What To Expect When Looking For A Home Under $200,000
Most of the buyers we work with are looking for a home under $300,000. In fact over 70% of all sales in Minneapolis are under $300,000. Homes under $200,000 account for 43% of the total market, but if we exclude north Minneapolis only 27% of the market is under $200,000. Since we are working with a lot of clients in this price range I am typically going through 10-15 homes under $300,000 every day. Once we get under the $200,000 it becomes harder to get a good value. But after going through so many I can tell you a few things that are common with this group of homes.
1. All the homes will need some work. Most of these homes tend to need about $30,000 worth of work. I see a lot of cosmetic work like flooring, kitchen counter tops, windows, roofs, etc. Most of the time the items are not a major concern and can be remedied pretty easily, but they still need to be done.
2. They are very small. Don't expect to get a very big house. Most of the homes in Minneapolis are around 1400 square feet. We are dealing with only 20% of the market so there is a good chance that that home will be very small. There is nothing wrong with this, just know that you are probably not going to get a home with 3 beds and 2 baths. It will more then likely be more a 2 bed, 1 bath with the ability to add a third bedroom in the basement.
3. Weird locations. I see this all the time. Houses on busy streets, on weird street corners, maybe sandwiched in between two apartment buildings. There are a lot of buyers that will not want to buy in these locations, therefore the price of the home must be reduced.
If you are looking under $200,000 what can you do to get a good value that will still be a good long term investment?
1. Buy a house that needs work that you can repair. Most of the work on these homes can be fixed and if done properly the home will be worth more then the cost of the repairs. I see a lot of homes that are priced at $160,000-$180,000 that could be worth $220,000 with $30,000-$40,000 worth of work. So if you are up for the challenge I highly recommend looking for these deals.
2. Buy a home in a great location. There is a house on the market in Longfellow in a great location for $79,000. It doesn't have a basement or a spot for a garage, but if you could get it for $50,000 that would be a great value. You could remodel it for $40,000 and it would be worth $115,000. There is not a ton of equity, but the whole house would be totally updated. You could easily rent it for $1100.
3. Wait until winter to buy. Prices drop every single year in Minneapolis after July. On average they go down 20% by January. People don't like to move in the winter. Sellers in the winter are generally very motivated to sell because why wouldn't you just wait until Spring to sell when prices are a lot higher and demand is higher as well? So if you want to buy around Thanksgiving or Christmas there will definitely be some great values.
Let me know if you need anything and please share this if you find it helpful.