Your National Resource For Duplex Ownership

National Resources for Duplex Owners

Welcome to DuplexChick, your online destination for duplex ownership information.

Whether you're thinking of buying your first duplex home, or an experienced investor looking to sell, DuplexChick can provide you with up-to-date market information, tips on investment property ownership, and when youíre ready to buy or sell, help you find a Realtor who specializes in these unique properties right in your area.

Considering Buying? See how a duplex specialist can help you get a better deal

Considering Buying?

While every Realtor can sell you a home, not every agent can do the necessary financial analysis to find a duplex that is a good investment. Click here for a neighborhood duplex specialist who can help you meet your financial goals.

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Considering Buying? See how a duplex specialist can help you get a better deal

Considering Buying?

Unlike single family home owners, duplex owners facing foreclosure must also contend with potential tax consequences. Whether you are an owner occupant or duplex investor enduring the stress of being behind on mortgage payments, or needing to sell even though you owe more than your duplex is worth, a short sale can help reduce damage to your credit and tax obligations.

During this stressful time, let one of our Realtors who is an expert carry the load.

Thinking of Selling?

What If I Need To Sell? Regardless of market conditions, learn the tips and tricks to maximize your equity!

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Kari Lundin, Keller Williams Realty Integrity

7401 Metro Blvd Suite 350, Edina, MN 55439 tel. (612) 290-5998

Featured Articles

Selling Your Minneapolis Duplex Contract For Deed – The Good, Bad and The Ugly 06.06.17

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In the last year, many Minneapolis and St Paul duplex and investment property owners told me they would sell if not for one thing: taxes.

I suggest a 1031 exchange to all of them. Many, however, realize they will have a difficult time during a time of little inventory finding a replacement property. And others want nothing more to do with rental property whatsoever, so they are in a bind.

There is another solution. While it doesn’t always spring immediately to mind, a contract for deed can help reduce tax obligations. Capital gains tax and depreciation recapture are only levied when you touch the money from a sale. Therefore, if a seller carries a contract on a property, there is time to tax plan and offset any gain realized on an annual basis.

Other benefits of a contract for deed for a seller include:

  • Income – Sellers who don’t have a mortgage on their duplex can use the monthly payments as income. Contracts for deed are often at an interest rate that’s a higher return than other investment options generally return.
  • More Buyers – While we’re currently in a seller’s market,  in times when either the market favors buyers or banks are reluctant to lend money, sellers can broaden their pool of potential buyers by offering more competitive interest rates than a traditional lender or extending credit to buyers who otherwise are not able to qualify for a loan.
  • Cancel the contract and resell the property. If a buyer misses two payments, the seller can reclaim the property without having either a foreclosure sale or going to court. The seller may keep everything the buyer has paid to date and resell the property to another buyer.

Of course, there are also some potential pitfalls of selling a property on a contract for deed. They include:

  • Due on sale clauses in mortgages – If you have a mortgage on your property, selling it on a contract for deed may trigger what’s known as a due on sale clause. Most mortgages have it. Basically, if the lender learns you have sold the property, they can accelerate the repayment schedule and demand to be paid in full.
  • Buyer is unable to make the balloon payment.  Real estate and job markets change. If the buyer is unable to refinance either by using the equity accrued over the time of the contract or as a result of a job loss, the seller is left holding the contract. In this case, the seller can choose either to extend the contract and continue to receive monthly payments or to cancel the contract and evict the buyer.
  • Buyer fails to make monthly payments. If the buyer fails to make payments, the seller will have to formally cancel the contract in a manner consistent with what the law dictates.

While not terribly common in today’s hot duplex and investment property market, contracts for deed can be an excellent way to sell property.

 

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Buying A Minneapolis Duplex On A Contract For Deed: The Good, Bad and The Ugly 06.01.17

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Every now and then, duplex buyers tell me they want to purchase a property with a contract for deed.

A contract for deed is an alternative means of financing in which the seller acts as the lender for the duplex purchase rather than a bank. The buyer makes monthly payments to the seller and takes immediate possession of the property.

Terms of the loan are negotiable. The seller and buyer agree on an amortization schedule and interest rate.

One common misunderstanding is that a seller must hold a contract for deed for 30 years. Nothing could be further from the truth. Most contracts for deed are for five years or less, with a balloon payment. In other words, when the balloon payment is due, the buyer will need to refinance.

There are advantages and disadvantages to a contract for deed for both a buyer and a seller. In this post, let’s look at it from the buyer’s point of view.

Pros

  • Low down payment. Some sellers require little to no money down. (In my career, however, I have found this to be the exception.)
  • Homesteading. If a buyer intends to owner occupy a duplex, he or she can qualify for reduced property tax and other property tax benefits.
  • Mortgage interest deduction. As the owner, a buyer can qualify for the mortgage interest and real estate tax deductions of their income taxes.
  • Easier to qualify. A seller may decide to give a buyer with a less than perfect credit score a chance to buy, or not care about the buyer having a slightly higher debt to income ratio.
  • May not appear on your credit report. Unless the seller reports the terms of your contract and repayment history to the credit bureaus, which may help you qualify for a traditional mortgage on other properties.
  • May appear on your credit report. If you have credit issues and the seller does report payment history to the credit bureaus, it may help improve credit scores.
  • Lower transaction costs. Seller financing does not have loan origination fees or loan application fees.  While it is a very good idea to use a title company to close the transaction, some of their costs may be reduced also.

Cons

  • Higher down payment. Sellers typically want a down payment above and beyond their costs of selling. Agents commissions and title fees can be as high as 7-10 percent. As a seller may want at least a 10 percent down payment. Other sellers will only carry a contract for deed if the risk is low. To them, this may mean a 40 or even 50 percent down payment.e
  • Faster foreclosure. If the buyer misses two payments or defaults for other reasons, the seller doesn’t need to go to court. He or she simply cancels the contract and takes possession of the property.
  • Balloon payments. When it’s time to refinance, interest rates for traditional mortgages may be higher, or the buyer’s credit score may prevent him or her from qualifying for a loan. If the buyer is unable to refinance, the seller may opt to cancel the contract with a 60-day notice, and keep any down payment, equity, or principal that has been paid off.
  • Repair and maintenance.  While negotiable, the seller may require the buyer to be responsible for keeping the property in good repair.
  • Seller retains the title. In other words, the seller can put a mortgage or a lien on the property unless you recorded the contract with the county.
  • Unfavorable terms. Loans through banks are regulated to protect consumers. Sellers are not required to have the same standards and may offer terms that favor them.
  • Seller may sell the contract. Sometimes sellers have a financial need that causes them to want out of the contract for deed before it balloons. In this case, they may choose to sell the loan to another investor who may be less forgiving. The buyer, on the other hand, most likely will not have the option to sell his own interest in the property.
  • Property taxes and insurance are not escrowed. Most buyers using traditional financing choose to have a portion of their monthly mortgage payments escrowed to pay property taxes and insurance.

A contract for deed can be a wonderful way to acquire property if you can find a seller willing to carry the loan. There are advantages to the seller as well, and I will cover them in my next blog.

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Minneapolis Tops The Nation In Rental Demand 05.26.17

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We may not win Super Bowls or Stanley Cups in the Twin Cities, but we are tops in one very important number.

The Minneapolis-St Paul metro has the tightest vacancy rate of any major city in the U.S. according to the national multifamily housing consulting firm Witten Advisors.

According to a story in the Star Tribune, demand exceeds supply. To solve that, at the start of 2017 there were 8,440 units under construction, with another 31,752 in the planning stages.

This is good news, of course, if you’re a duplex owner in the Twin Cities. After all, lower vacancy rates mean higher rent.

So where are all of these tenants coming from?

According to Ryan Davis, senior economist for Witten Advisors, half of the growth in the rental market in the last seven years has come from renters age 55 and older, and 40 percent of the growth has come from renters who make $75,000 or more a year.

Matt Rauenhorst is vice president of Opus Development Co., an active developer of multifamily properties in the Twin Cites. In Opus’ higher end developments, he says residents are willing to pay more in exchange for “condo-like finishes”.

As more new construction multifamily properties come into the market, smaller property owners may eventually find the need to update properties to stay competitive at higher rent points.

For now, however, demand continues to exceed supply. It’s a great time to be a landlord in the Twin Cities.

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