St. Paul Vs. Minneapolis: Which is a Better Investment?

Most investors and owner-occupants ask this question:

Where is the best place to invest?

As Realtors we cannot tell people where we would buy – it is illegal.  That said, I can give data that will allow you to make your own judgments.

Average Price

In Minneapolis:

The median sale price for duplexes is $279,850 in 2017. It was $270,000 in 2016.

In St. Paul:

The median sale price for duplexes in St. Paul is $195,000 in 2017. It was $167,500 in 2016.

In multifamily real estate, price isn’t the only factor necessary to determine great deals. Let’s move on to take a look at the average rental income generated in each city.

Average Rental Income

In Minneapolis:

• For All Rentals: $1,305
• For 2 Bedrooms: $1603
• For 3 Bedrooms: $1824

The Year-over-Year increase is 5% on average for all units.

In St. Paul:

• For All Rentals: $1,119
• 2 Bedrooms: $1260
• 3 Bedrooms: $1,829

The Year-over-Year increase is 5% on average for all units.

Conclusions

From this data, there are a couple of things to note:

The rental income for Minneapolis is higher in almost all cases – except with 3 bedroom units. The average rental income for a three bedroom in Minneapolis is $1,824. In St. Paul, it’s slightly higher – $1,829.

In St. Paul, the price of duplexes is significantly lower than it is in Minneapolis. St. Paul duplexes are $195,000 vs. $279,850 in Minneapolis. This differential will equate to about $300 less per month on a mortgage.

You will also find that, in general, St. Paul has lower taxes than Minneapolis.

One advantage that Minneapolis has seen is rapid appreciation. Since 2014, duplexes in Minneapolis have increased from $179,500 on a median basis compared to St. Paul moving from $138,000 to $195,000.

Minneapolis’s appreciation has been 55% vs. St. Paul’s 41% increase.

One other note on appreciation:

St. Paul’s appreciation actually took a step back in 2016 vs. 2015, delving by $1,250 per property. It recovered in 2017 by appreciating with a $27,500 average increase.

So, appreciation is not a guarantee, nor is it a steady climb.

Per Northstarmls data, the number of listings in St.Paul decreased by 10% and Minneapolis saw a nearly 20% decrease. The lesser number of properties on the market will drive prices higher.

Each neighborhood and property is different, and that is where you need to make the decision on where you feel comfortable living and/or investing.

Sources:  Northstarmls and RentCafe.com

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