Summary: Shopping for apartment buildings for sale in MN? Freedom Rental Property Management helps Twin Cities investors find, buy and manage multifamily property, from duplexes and fourplexes to apartment buildings with 5 or more units. Because we manage for a lot of investors, we hear about buildings before they’re listed, run the numbers with you, help you buy and then manage the property for a flat fee.
Looking for 2 to 4 units? See duplexes, triplexes and fourplexes for sale in the Twin Cities.
Apartment buildings and small multifamily properties for sale in Minnesota show up in three places: the MLS, commercial listing sites and off-market deals that trade between owners, brokers and managers without a public listing. The first two are where every buyer looks. The third is where we help.
When an owner we manage for decides to sell, we already know the building: the rent roll, the lease terms, the repair history and which tenants pay on time. Our investor clients hear about it first, and a lot of these buildings sell to another client before they ever hit the market. You buy with real operating numbers instead of a seller’s pro forma.
What's the difference between small multifamily and an apartment building?
In Minnesota, the line between small multifamily and an apartment building falls at 5 units, and it changes the financing, the valuation and the buyer pool.
| 2 to 4 units | 5 or more units | |
|---|---|---|
| Financing | Residential mortgages, including 30-year fixed loans and FHA loans for an owner who lives in one unit | Commercial loans with shorter terms, and the lender underwrites the building’s income |
| How it’s valued | Comparable sales of similar duplexes and fourplexes | Net operating income divided by a cap rate |
| Minnesota tax class | 2 to 3 units: class 4b at 1.25%; 4 units: class 4a at 1.25% | Class 4a at 1.25% |
| Typical buyer | House hackers and investors growing from single-family homes | Experienced investors and investor groups |
The class rates come from the Minnesota House Research property tax guide. By comparison, a single-family rental pays 1.00% on the first $500,000 of value. Our guide to judging a rental investment compares single-family and multifamily returns.
How do you value an apartment building for sale in Minnesota?
An apartment building is valued on its income: value equals net operating income divided by the cap rate. Net operating income (NOI) is the rent collected minus operating expenses, before the mortgage payment. The cap rate is the return buyers in that market accept on a building of that age and location.
Here’s an example. An 8-unit building rents for $1,300 a unit, or $124,800 a year. After 5% vacancy, it collects $118,560. Taxes, insurance, utilities the owner pays, repairs, turnover and management run 45% of collected rent, or $53,352. That leaves $65,208 of NOI. At a 6.5% cap rate, the building is worth about $1,003,000.
Every assumption in that math is negotiable, so check each one against the real books. A seller’s pro forma that skips vacancy or management makes a building look worth more than it is.
What should you check before buying a multifamily building in Minnesota?
Rental licensing and inspections
Minneapolis, Richfield, Brooklyn Park and other Twin Cities cities license and inspect rental buildings, and Minneapolis tiers its license fees by the property’s history. Ask for the current license and the last inspection report. Our city pages, like Minneapolis and Richfield, list each city’s rules.
Rent stabilization in St. Paul
St. Paul has a rent stabilization ordinance that caps annual rent increases at 3%, with exemptions the city council has amended several times. Underwrite a St. Paul building with the rent increases the ordinance allows, not the increases you’d like.
Who pays the utilities
Older Twin Cities apartment buildings run on a single boiler and a single water meter, so the owner pays heat and water for every unit. Get 24 months of utility bills.
Big-ticket systems
Boilers, roofs, parking lots, windows and sewer lines are the expenses that wreck a multifamily budget. Get the age of each and price the replacements into your offer.
Leases and deposits
Read every lease, match the rent roll to the bank deposits and confirm the security deposits transfer at closing. Minnesota requires deposits to be returned with 1% simple interest a year (Minn. Stat. 504B.178), and that liability transfers to you.
Lead paint
Buildings built before 1978 need a lead-based paint disclosure on every lease, and the EPA rules apply to renovation work in occupied units.
How do we help you buy and manage an apartment building?
- Numbers first. We sit down with you, learn your goals and run the deal before anyone writes an offer: rent roll, expenses, vacancy, capital needs and financing.
- Off-market access. We hear about buildings when our owner clients decide to sell, and we introduce them to our investor clients first.
- Help buying. Our licensed agents write the offer and manage the inspection and closing. Already have a Realtor? Keep them, and we’ll still manage the building.
- Management from day one. We take over leases, deposits, rent collection, maintenance and licensing at closing, for the same flat fee per unit whatever the rent. See our pricing.
Read more about buying duplexes, triplexes and fourplexes and when to sell an investment property.
Frequently asked questions
Where can I find apartment buildings for sale in Minnesota?
Apartment buildings for sale in Minnesota are listed on the MLS and on commercial listing sites, and others trade off-market between owners, brokers and property managers. Freedom Rental Property Management introduces buildings from our owner clients to our investor clients before they’re listed.
How is an apartment building valued?
An apartment building is valued by dividing its net operating income by the cap rate buyers accept in that market. For example, a building with $65,208 of net operating income at a 6.5% cap rate is worth about $1,003,000.
Can I get a residential mortgage on a multifamily building?
Buildings with 2 to 4 units qualify for residential mortgages, including FHA loans when the buyer lives in one unit. Buildings with 5 or more units need a commercial loan, where the lender underwrites the building’s income.
What is the property tax rate on an apartment building in Minnesota?
Minnesota taxes apartment buildings with 4 or more units in class 4a at a 1.25% class rate, and 2 to 3 unit buildings in class 4b at 1.25%. A single-family rental pays 1.00% on the first $500,000 of value.
Does St. Paul have rent control?
St. Paul has a rent stabilization ordinance that caps annual rent increases at 3%, with exemptions the city council has amended several times. Check the city’s current rules before you underwrite a St. Paul building.
Tell us what you’re looking for
Share your budget, unit count and target cities. We’ll let you know when a building that fits comes up, run the numbers with you and manage it after closing. We work with investors across our service area, or contact us directly.