4491 Birchwood Dr

Hermantown, MN 55811

$42,000B

2 bd · 1.0 ba · 1,064 sqft · Built 1979 · Other · Active · 12 DOM

Cashflow @ list (25.0% down · 7.5%)

• Estimated rent: $1,693/mo
• Mortgage (P&I): −$220
• Tax + insurance: −$70
• HOA: −$0
• Vac / Maint / Mgmt: −$355
• Net cashflow: $1,047/mo
• Annual: $12,562/yr
• Cap rate: 36.20%
• Cash-on-cash: 106.82%
• DSCR: 5.75
• 1% rule: 4.03%
• Cash to close: $11,760

Investor read

• This is a 2-bed/1.0-bath other listed at $42k. Condition is rated poor.
• 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 ($2k rent vs $42k).
• Only 12 days on market — expect competitive offers; lowballing is unlikely to land.
• Local home prices are declining (-3.0%/yr); year-one equity from $290 of loan paydown is wiped out by about $1k of value loss. Plan a longer hold.
• Location reads 67/100 on livability (#446 in MN) — a middle-class / working-renter tenant base. Strengths: employment A+, housing A+, crime B+; Watch: health & safety D, amenities F, commute F.
• Hermantown Public School District (rural): math 48% / reading 57% proficiency, ranked #73 of 301 in MN (top 24%) — acceptable for families but not a draw, mixed tenant base, ~2y average lease; only 11% free/reduced lunch — higher-income household profile.
• Zoned schools: Hermantown Elementary (math 61% / reading 52%, grade C+, #300 of 857 statewide, top 35%, 739 students, 23% FRL); Hermantown Middle (math 41% / reading 57%, grade C-, #85 of 258 statewide, top 33%, 680 students, 22% FRL); Hermantown Senior High (math 52% / reading 62%, grade C, #64 of 471 statewide, top 16%, 660 students, 16% FRL).
• Market conditions: Rents rising fast (+4.6%/yr); 208 active listings in the ZIP; 4 comparable units currently listed for rent nearby; rentals lingering (median 45d on market — plan ~5-8 weeks vacancy on turnover, expect pricing pressure); 50% of comp listings sitting > 30 days — soft ceiling on asking rent; solid renter incomes; 639 units permitted in St. Louis County in 2024 (338 in 5+ unit buildings).
• At projected returns (-3.0% appreciation + 4.6% rent growth), your $12k cash investment doubles in ~2 years — after that, you're playing with house money.
• Climate carrying-cost: moderate flood risk — expect insurance premiums to compound above CPI over the hold.
• Cap rate 36.2% vs local median 2.1% in Hermantown — 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

• Have any recent inspections been done? Can we get a copy of the seller's disclosures and any deferred-maintenance estimates?
• Built in 1979 — 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?
• 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.

Repairs flagged (vision-AI assessment)

• Major: Structural damage — Significant structural issues are evident
• Major: Roof — Severe damage to the roof
• Major: Exterior — Severe damage to the exterior
• Major: Flooring — Severe damage to the flooring
• Major: Interior walls/paint — Severe damage to the interior walls and paint
• Major: Windows — Severe damage to the windows