We’re talking to many Minnesota home owners about renting out their home that won’t sell. Commonly, their home will be on the market for 2-3 months and after dropping the price multiple times, Freedom Rental Property Management is called to consult on the option of renting the home until market conditions improve. Below is what’s going on in Minnesota’s real estate market.
- Closed sales: 5,537 (down 0.8%)
- Median sales price: $360,000 (up 2.9%)
- Average sales price: $418,831 (up 3.4%)
- New listings: 9,851 (up 7.2%%)
- Pending sales: 6,498 (up 2.8%)
- Days on the market: 44 (up 4.8%)
- Homes for sale: 14,371 (up 8.5%)
- Months Supply: 2.6 (up 13.0%)
New listings are outpacing sales by +78%, nearly double, causing inventory to rise all the while homes are taking longer to sell. For many people we’re talking to about renting out their home, they’ve already moved and their former home is sitting on the market empty. Holding costs such as the mortgage, taxes, insurance, utilities, and association fees are costly (commonly $2,000 – $3,000 per month). People are having to pay for two houses at once and that’s unsustainable for most.
Lower the Price and Wait or Rent the Home?
Most homes have a monthly mortgage payment, so there is a point where further dropping the price of the home being sold may require the seller to write the bank a check for thousands of dollars upon sale to satisfy the mortgage loan balance. Savings rates are at their lowest point in decades with people having a median balance of $8,000, so writing a check for $10,000 – $15,000 to get rid of the old house after just purchasing the new one often isn’t possible.
The difficult decision
- Continue reducing the price until sold and then write the bank a check for thousands of dollars to get rid of the home.
- Keep the home on the market for 3+ months hoping for a sale and continue to pay more than $2,000 per month in holding costs.
- Rent the home and initially be around break even on cashflow (depending on financing and other factors) while earning 20-30% overall return on the money put down on the home in most cases. Consider selling again next year if market conditions improve, or realize the benefits of owning the house as a long term real estate investment that generally pays you with greater returns each year.
You’ll need to cancel the for sale listing before a property manager will take over and list the home for rent. Finding a qualified tenant takes a little time, and then time is needed for their move in date (a couple months in total in most cases).
Benefits of Renting the Home
90% of millionaires become so by owning real estate, and it’s more achievable with the right team, including having an expert local property manager in Minnesota. Real estate pays you in a variety of ways including:
- Cashflow. Rents minus expenses leaves you with cash in your pocket at the end of each month.
- Appreciation. The value of the home increasing. This also occurs due to general inflation as owning real estate is a good hedge against inflation; the value of the home increases as with everything else over time (unlike your car).
- Mortgage Principle Reduction. Your mortgage, including the balance, continues to decrease as payments are made using money from the rents collected.
- Tax Shelter. As the owner you can still write off the cost of the mortgage interest, and all expenses of the home. Additionally, the home is still getting depreciated over 27.5 years, so a house (not the land) valued at $275,000 will provide you with a “paper loss” of $10,000 per year on top of all other expense deductions including property management fees. Depending on your income level, you may be able to pay less federal and state taxes annually due to this paper loss, which means more cash in your pocket at tax time.
How Long Should I Rent the Home for?
Most people I talk to in this situation have a short term focus and they just want to get rid of the house as soon as possible. People don’t want to be a landlord and don’t want to add additional complexity to their lives by maintaining a second home. There is a lot of uncertainty with the Minnesota housing market in 2025 and nobody knows when the market will improve, but hopefully within a couple of years. If you hire a professional property manager in Minnesota and have a good experience, you may find that earning 20-30% on your money every year isn’t such as bad thing (stock market returns are around 8%)!
Should I Become the Landlord and Rent out the Home Myself?
Becoming a landlord or property manager is something many people fall into, and it’s done on their own because hiring a property manager is thought to be too expensive. Answering this question in detail is an entire article on its own, but in short property management is a job that requires hundreds of hours of training and experience to learn the basics, and if not done right the risk of costly tenants or home maintenance issues escalates quickly. There are too many potential pitfalls to detail here, but in short legally required notice periods must be communicated, and processes and maintenance must be completed within a timeframe or the courts fine the owner a multiple of the damage and award the tenant. Turnovers are a lot of work and must be completed properly and in a timely manner to maintain a good relationship with your tenants.
As a professional property manager in Minnesota, most of the evictions we file are for new customers that hire us when they attempted to self manage and then get in over their head with a bad tenant situation. An eviction, including legal and court fees, lost rent (vacancy) and repairs costs the homeowner $8,000 – $14,000 in most cases.
Should I Hire a Professional Property Manager?
Property Management is becoming more complex and challenging every year as more tenant friendly laws are passed, and tenant expectations increase. Mistakes can be costly, and missing a step in a required process can also be costly. Did you know as of 2025, we can’t deny an applicant that has had an eviction filed against them as a reason, unless it went as far as having to obtain a writ of recovery and a sheriff to escort them out of the home? There are many new laws that must be followed or fines may be issued or eviction filings tossed out. A professional property manager has thousands of hours and years of experience dealing with hundreds or thousands of homes and tenants (senior property managers still encounter new situations). It’s one thing to know the laws (2024 and 2025 Minnesota Rental Law Changes) and know what to do, and it’s another to perform lease enforcement and navigate people’s (tenant’s) emotions, personalities, situations, and negotiations ( see our article on how to handle professional tenants ).
Most people don’t hire a professional property manager because they think it’s too costly, so they take on learning the part time job, the headaches, and risk of losses in time and money (and stress) that goes with it. Considering the financial returns the home likely produces (20-30% on your down payment money), the couple hundred dollars you’ll pay a professional property manager is worth your peace of mind, especially if you’re renting out less than ten homes. A good experience for an owner is to hear from their property manager once or twice per month – when they pay you and if an approval is needed. A good property manager in Minnesota will allow you to focus your time and energy on other things like family and career and still have a little time to rest instead of dealing with a rental property.
Not all Property Managers are Created Equal
You’ll find a variety of different pricing structures between property management companies, but like most things, you get what you pay for. There are A LOT of corners that can be cut with property management, and each one of them increases risk to the unknowing owner. Freedom Rental Property Management was started following bad experiences with other management companies. We are excellent communicators, great documenters, and are very thorough in all things. This requires a lot of time and effort and our pricing is very competitive for this level of service. You want to ensure the job is done right to minimize your risk and maximize profits. Our values include
- Great Communication
- Thoroughness & Attention to Detail
- Leadership
- Integrity and Trust
- Proactiveness
- Continuous Improvement
Contact us today for more information on our “done right” property management services.
