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Why Is A Minneapolis Duplex Worth More Than A Fourplex?

September 3rd, 2010 categories: Buying A Duplex

Have you ever noticed that many Minneapolis duplexes sell for as much as a fourplex?

Why? After all, if there are more people paying rent, shouldn’t the property be worth more?

Not necessarily.

See it all boils down to that law we all learned in our first economics class: the law of supply and demand.

There are simply more prospective buyers for duplexes than there are for four unit buildings.

In the years I’ve been a Realtor, I would say that on average, at least 50 percent of the duplex buyers I’m working with at any given time are owner occupants.

Some are looking as a duplex as an affordable way to move into a neighborhood that’s out of their price range as single family home buyers.

Others are looking to owner occupy the property for a time, before moving on to a single family home while keeping the duplex as an investment.

While the prospect of having a single tenant to manage is palatable to most of these owner occupants, the idea of having three sets of tenants to respond to is overwhelming.

As a result, these owner occupants tend to relegate themselves to duplexes, where they compete with investors who are simply looking to earn a specific rate of return on a property.

More buyers in the market for a property always results in a higher price.

Written by Kari Lundin | Discussion: No Comments »

Beware of Black Belt Craigslist Duplex Sellers

September 2nd, 2010 categories: Buying A Duplex

I’ve been finding a lot of wolves in s Sheep’s clothing lately.

Not in my dreams, but rather, on Craigslist.

Every now and then I scan the list of duplexes for sale on Craigslist. As I’m familiar with most of the ones listed by Realtors and active on the MLS, I narrow my search to those properties offered for sale by owner.

I do this for several reasons, one of which is finding that elusive “perfect” property for a client who’s seen everything on the MLS.

But lately when I contact these sellers I am surprised to learn the seller herself is a Realtor.

Now there’s nothing wrong with an agent selling her own property without listing it on the MLS. S he has the same rights to sell it herself and advertise it anywhere she chooses that a seller who does not hold a real estate license has.

The difference is she has a legal responsibility to disclose this information from the start. In other words, her ad should say something like, “owner/agent”.

The reason this is required by law is to protect the consumer. It is assumed the agent has specialized training that makes her an expert in her field, thereby giving her an advantage over someone who doesn’t have the same training.

It’s kind of like walking into a fight with a black belt when all you’ve done is watch Jackie Chan movies.

If you’re aware you’re doing this prior to seeing the property, you have the ability to find competent representation to look out for your best interests.

And you should.

Written by Kari Lundin | Discussion: No Comments »

Minneapolis Real Estate Market Gains Weight

August 31st, 2010 categories: Twin Cities Real Est

The Minneapolis real estate market is like someone who just can’t stop eating.

No matter how much it needs to not put another piece of chocolate in its mouth without also working out, it just can’t seem to keep itself from reaching for another piece.

For the last 12 weeks, the number of single family homes for sale in the market has been higher than it was a year ago; 8.1 percent higher to be exact.

And it’s growing because buyers aren’t out there to help work off the pounds of excess inventory.

For the week ending August 21, there were 601 purchase agreements signed. That’s 40.6 percent less than a year ago.

Duplex and small multi-family sales fared better however. While pended sales were down 10.7 percent year over year, the amount of new inventory also declined by 9.75 percent.

Of those properties that received purchase agreements, just 20 percent were signed by traditional sellers. This is down slightly from last year’s 25 percent. While the average off market price was $119,492, faring better than last year’s sold price of $113,148, it’s important to remember we won’t know until the sales have closed how near list price those transactions were for. In this market, odds are the “getting” price was below the “asking” price.

Traditional sellers brought 32.43 percent of the new inventory to the market for the week; a healthier showing than last year’s 22 percent of the new offerings.

Written by Kari Lundin | Discussion: No Comments »

Is The Duplex Tax Credit About To Make A Comeback?

August 30th, 2010 categories: Tax Credits

If you blinked over the weekend, you missed what might be the summer’s biggest news in the U.S. housing market.

There was actually a conversation on CNN’s “State of the Union” program yesterday morning where Housing and Urban Development Secretary Shaun Donovan said it was too early to say whether or not the $8000 first time home buyer and $6500 repeat buyer tax credits would be revived.

Home buyers could purchase a single family homes, duplex homes, triplexes or apartment building to earn the credit; so long as they deemed the property their principal residence.

On the surface, that doesn’t sound like good or exciting news. However, it is the first time that I can recall a revival of the tax credit being discussed at all.

What prompted Donovan’s statement?

It was last week’s report of that sales of existing U.S. homes in July fell to their slowest pace in 15 years. It was worse than everybody, including the Obama administration, anticipated.

Of course, many fear an extension of the tax credit would increase the deficit. Others don’t see the economy improving until the housing market stabilizes.

I can’t tell you whether another tax credit will solve anything or not. I do know there seemed to be a greater sense of urgency to get something done among both my buyers and sellers when the extension was in place.

Without it, while many are planning to buy and want to sell, nobody seems in a hurry to do anything.

Written by Kari Lundin | Discussion: No Comments »

MLS Now Makes It Easy To Find Tenants

August 27th, 2010 categories: Tenants

Starting September 1, duplex home owners looking to lease their units will be able to list them on the Minneapolis/St Paul MLS.

This will help more property owners expose their vacancies to a greater number of prospective tenants, as well as provide a centralized destination for people to find places to live.

It will also help duplex sellers who are having difficulty finding a buyer market their property for rent until market conditions improve.

The rental section of the MLS will feature single family homes, condos, townhouses, apartments, duplexes, triplexes and fourplexes.

Listing your rental on the MLS can be done through any Realtor who’s a member of the MLS. The listing must include an offer of compensation; an amount that will be a flat dollar amount rather than a percentage.

Rental listings will look much like those for properties that are for sale, including a list of amenities, length of the lease, rent amount and one or more photos.

Properties being actively marketed for sale may also be listed separately as rentals; resulting in two listings and two MLS numbers.

If you’re interested in getting your property rented, call me. I’d be happy to help you get it on the MLS.

Written by Kari Lundin | Discussion: No Comments »

Why Bankruptcy Won’t Prevent Foreclosure

August 26th, 2010 categories: Short Sales/Foreclosure

I subscribe to a web site that tells me which duplexes in the Twin Cities are facing a Sheriff’s Sale.

Every now and then, I see a property listed where the Sheriff’s Sale has been delayed because the property owner is filing for bankruptcy.

I don’t know if the duplex home owners are doing this with the hope of avoiding foreclosure or not. But if they are, it won’t work.

Declaring bankruptcy may temporarily halt foreclosure proceedings, giving the property owner an opportunity to reorganize debt. However, it will not stop the foreclosure process.

Both bankruptcy and foreclosure stay on your credit report for a minimum of 7 years. Imagine giving yourself the double whammy of both.

For many property owners, mortgage payments are the biggest portion of their debt.  So when considering filing for bankruptcy, it may be useful to consider whether or not the financial strain would be eliminated or reduced if it were eliminated or reduced.

Duplex owners who can demonstrate a monthly financial shortfall may qualify for a short sale. While this too has some impact to credit, it is nowhere near as damaging or enduring as a foreclosure.

If you’re considering bankruptcy because of overwhelming debt, including your mortgage payments, give me a call. As a CDPE agent, I can help you explore your financial options.

You may discover bankruptcy isn’t inevitable after all.

Written by Kari Lundin | Discussion: 2 Comments »

Duplex Sales Make You Want To Stay In Bed

August 24th, 2010 categories: Twin Cities Real Est

Some days, it’s tough for Realtors to get out of bed.

Today was one of those mornings, knowing as I did that the National Association of Realtors would be releasing their report for July existing home sales.

The news was worse than expected. Nationally, sales fell by more than 27 percent; the largest decline in 15 years.

Worse yet, Minneapolis lead the nation in declines, with sales down 42 percent from their mark one year ago.

August doesn’t appear to be faring any better. For the week ending August 14,  pending single family home sales were down 38.5 percent from last year.

In fact, over the last three months, there have been 5,812 fewer pending sales than there were one year ago over the same stretch of time.

Pending duplex and small multi-family property sales also declined 24 percent from the same week last year. Of those property owners who accepted purchase agreements, 74 percent were or had to involve lenders in their negotiations.

Traditional sellers eased ahead of foreclosures and short sales in the new listing category, bringing 53 percent of the listings to market.

The silver lining may be that while duplex and small multi-family sales were down, the average off market price of $126,742 was 11.9 percent higher than the sold price of last year.

Somebody wake me when this is over.

Written by Kari Lundin | Discussion: 1 Comment »

What Does Donald Trump Know About Real Estate?

August 23rd, 2010 categories: Buying A Duplex

The New York Times published an article today with the headline announcing “Real Estate Fading As A Means To Build Wealth”.

I’m sure this came as news to Donald Trump.

While the article focused on single family homes, it also quoted Zillow’schief economist Stan Humphries, who stated, “There is no iron law that real estate must appreciate.”

Well, that’s exactly why duplexes and small multi-family properties are good investments. If you and your Realtor are doing your math correctly, the cash flow can give you a good return;  without appreciation.

Anyone who encourages you to buy an investment property that doesn’t cash flow because “it will go up in value” doesn’t know what they’re doing. How much something will appreciate is entirely speculative.

Successful real estate investors buy properties because they know, going in, what the rate of return on their money will be.

Sure, we all got used to rapid appreciation during the years of the boom market. But savvy investment property buyers were sitting on the sidelines, because the numbers didn’t work.

If a duplex house, triplex or fourplex either pays for itself, or makes your portion of the mortgage affordable, something like appreciation should be seen as a bonus.

After all, if the property never went up in value, at the end of the mortgage term you would have equity equivalent to the amount you paid for it, as well as monthly cash flow.

Small multi-family properties in the Twin Cities are averaging better rates of return than they have in years.

They can be a pretty nice way to supplement your income, even if your last name isn’t Trump.

Written by Kari Lundin | Discussion: No Comments »

Duplex Owners May Not Have Recourse

August 20th, 2010 categories: Short Sales/Foreclosure

If you’re a duplex home owner facing a short sale or foreclosure, one of the most important items to consider in your decision-making process is whether your state is a recourse or non-recourse loan state.

A recourse loan is one in which the bank can obtain a deficiency judgement for any amount they can’t recuperate through a short sale or foreclosure.

For example, if you sell your duplex and are $25,000 shy of what you owe the lender, they can pursue you for the difference. Of course, if you lose the property to foreclosure, they can come after you for the total loan balance.

Sadly, most states are recourse loan states.

However, Minnesota, California, Mississippi, Montana, North Dakota and West Virgina are what’s known as non-recourse loan states. There, the property is the only collateral the bank can come after. Once it’s sold or foreclosed upon, they can’t pursue further judgements.

Of course, for duplex owners, that may not mitigate tax liabilities and it’s important that you consult with your accountant before making any decisions.

Written by Kari Lundin | Discussion: No Comments »

An Unnecessary Fourplex Tragedy

August 19th, 2010 categories: Short Sales/Foreclosure

I looked at a familiar fourplex this morning.

I knew the building because I showed it to a client two or three years ago when the owner was trying to sell it herself.  At that time, my client liked it well enough to write an offer.

The offer was for $260,000.

The building is now on the market as a foreclosure for $135,000.

Sadly, I had another buyer for the building last summer. I’d called the owner and she never called me back.

She chose to be foreclosed upon. She had the option of a short sale. The latter would have greatly reduced her tax liabilities and alleviated many long-term credit issues.

But pride got in her way.

If you’re upside down in a duplex, triplex, or fourplex, remember you do have options. And almost all of them are better than foreclosure.

If you’d like help finding a way out, call me. As a Certified Distressed Property Expert, I can present you with options you may not have considered.

And remember, you’re not alone. We’re all in this housing crisis together.

Written by Kari Lundin | Discussion: No Comments »

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