What’s the best place to invest in the Midwest real estate market? According to a recent report by the PwC, the TwinCities, Minneapolis/St. Paul, headline the Midwest real estate market this year. How is the Minneapolis housing market forecast looking? Also, what are the best neighborhoods in the Minneapolis real estate market? Keep reading to find out!
Related: Should a Minneapolis Investment Property Be Your Next Purchase?
Minneapolis Real Estate Market: City-Level Data
What makes the Minneapolis real estate market so great? Multiple factors contribute to the success of the market, many of which we will cover soon. But to quantify the exceptional performance of the Minneapolis housing market, we need to look at some data. Here is the data of the average Minneapolis investment property, provided by Mashvisor’s investment property calculator (Learn more about this tool by clicking here).
Pricing
- Median Property Price: $386,061
- Price per Square Foot: $242
- Price-to-Rent Ratio: 18
Traditional Investing
- Rental Income: $1,835
- Cap Rate / Cash on Cash Return: 1.2%
Airbnb Investing
- Rental Income: $2,415
- Cap Rate / Cash on Cash Return: 1.7%
- Occupancy Rate: 51.5%
Why You Should Invest in the Minneapolis Real Estate Market
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Rental Income
The bread and butter of any rental property is rental income. As seen from the data from Mashvisor’s investment property calculator, the typical Minneapolis real estate investment generates a whole lot of rental income. The average rental income for traditional long-term rentals is $1,835. Minneapolis Airbnb rental properties are also very lucrative, with an average Airbnb rental income of $2,415. These figures represent mere averages. This means that any given Minneapolis real estate investment will very likely generate above these averages. Of course, any real estate investor can find Minneapolis houses for sale that are geared for high rental income by using Mashvisor’s property finder.
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Appreciation
Properties in the Twin Cities also benefit from high appreciation rates. The appreciation rate of the Minneapolis real estate market in the last 12 months was 8.19%, according to Neighborhood Scout. This places the Minneapolis rental market in the top 20 percent for appreciation in the nation. Relative to Minnesota, the Minneapolis housing market has a higher appreciation rate than 80 percent of cities and towns in the state. The city’s appreciation rate is projected to remain high. The appreciation rate of the last quarter was 1.70%, which equates to an annual rate of 6.98%. Appreciation is a huge advantage for both Minneapolis long-term rentals and Airbnb rental properties, acting as a significant reason why investors should purchase property in the market.
Related: Natural vs. Forced Appreciation in Real Estate Investing
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Traditional Investing
Minneapolis is an excellent market for traditional real estate investing. For starters, Minneapolis consistently ranks as one of the best places to live in the US. Also, the city’s price-to-rent ratio is over 15, meaning that it is more affordable to rent out a Minneapolis investment property than to buy one. This gives real estate investors an edge, as 53 percent of residents are renting out a property.
The city’s economy is also top-notch. Minneapolis is the 8th best city for young professionals. Its unemployment rate is 2.5%, which is much lower than the state’s 3.2% and the nation’s 3.9%. Minneapolis’ job growth is another indicator of its stellar economy. Its job growth over the last year was 1.8%. Future job growth over the next 10 years is 36.7%, compared to the national 33.5%. These factors make traditional long-term rentals a smart investment in the Minneapolis real estate market.
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Airbnb Investing
The Minneapolis housing market forecast is also looking great for Airbnb rental properties. According to Airbnb, Minneapolis is expected to be one of the most popular destinations worldwide, based on a 193% increase in bookings from 2018. Tourism in the Twin Cities continues to shatter its own records. In 2017, more than 33 million people visited the area, which was a 2.5% increase from 2016. This tourism generated a whopping $7.8 billion during that year, which was a 2.6% increase from the year before. With tourism supplemented by shopping, nature and outdoor activities, sports, amusement parks and much more, Airbnb investing will continue to be a lucrative Minneapolis real estate investment.
Airbnb Regulations in the Minneapolis Real Estate Market
As money-making as Airbnb is in Minneapolis, is it legal? The answer is yes, Airbnb is fully legalized in the Minneapolis real estate market. Permit and registration requirements vary based on the type of property. Non-owner occupied Airbnb rentals, for instance, require a rental license. Owner-occupied rentals, in which the entire unit is rented, require registration, while those in which a portion of the property is rented do not. For more information on the Airbnb regulations for the types of short-term rentals in Minneapolis, read this. As it pertains to taxes, investors of Airbnb rental properties in Minneapolis must pay a 6.875% State Sales Tax, 3% Entertainment Tax, 0.5% Minneapolis Sales Tax, 0.25% Transit Improvement Sales Tax, and a 0.15% Hennepin County Tax.
Related: Short-Term Rental Strategy: Best Cities for Airbnb Rental Income
Best Neighborhoods in Minneapolis for Traditional Rentals
Finally, what are the best neighborhoods in the Minneapolis real estate market? According to Mashvisor’s heatmap analysis, the best neighborhoods for traditional investing are Central, Ventura Village, and Cleveland.
Central
Pricing
- Median Property Price: $263,696
- Price per Square Foot: $122
- Price-to-Rent Ratio: 19
Traditional Investing
- Rental Income: $1,178
- Cap Rate / Cash on Cash Return: 4.1%
Ventura Village
Pricing
- Median Property Price: $252,051
- Price per Square Foot: $134
- Price-to-Rent Ratio: 12
Traditional Investing
- Rental Income: $1,789
- Cap Rate / Cash on Cash Return: 3.6%
Cleveland
Pricing
- Median Property Price: $184,183
- Price per Square Foot: $139
- Price-to-Rent Ratio: 11
Traditional Investing
- Rental Income: $1,446
- Cap Rate / Cash on Cash Return: 3.5%
Best Neighborhoods in Minneapolis for Airbnb Rentals
How about Airbnb investing? The best neighborhoods for Airbnb investing are Central, Willard Hay, and Linden Hills.
Central
Pricing
- Median Property Price: $263,696
- Price per Square Foot: $122
- Price-to-Rent Ratio: 19
Airbnb Investing
- Rental Income: $3,386
- Cap Rate / Cash on Cash Return: 11.6%
- Occupancy Rate: 51.7%
Willard Hay
Pricing
- Median Property Price: $208,496
- Price per Square Foot: $132
- Price-to-Rent Ratio: 12
Airbnb Investing
- Rental Income: $2,538
- Cap Rate / Cash on Cash Return: 7.1%
- Occupancy Rate: 48%
Linden Hills
Pricing
- Median Property Price: $677,448
- Price per Square Foot: $273
- Price-to-Rent Ratio: 26
Airbnb Investing
- Rental Income: $6,367
- Cap Rate / Cash on Cash Return: 5.5%
- Occupancy Rate: 57.9%
To find Minneapolis houses for sale or learn more about where to buy investment property in the US, click here to start your 14-day free trial with Mashvisor!