards our closing costs. Banks are typically pricing their listings to sell from the outset, and want to stay within 10% of the list price, but we knew that a similar condo in the building had recently sold for $48,000 so we were able to make the case for a lower price.
Because this is a secondary residence for us, we were required to have a 20% downpayment, and prove that we had 2 years of rental property experience. Having owned our vacation rental in Annandale for 3 years, we qualified.
Buying a bank owned home is a little different – and it was good for us to go through the process ourselves. We need to know first hand what our clients are facing. Our desired closing date came and went- waiting for the bank to sign paperwork and the title work to be completed. If you are buying a foreclosure you have to be flexible, that’s for sure, don’t schedule the truck until you have a closing date on the books with the sellers title company. We were lucky that the listing agents were The Pastrana Team of Century 21 Pastrana. The biggest complaint against foreclosure listing agents is a lack of communication and timely response, but we had none of these issues with the Pastranas- they really were great to work with.
We were asked to use the sellers title company. This is often a point of contention, the buyer does have the right to choose who they want to close with, but the title company was one that we had used many times before, and trusted, and the seller paid for our title insurance policy, so that worked for us. On the day of closing, we went and signed all of the paperwork, but we had to wait for the selling bank to sign off on the paperwork, which took several hours (and can take up to 48 hours). We didn’t really have rights to the property until we had the ok, so we couldn’t go in and start painting or ripping things apart until the next day.
In this case, we opted not to have a professional inspection. I would NEVER recommend this to a client. The heating and plumbing systems are shared in the condo, we didn’t have to worry about the roof or foundation, and we were going to rip out the kitchen, so there wasn’t much more to inspect in this case. Usually when our clients buy a foreclosure, we make sure they get a warranty on the property to cover unexpected repairs, but again, since we were re-doing everything, we didn’t think this was necessary. We knew we would have to address the big water leak in the bathroom ceiling – that was something we included in the budget for repairs. I anticipated about $5000 for repairs and upgrades – but like any other project that went over about 20%.
Here is a video of the rehab project – this was fun and rewarding, and our daughter had a great place to live!
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