1221 Madison Ave #218

Detroit Lakes, MN 56501

$122,000B

2 bd · 1.0 ba · 792 sqft · Built 1971 · Condo · Pending · 14 DOM

Cashflow @ list (25.0% down · 7.5%)

• Estimated rent: $2,649/mo
• Mortgage (P&I): −$640
• Tax + insurance: −$124
• HOA: −$250
• Vac / Maint / Mgmt: −$556
• Net cashflow: $1,079/mo
• Annual: $12,953/yr
• Cap rate: 16.91%
• Cash-on-cash: 37.92%
• DSCR: 2.69
• 1% rule: 2.17%
• Cash to close: $34,160

Investor read

• This is a 2-bed/1.0-bath condo listed at $122k.
• At list price, monthly cash flow is $1k ($13k/yr) — positive.
• The deal already cash-flows at list — no discount required.
• Meets the 1% rule at list price ($3k rent vs $122k).
• Only 14 days on market — expect competitive offers; lowballing is unlikely to land.
• Local home prices are declining (-3.0%/yr); year-one equity from $843 of loan paydown is wiped out by about $4k of value loss. Plan a longer hold.
• Location reads 80/100 on livability (#78 in MN, #1,847 nationally) — a professional / high-income tenant draw. Strengths: housing A+, health & safety A+, cost of living A; Watch: amenities F, commute F.
• Detroit Lakes Public School District (town): math 44% / reading 50% proficiency, ranked #155 of 301 in MN (top 52%) — families likely to look elsewhere, expect single-tenant / working-renter base with shorter leases.
• Market conditions: 307 active listings in the ZIP; 156 units permitted in Becker County in 2024 (0 in 5+ unit buildings).
• Becker County population projected at +4% by 2050 — modest demand growth; plan on rents tracking national, not racing it.
• 2 sale attempts since 2y ago with the ask held roughly flat each time — persistent listings suggest the price (not the market) is what's stuck; bring a comps-based counter.
• At projected returns (-3.0% appreciation + 3.0% rent growth), your $34k cash investment doubles in ~4 years — after that, you're playing with house money.
• Climate carrying-cost: moderate wildfire risk — expect insurance premiums to compound above CPI over the hold.
• Cap rate 16.9% vs local median 4.7% in Detroit Lakes — 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 1971 — when were the roof, HVAC, electrical panel, plumbing, and water heater last replaced?
• What does the HOA fee cover, when was the last increase, and are there any pending special assessments or reserve-fund shortfalls?
• Any open or pending special assessments — roof, HVAC, plumbing, elevator, façade? What's the per-unit balance and payoff schedule, and is the seller paying it off at close or rolling it to the buyer?
• 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?
• 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 apartment / multifamily construction is in the pipeline within 1–3 miles? Heavy new supply (>2% of stock underway) typically softens rents 12–24 months out; light construction supports rent growth.