507 Main St

Tower, MN 55790

$159,000D-

2 bd · 2.0 ba · 1,512 sqft · Built 1925 · Other · Active · 346 DOM

Cashflow @ list (25.0% down · 7.5%)

• Estimated rent: $1,103/mo
• Mortgage (P&I): −$834
• Tax + insurance: −$195
• HOA: −$0
• Vac / Maint / Mgmt: −$232
• Net cashflow: $-158/mo
• Annual: $-1,892/yr
• Cap rate: 5.10%
• Cash-on-cash: -4.25%
• DSCR: 0.81
• 1% rule: 0.69%
• Cash to close: $44,520

Investor read

• This is a 2-bed/2.0-bath other listed at $159k.
• At list price, monthly cash flow is $-158 ($-2k/yr) — negative.
• To cash-flow at today's rent, offer at most $131k (17.5% below list).
• To meet the 1% rule (rent ≥ 1% of price), the offer needs to be $110k (30.6% below list).
• It's been on market 346 days — a 12% lower offer ($140k) is reasonable based on typical stale-listing flexibility.
• Recommended offer: $110k (30.6% below list) — sets the bar for 1% rule.
• In year one you build about $17k of equity ($1k loan paydown + $16k appreciation (10.0% local appreciation)).
• Location reads 65/100 on livability (#517 in MN) — a middle-class / working-renter tenant base. Strengths: cost of living A+, housing A+, schools B; Watch: crime C-, employment C-, health & safety D.
• St. Louis County School District (rural): math 34% / reading 49% proficiency, ranked #212 of 301 in MN (top 70%) — families likely to look elsewhere, expect single-tenant / working-renter base with shorter leases.
• Watch-outs: built in 1925 — expect roof / HVAC / electrical / plumbing capex.
• Market conditions: 128 active listings in the ZIP; 639 units permitted in St. Louis County in 2024 (338 in 5+ unit buildings).
• 4 sale attempts since 6y ago; this cycle's ask has dropped $17k (10%) from the opening price — seller is motivated, your offer sets the floor, not the list.
• Current owner paid $50k; list at $159k implies a 218% gain — meaningful room to come down on a strong offer.
• By year 3, paydown + projected appreciation supports a ~$43k cash-out refi (75% LTV) — recoverable capital for the next deal without selling this one.
• Cap rate 5.1% vs local median 0.4% in Tower — 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

• What do current leases actually rent for vs. the listed asking? Can we see a recent rent roll and the last 12 months of T-12 income?
• It's been on market 346 days. Have you received any prior offers? Is the seller open to a 31% concession, seller financing, or rate buy-down credit?
• Built in 1925 — when were the roof, HVAC, electrical panel, plumbing, and water heater last replaced?
• Why hasn't it sold? Are there any deal-killer items the seller is aware of (foundation, flood, title, zoning, code violations)?
• Is there a deadline driving the sale (1031 exchange, divorce, estate, relocation)? That informs how much negotiation room exists.
• Schools are B-rated — typically a magnet for longer-tenancy family renters. What's the average tenant stay here, and is there a school-zone premium baked into asking?
• The area grade is low — what's the realistic commute time and amenity access for the typical tenant pool here? Any planned neighborhood developments (good or bad) we should know about?
• 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.