How Do I Get Started in Real Estate Investing in Minnesota?

If you are wondering how to get started in real estate investing, you are not alone. Higher interest rates, tight housing supply, and headlines about affordability have made the decision more complicated than it was a few years ago.

Real estate can still be a powerful way to build long-term wealth and steady income. The difference in 2025 is that you need to be more careful about how you use debt, where you buy, and how you manage risk. This guide will walk through the basics, with a focus on what it looks like for a first-time investor in Minnesota.

What is investment real estate?

Investment real estate is property you buy to generate income or long-term profit rather than to live in yourself. Most opportunities fall into four broad categories:

Residential are the properties that you would be renting out to tenants. Typically this involves homes, townhouses, single-family rentals (SFRs), multi-family units, apartment buildings, vacation properties, and every other living space you can think of. For many new investors, a simple long-term residential rental is the most approachable starting point.

Commercial real estate properties are used for business activities. Office buildings, retail storefronts, mixed-use buildings, and some types of medical or professional offices fall in this group. Commercial real estate usually involves larger loans, longer leases, and more complex underwriting.

Industrial properties include warehouses, storage facilities, light manufacturing spaces, and other special-purpose buildings such as breweries, car washes, and similar operations.

Land can be held for future development or current use. That might mean lots to be split and sold, land for future construction, or agricultural land used for crops and livestock. Land can be attractive because there is no building to maintain, but it also produces no rent on its own.

Each category has its own risks, financing structures, and typical investors. What they share in common is the need for realistic expectations and careful planning before you buy.

Is real estate still worth it in 2025?

The short answer is that real estate can still be a strong long-term investment, but the numbers look different at today’s rates and prices.

In recent years, mortgage rates have climbed from the low threes to the mid-sixes, and in some months higher, which means monthly payments are significantly larger for the same loan amount. At the same time, home values in Minnesota have continued to rise modestly, and the average home value sits in the mid-$300,000s. Rental demand remains solid in many parts of the state, especially around growing job centers, and vacancy rates in the Twin Cities metro have held at relatively healthy levels.

That combination creates both opportunity and pressure. Real estate still offers:

• income through rent
• potential long-term appreciation
• tax benefits such as depreciation and the ability to defer gains in some cases
• some protection against inflation over long periods

But to make it work in 2025, investors need to:

• rely on realistic, not optimistic, rent and expense assumptions
• accept that cash-on-cash returns on a first purchase might be modest at today’s borrowing costs
• keep more reserves on hand to cover vacancies, repairs, and rate changes

In other words, the asset class has not changed; the margin for error has shrunk. These are times when it is important to understand how to best maximize cash flow of your real estate investment alongside operating it. 

The main risks you need to be honest about

With every opportunity, comes responsibility and risk, and getting started in real estate investing is no different. While anyone can be a real estate investor, real estate investing is not for everyone. 

Capital requirements: It requires a lot of upfront capital.

Buying property isn't budget-friendly. You'll either need plenty of savings or a mortgage from a financial institution. Buying property comes with down payments, closing costs, and the need for a reserve fund. You want enough cash to close, complete any required repairs, and cover several months of mortgage and operating costs without stress.

Time and Attention: It can be time-consuming.

Researching, planning, financing, buying, selling, and improving a property all take real time and real energy. Finding deals, running the numbers, arranging financing, and getting to the closing table only adds to the load. And even with a property manager, you are still the one making decisions, setting standards, and watching performance.

Local Market Risk: It is highly localized.

Local real estate is exactly what it says: local. Markets can shift from block to block, and the returns you see will depend on the specific dynamics of your community. We see this across Minnesota. Strong investing means studying real rental comps, understanding neighborhood trends, and paying attention to the changes that can push values up or down.

Maintenance: Properties require regular maintenance and upkeep.

Every property needs ongoing maintenance. You’ll handle repairs when something breaks, seasonal upkeep, and the work required to turn the unit between tenants. Rental income should cover these costs over time, but depending on how you finance the property, you’ll still need to meet your mortgage and insurance obligations and maintain a healthy margin. 

Liability and Leverage: It adds liability and decreases liquidity.

Owning property introduces legal and insurance risk. Taking on too much debt relative to rent and income can magnify small problems into big ones. Rising taxes or insurance, a few months of vacancy, or an unexpected repair can wipe out thin cash flow.

If you are already stretched by existing debt, short on emergency savings, or looking for a quick fix to a cash-flow problem, this is not the right time to add leverage. The more conservative you are going in, the better you will sleep when something goes wrong, because at some point it will.

How to lower your risk before you buy anything

With every opportunity comes risk and responsibility, but also comes ways to if not eliminate, then minimize it. There are a few simple disciplines that go a long way toward protecting you.

• Getting a thorough home inspection from a trusted individual. This could also include a walk-through with a contractor to see what repairs need to be done and how much it will cost in advance.

• Consulting with a real estate attorney. They have the knowledge and experience you may lack since buying and selling homes is their passion, full-time job, and specialty.

• Securing landlord insurance if you are renting out. While it may be taboo to plan for the worst, you should at least prepare for it. This type of insurance generally covers property damage, lost rental incomes, investment mistakes, and that liability piece we talked about earlier. 

• Having an exit strategy. (We'll touch on this more later...)

Additionally:

Before you ask, "How do I get started in real estate investing?", you should ask, "What do I need to know before getting started in real estate investing?" It's important to realize that buying a property is not the first step in your investing journey. Not even close. There is a crazy amount of work that goes into preparation before ever signing your name on that dotted line.

Know Your Financing Options

Talk with a lender early. A conversation about your income, existing debts, credit profile, and goals will help you understand how much you can prudently borrow and what kinds of loans fit your situation. The goal is not just to get approved, but to choose a structure that gives your investment room to breathe.

Pay Down Personal Debt

Paying down high-interest debt and building a healthy emergency fund before you take on an investment property puts you in a much better position. You want to avoid a situation where a vacancy or repair on your rental creates a crisis in your personal finances.

Calculate Cash Flow

Before you make an offer, run the numbers with conservative assumptions. Start with an estimate of market rent, then subtract every realistic expense: your mortgage payment, property taxes, insurance, utilities you may be responsible for, routine repairs, and a management fee if you won’t be handling the property yourself. Build in a vacancy allowance because months without a tenant happen, even in strong markets.

Perhaps, you plan to improve the cash flow by making changes in the operations or configuration. Be sure to consider these impacts on cash flow and capital. If the cash flow is weak or negative using realistic inputs, walk away and save your capital for a property that performs from day one.

Determine an Exit Strategy

Decide in advance how long you intend to hold the property and under what conditions you would sell. Your exit plan will influence the type of property you buy, how you finance it, and what level of cash flow you are willing to accept.

Build the Right Team

A knowledgeable real estate agent, an experienced lender, a good property manager if you do not want to be hands-on, and a real estate attorney all add cost, but they also help you avoid mistakes that are far more expensive.

Active vs passive: what kind of investor do you want to be? 

Some investors like to be deeply involved. They find their own deals, manage renovations, and handle tenant relationships. Others prefer to provide capital and let professionals run the day-to-day operations.

If you want to be active, expect to invest significant time in learning your local market, building relationships, and managing properties. The potential upside can be higher, but so is the workload.

If you prefer a more passive role, you have options such as:

• hiring a property manager for your own rentals
• investing in professionally managed real estate funds or REITs
• participating in carefully vetted real estate syndications or crowdfunding platforms

Passive options can give you exposure to real estate without the responsibility of owning and operating a property yourself, though they come with their own risks and fees. The important thing is to be honest about your temperament and available time.

Property types that often work for first-time investors

REITs

A simple way to get exposure to real estate without owning a property yourself is through real estate investment trusts (REITs). REITs let you invest in commercial properties the same way you would buy a stock. You purchase shares in a company that owns income-producing real estate, and you receive a share of the cash flow through dividends.

REITs are required to distribute at least 90 percent of their taxable income to shareholders, which is why their dividends tend to be higher than many traditional stocks. They also offer liquidity because they are traded on the stock market. You can sell your shares whenever you need to, without dealing with the process of selling a building.

The trade-off is that REITs are still long-term investments. They can fluctuate with the market, and you should expect to hold them for years rather than look for quick gains.

Single-Family Homes Near An Elementary School

Families are always looking for houses in good school districts, making this a reliable property type for long-term investing. There is less tenant turnover since families with school-age children want to stay in one place longer, making them more likely to renew leases every year, even if that means rent increases. You will also make a large return down the road if you want to sell the property all together instead of renting out for that same reason: Homes in good school districts are always in demand.

Apartment Buildings Near Universities

Apartment buildings near universities tend to stay in demand. Students consistently need housing within walking distance of campus, and units of all sizes—studios to two-bedrooms—lease quickly when they are close to classes and amenities. Turnover is higher and income can vary with the academic calendar, but vacancy is rarely the issue. If you price the units correctly and manage the leasing cycle well, you can maintain steady occupancy and predictable cash flow.

Properties with Two Separate Entrances

Properties with two separate entrances can turn a single structure into two income streams. This might include a mother-in-law suite, an accessory dwelling unit (ADU), or a finished basement or garage that qualifies as a legal rental. As long as the space meets local zoning and building requirements, having two leases under one roof can improve cash flow and reduce vacancy risk.

What you want to avoid as a first-time investor in 2025 is an overly complex project with thin margins: heavy rehabs without experience, distant markets you do not understand, or speculative flips that only work if everything goes right.

A simple game plan for your first investment

Step one: Get your personal finances in order

Make sure you have a budget, an emergency fund, and manageable debt levels. Know your credit score and what you can comfortably afford to invest without depending on perfect results.

Step two: Decide your role and time commitment

Clarify whether you want to manage tenants and repairs or prefer a property manager or more passive vehicle. This decision will narrow your options.

Step three: Choose one market and one strategy

Pick a specific area in Minnesota you know or want to know well, and focus on a single approach, such as long-term rentals near job centers or small multi-family properties in stable neighborhoods.

Step four: Talk with a lender and run real numbers

Sit down with a lender who understands investment real estate and walk through actual properties and sample numbers at today’s interest rates. That conversation should help you see what down payments, debt-service coverage, and cash-flow profiles are realistic.

Step five: Build your team and take the first step

Line up your agent, attorney, inspector, and any other professionals you will rely on. When the right property appears and the numbers work under conservative assumptions, move forward deliberately, not impulsively.

How Security Bank & Trust Co. can help

Real estate investing sits at the intersection of your personal finances, your tolerance for risk, and your long-term goals. A good banking partner should do more than provide a loan approval.

At Security Bank & Trust Co., our team works with investors across Minnesota on:

• investment real estate financing for residential, commercial, and agricultural properties
• structuring loans with an eye on cash flow, reserves, and long-term sustainability
• coordinating with your other advisors so that your banking, investing, and estate planning work together

If you are considering your first investment property or looking to add to an existing portfolio, we are happy to sit down, run through the numbers, and talk through whether now is the right time and what structure makes sense for you.

You can start the conversation by reaching out to our investment real estate lending team or by downloading our Investment Real Estate Guide or check out another one of Security's many resources:

• 7 Podcasts Commercial Real Estate Professionals are Listening To
• The Best Commercial Real Estate Investing Books
• Talk to a Lending Expert