505 Spear Ave

Duluth, MN 55803

$284,900D

3 bd · 2.0 ba · 1,221 sqft · Built 1920 · SingleFamily · Pending · 35 DOM

Cashflow @ list (25.0% down · 7.5%)

• Estimated rent: $2,559/mo
• Mortgage (P&I): −$1,494
• Tax + insurance: −$371
• HOA: −$0
• Vac / Maint / Mgmt: −$537
• Net cashflow: $157/mo
• Annual: $1,883/yr
• Cap rate: 6.95%
• Cash-on-cash: 2.36%
• DSCR: 1.11
• 1% rule: 0.90%
• Cash to close: $79,772

Investor read

• This is a 3-bed/2.0-bath single-family listed at $285k.
• At list price, monthly cash flow is $157 ($2k/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 $256k (10.2% below list).
• It's been on market 35 days — a 3% lower offer ($276k) is reasonable based on typical stale-listing flexibility.
• Recommended offer: $256k (10.2% below list) — sets the bar for 1% rule.
• Local home prices are declining (-3.0%/yr); year-one equity from $2k of loan paydown is wiped out by about $9k of value loss. Plan a longer hold.
• Location reads 82/100 on livability (#36 in MN, #1,060 nationally) — a professional / high-income tenant draw. Strengths: commute A+, cost of living A+, housing A+; Watch: amenities F.
• Duluth Public School District (urban): math 44% / reading 55% proficiency, ranked #132 of 301 in MN (top 44%) — families likely to look elsewhere, expect single-tenant / working-renter base with shorter leases.
• Zoned schools: Congdon Elementary (math 71% / reading 76%, grade A, #41 of 857 statewide, top 5%, 452 students, 20% FRL); Ordean East Middle School (math 45% / reading 61%, grade C+, #53 of 258 statewide, top 22%, 989 students, 26% FRL); East High School (math 42% / reading 73%, grade C, #59 of 471 statewide, top 13%, 1,494 students, 23% FRL) — zoned schools average 23% FRL vs 39% district-wide (16 pts lower); this property's tenant base skews higher-income than the district average.
• Watch-outs: built in 1920 — expect roof / HVAC / electrical / plumbing capex.
• Market conditions: 109 active listings in the ZIP; 1 comparable units currently listed for rent nearby; solid renter incomes; 639 units permitted in St. Louis County in 2024 (338 in 5+ unit buildings).
• 4 sale attempts since 21y 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.
• Current owner paid $225k; 27% above their basis — modest negotiation headroom, anchor on the comps not their cost.
• Cap rate 7.0% vs local median 4.9% in Duluth — 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

• It's been on market 35 days. Have you received any prior offers? Is the seller open to a 10% concession, seller financing, or rate buy-down credit?
• Built in 1920 — 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.
• 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.
• 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.