406 4th St SW

Montgomery, MN 56069

$169,900D+

2 bd · 1.0 ba · 675 sqft · Built 1908 · SingleFamily · Pending · 17 DOM

Cashflow @ list (25.0% down · 7.5%)

• Estimated rent: $1,538/mo
• Mortgage (P&I): −$891
• Tax + insurance: −$255
• HOA: −$0
• Vac / Maint / Mgmt: −$323
• Net cashflow: $69/mo
• Annual: $829/yr
• Cap rate: 6.78%
• Cash-on-cash: 1.74%
• DSCR: 1.08
• 1% rule: 0.91%
• Cash to close: $47,572

Investor read

• This is a 2-bed/1.0-bath single-family listed at $170k.
• At list price, monthly cash flow is $69 ($829/yr) — positive.
• The deal already cash-flows at list — no discount required.
• To meet the 1% rule (rent ≥ 1% of price), the offer needs to be $154k (9.5% below list).
• It's been on market 17 days — a 2% lower offer ($167k) is reasonable based on typical stale-listing flexibility.
• Recommended offer: $154k (9.5% below list) — sets the bar for 1% rule.
• 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 68/100 on livability (#399 in MN) — a middle-class / working-renter tenant base. Strengths: crime A+, cost of living A+, housing A+; Watch: amenities F, commute F, health & safety F.
• Watch-outs: built in 1908 — expect roof / HVAC / electrical / plumbing capex.
• Market conditions: 80 active listings in the ZIP; 60 units permitted in Le Sueur County in 2024 (0 in 5+ unit buildings).
• Le Sueur County population projected to shrink 8% by 2050 — rents likely to lag national; underwrite the cash flow, not the appreciation.
• 7 sale attempts since 30y ago; this cycle's ask has dropped $30k (15%) from the opening price — seller is motivated, your offer sets the floor, not the list.
• Cap rate 6.8% vs local median 3.3% in Montgomery — 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 1908 — 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.
• 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.
• 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.