406 5th St NW

Montgomery, MN 56069

$215,000D+

3 bd · 1.0 ba · 979 sqft · Built 1946 · SingleFamily · Active · 130 DOM

Cashflow @ list (25.0% down · 7.5%)

• Estimated rent: $1,728/mo
• Mortgage (P&I): −$1,127
• Tax + insurance: −$273
• HOA: −$0
• Vac / Maint / Mgmt: −$363
• Net cashflow: $-36/mo
• Annual: $-428/yr
• Cap rate: 6.09%
• Cash-on-cash: -0.71%
• DSCR: 0.97
• 1% rule: 0.80%
• Cash to close: $60,200

Investor read

• This is a 3-bed/1.0-bath single-family listed at $215k.
• At list price, monthly cash flow is $-36 ($-428/yr) — negative.
• To cash-flow at today's rent, offer at most $209k (2.9% below list).
• To meet the 1% rule (rent ≥ 1% of price), the offer needs to be $173k (19.6% below list).
• It's been on market 130 days — a 12% lower offer ($189k) is reasonable based on typical stale-listing flexibility.
• Recommended offer: $173k (19.6% 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 $6k 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 1946 — 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.
• 11 sale attempts since 27y 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.
• Cap rate 6.1% vs local median 3.2% 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

• 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 130 days. Have you received any prior offers? Is the seller open to a 20% concession, seller financing, or rate buy-down credit?
• Built in 1946 — 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.
• 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.