238 Locust Ave

Owatonna, MN 55060

$132,000D

2 bd · 1.0 ba · 1,087 sqft · Built 1910 · SingleFamily · Active · 210 DOM

Cashflow @ list (25.0% down · 7.5%)

• Estimated rent: $1,055/mo
• Mortgage (P&I): −$692
• Tax + insurance: −$216
• HOA: −$0
• Vac / Maint / Mgmt: −$222
• Net cashflow: $-74/mo
• Annual: $-891/yr
• Cap rate: 5.62%
• Cash-on-cash: -2.41%
• DSCR: 0.89
• 1% rule: 0.80%
• Cash to close: $36,960

Investor read

• This is a 2-bed/1.0-bath single-family listed at $132k.
• At list price, monthly cash flow is $-74 ($-891/yr) — negative.
• To cash-flow at today's rent, offer at most $119k (9.9% below list).
• To meet the 1% rule (rent ≥ 1% of price), the offer needs to be $106k (20.1% below list).
• It's been on market 210 days — a 12% lower offer ($116k) is reasonable based on typical stale-listing flexibility.
• Recommended offer: $106k (20.1% below list) — sets the bar for 1% rule.
• Local home prices are declining (-3.0%/yr); year-one equity from $913 of loan paydown is wiped out by about $4k of value loss. Plan a longer hold.
• Location reads 76/100 on livability (#155 in MN, #3,413 nationally) — a middle-class / working-renter tenant base. Strengths: cost of living A+, housing A+, crime A; Watch: amenities D-, commute F, health & safety D-.
• Owatonna Public School District (town): math 38% / reading 47% proficiency, ranked #194 of 301 in MN (top 64%) — families likely to look elsewhere, expect single-tenant / working-renter base with shorter leases.
• Zoned schools: Washington Elementary (math 56% / reading 53%, grade C, #320 of 857 statewide, top 41%, 487 students, 48% FRL); Owatonna Middle School (math 25% / reading 42%, grade F, #182 of 258 statewide, top 71%, 999 students, 49% FRL); Owatonna Senior High (math 49% / reading 65%, grade C, #64 of 471 statewide, top 16%, 1,475 students, 39% FRL).
• Watch-outs: built in 1910 — expect roof / HVAC / electrical / plumbing capex.
• Market conditions: 222 active listings in the ZIP; 7 comparable units currently listed for rent nearby; rentals lingering (median 46d on market — plan ~5-8 weeks vacancy on turnover, expect pricing pressure); 100% of comp listings sitting > 30 days — soft ceiling on asking rent; solid renter incomes; 28 units permitted in Steele County in 2024 (0 in 5+ unit buildings).
• Steele County population projected to shrink 10% by 2050 — rents likely to lag national; underwrite the cash flow, not the appreciation.
• 8 sale attempts since 12y ago; this cycle's ask has dropped $43k (25%) from the opening price — seller is motivated, your offer sets the floor, not the list.
• Current owner paid $108k; 22% above their basis — modest negotiation headroom, anchor on the comps not their cost.
• Cap rate 5.6% vs local median 3.2% in Owatonna — 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.
• This rent is only 15% of the median local income ($85k/yr) — well below the 30% rent-burden line; pricing power to push rent on renewal without tenant pushback.

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 210 days. Have you received any prior offers? Is the seller open to a 20% concession, seller financing, or rate buy-down credit?
• Built in 1910 — 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.