The High Cost of Waiting To Buy A Minneapolis Duplex

The other day I heard a speaker at a national real estate seminar say his home in Texas had doubled in value in 18 years. Of course, that made me wonder how long it takes for real estate to double in value; specifically, Twin Cities duplexes, triplexes and fourplexes.

Between 2016 and 2025, the median value of a small multifamily property in the Twin Cities rose 73.9% in just 9 years. In Minneapolis, the median increase in just under a decade was 51.9%. Over the same period, St Paul saw a whopping 203% increase in median value!

These figures are impressive. What makes them even more so is that, in every case, there were one or more years in which values declined from one year to the next.

Of course, smart real estate investors never count on appreciation. A property needs to make financial sense for a buyer from its first day of ownership. It has to either cash flow or fall within a house hacker’s lifestyle budget. Additional annual benefits include principal reduction and tax savings.

As a real estate agent, I often work with buyers hesitant to act. They repeatedly cite one or more of a handful of reasons; waiting for interest rates or prices to fall. Sometimes it’s even a concern about the broader economy.

Of course, lower rates and the perception of a healthy economy inspire confidence in everybody. This, in turn, brings more buyers into the marketplace. That’s when that old basic economic principal of supply and demand kick in, ultimately driving property values up, which makes them more expensive to buy.

What’s the total cost had a buyer waited from 2016 until now to buy? In the 7 county metro area, the median value rose from $230,000 in 2016 to $400,000 last year. That’s a loss of $164,015.

Using the average mortgage interest rate in February 2016 of 3.7%, an an owner-occupant down payment of 5%, the buyer would have paid off $65,985 of the mortgage. Debt retirement of $52,501 + appreciation of $164,015 = $216,516. That’s nearly the entire purchase price of the duplex in just 9 years. Of course, it’s likely there would also have been increasing cash flow due to rising rents, and the tax savings provided by depreciation and the mortgage interest deduction.

Let’s say that same person decided to wait for rates to drop 1% before buying. A 1% annual savings on a $218,500 loan ($230,000 – 5% down payment) is $2185 per year. The total interest savings over the same 9 year period is $19,665.  Rates dropped into the 2’s in 2021, buy by that time the median sales price had risen to $342,000. Five years of saving $2185 in mortgage interest ended up in a loss of $112,000 in appreciation, as well as cash flow, prinicipal reduction and tax savings.

In other words, trying to save a little ended up costing a lot.

And in all likelihood waiting for a better interest rate somewhere down the road will have the same result.