508 2nd St SE

Pelican Rapids, MN 56572

$170,000C

3 bd · 2.0 ba · 1,894 sqft · Built 1960 · SingleFamily · Pending · 9 DOM

Cashflow @ list (25.0% down · 7.5%)

• Estimated rent: $1,787/mo
• Mortgage (P&I): −$891
• Tax + insurance: −$252
• HOA: −$0
• Vac / Maint / Mgmt: −$375
• Net cashflow: $269/mo
• Annual: $3,228/yr
• Cap rate: 8.19%
• Cash-on-cash: 6.78%
• DSCR: 1.30
• 1% rule: 1.05%
• Cash to close: $47,600

Investor read

• This is a 3-bed/2.0-bath single-family listed at $170k.
• At list price, monthly cash flow is $269 ($3k/yr) — positive.
• The deal already cash-flows at list — no discount required.
• Meets the 1% rule at list price ($2k rent vs $170k).
• Only 9 days on market — expect competitive offers; lowballing is unlikely to land.
• Local home prices are declining (-3.0%/yr); year-one equity from $1k of loan paydown is wiped out by about $5k of value loss. Plan a longer hold.
• Location reads 78/100 on livability (#114 in MN, #2,581 nationally) — a middle-class / working-renter tenant base. Strengths: crime A+, cost of living A+, housing A+; Watch: amenities F, commute F.
• Pelican Rapids Public School District (rural): math 45% / reading 54% proficiency, ranked #123 of 301 in MN (top 41%) — families likely to look elsewhere, expect single-tenant / working-renter base with shorter leases.
• Zoned schools: Viking Elementary School (math 58% / reading 62%, grade B-, #209 of 857 statewide, top 25%, 460 students, 61% FRL); Pelican Rapids Alt Center Mid-Level (math 10% / reading 10%); Pelican Rapids Secondary (math 32% / reading 47%, grade F, #246 of 471 statewide, top 59%, 405 students, 56% FRL) — zoned schools average 58% FRL vs 39% district-wide (20 pts higher); higher-poverty schools than district average — tighter screening recommended.
• Zoned-school proficiency averages 36% at this address vs 50% district-wide (-13 pts) — the specific schools serving this property underperform the Pelican Rapids Public School District average; the district grade overstates school quality for this exact location.
• Market conditions: 175 active listings in the ZIP; 140 units permitted in Otter Tail County in 2024 (48 in 5+ unit buildings).
• Climate carrying-cost: major flood risk — expect insurance premiums to compound above CPI over the hold.
• Cap rate 8.2% vs local median 1.4% in Pelican Rapids — top-decile yield for the area; either an underpriced asset or a hidden risk that comps aren't pricing in. Stress-test before assuming the spread holds.

Questions for listing agent

• Built in 1960 — when were the roof, HVAC, electrical panel, plumbing, and water heater last replaced?
• Is there a deadline driving the sale (1031 exchange, divorce, estate, relocation)? That informs how much negotiation room exists.
• What's the average days-on-market for RENTAL listings here right now (not sales)? A rising rental-DOM trend means longer vacancies and softer asking-rent achievability than the comps imply.
• What's the recent tenant-quality profile in this submarket — average credit score on applications, eviction rate, late-payment / NSF rate, and stable-employment percentage? A property-management company in the area should have these aggregated.
• How much new for-sale + rental construction is in the pipeline within 1–3 miles? Heavy new supply typically softens prices + rents 12–24 months out; constrained supply supports both.