Subscribe
Contact Info
Latest Blog Posts
Listings
Archives
Useful Links
Blogroll
Congress Threatens To Require Higher FHA Down Payments
March 12th, 2010 categories: Financing
Once upon a time, way back in 2005 and 2006, you could buy a duplex with no money down.
Then the housing crisis happened. And in an effort to make sure buyers had more at stake, banks decided they would only give loans to investors with 20 to 25 percent down, or owner occupants who qualified for FHA insured financing and had three percent for a down payment.
Then the Federal Housing Administration decided they would only insure loans of owner occupants who had 3.5 percent for a down payment.
Fair enough. That increase didn’t deter too many borrowers.
However, according to a report in the Wall Street Journal, a bill now in Congress advocates for FHA insured loans to require a 5 percent down payment. The thinking goes that if borrowers have a bigger equity position, they are less likely to default.
While that still doesn’t seem like nearly as big of a jump as a 20 percent down payment would, FHA Commissioner David Stevens testified that slight adjustment would eliminate 40 percent of new FHA loans; the equivalent of 300,000 transactions a year.
Fewer sales would, of course, result in fewer mortgage insurance premiums being paid to FHA, which doesn’t make loans, but simply insures them. This loss of revenue, Stevens contends, would in turn put the already financially stressed institution on still shakier ground.
No word on which way Congress is leaning. The imminent expiration of the first time and repeat home buyer tax credits, looming interest rate increases and the threat of higher down payments, however, mean now is the perfect time to buy.
| Discussion: No Comments »
What’s The Most Common Type of Rental Housing Anyway?
March 11th, 2010 categories: Multi-Family Property Investing
When I say “rental housing”, what image springs to mind?
Is it a large apartment complex with hundreds of units sprawling over acres of earth?
Or is the image one of single family homes, duplexes or fourplexes?
Most of us dream of parlaying a collection of duplexes into a massive apartment complex or two capable of cash flowing our retirements. And yet, according to a 2008 Joint Center for Housing Studies of Harvard University, less than 10 percent of all rental units are in buildings with 50 units or more.
Ironically, more than one third of rental units in the country are single-family homes. However, more than half of all rental units are in buildings with less than five units.
In all, the study counted 6.3 million two to four unit rental properties; 1.3 million of which are owner occupied. Eighty-five percent of these smaller properties are owned by either individual owners or couples.
The study also reports the number of households that reported at least some rental income from one to four-unit properties increased by almost a million between 2001 and 2007.
Guess it’s time to replace that mental image of a rental unit.
| Discussion: No Comments »
Deadline Pushes Minneapolis Duplex Market
March 9th, 2010 categories: Twin Cities Real Est
There are less than 60 days left to qualify for either the first time home buyer or repeat buyer tax credit.
That looming deadline may well have inspired the Twin Cities housing market’s 13.9 percent year-over-year jump in accepted offers for the week ending February 27.
While not as dramatic, the duplex and small multifamily property market also saw an increase in pended transactions; up 4.4 percent year-over-year.
Of the properties that pended, 19.46 percent were offered by traditional sellers; up from 11.6 percent for the same week in 2009.
While neither year posted particularly inspiring average off-market prices, the figure for the week in 2010 of $83,746, did nonetheless represent an increase of $805 over the year before.
The amount of new duplex inventory continued to trail last year’s mark, with just 45 properties coming on the market for the week. This represents a 30.7 percent drop from last year.
Of these new listings, 28.9 percent were offered by traditional sellers. While that’s a figure that appears thin, it is still more than twice as many as last year.
As the tax credit deadlines loom, let’s hope for continued good news.
| Discussion: No Comments »
Go Green And Save When You Fix Your Minneapolis Duplex
March 8th, 2010 categories: Home Repair
When I sit down with someone considering buying their first rental property, I always go over not only the potential revenue the property can generate, but also the certain and probable expenses.
The one expense most prospective owners (and to be honest, listing agents) seem to omit most often is the cost of repairs.
Let’s face it. No matter how new or old your duplexor house is, sooner or later something’s going to break, become outdated or wear out.
I have fixed numbers I use as projected repair costs for each unit per year. Of course, some years nothing breaks and others, everything does. So my estimates are just that; estimates.
It’s usually about then that I also share the names of some of my favorite local shops.
Of course, when and if something needs repair or improvement, the obvious locations to look for supplies are Home Depot, Menards and Lowe’s.
However, if the repair or upgrade isn’t urgent, it might be easier to stay under budget by shopping at a couple of local treasures.
Building Materials Outlet (formerly Cannon Recovery) is just over the Mendota Bridge in Eagan. For over forty years they’ve specialized in liquidating excess inventory from national distributors and manufacturers.
While their inventory isn’t as reliably consistent as the retail stores, the savings are significant. On any given day you can find French doors, new windows, rolls of carpeting or pallets of tile for as a third less or more than at traditional home improvement stores.
Another local institution that’s not only a great place to save money, but also a green solution is The ReUse Center in Minneapolis.
| Discussion: No Comments »
Title Is Everything When Buying With Family
March 5th, 2010 categories: Buying A Duplex, Legal Stuff
It’s often said that blood is thicker than water.
With that in mind, I often have two family members express an interest in buying a duplex together. Each intends to live in one of the units.
Sometimes the buyers are a grown child and a parent who winters in warmer climates.
Sometimes the buyers are siblings.
In one case I even encountered a former husband and wife who saw a duplex as a way to co-parent their children, but continue on with their respective lives.
Sharing a multifamily property can be a workable solution for some people. And while family may well look out for each other’s interests more reliably than friends or acquaintances, it’s important to remember life circumstances can change.
And that’s why deciding how your going to take ownership at closing is so very important.
There are two ways a pair of buyers can take title; either as joint tenants or tenants in common.
| Discussion: No Comments »
The Question Most Often Asked On Duplex Chick Is…?
March 4th, 2010 categories: Tax Credits
As a Realtor, I get asked a lot of questions.
They range from, “What were they thinking when they installed the bathroom here?” to “Won’t people just make us an offer, even if we list our duplex at a higher price?”
I don’t know the answer to the first question. And the answer to the second is usally no.
But these days, the question I get asked most often is “Does a duplex qualify for the $8000 first time home buyer tax credit?”
And while I’ve discussed it here before, then answer was and is yes.
For the record, multifamily homes like triplexes, four-plexes and apartment buildings qualify too. However, the property must be used as your principal residence. It’s also important to note you can only get credit for the part you live in.
The credit has been structured so that any first time home buyer who has a binding purchase agreement in place by April 30, 2010, can receive up to 10 percent of the property’s purchase price, not to exceed a total of $8000 in the form of a tax credit.
Since only one half of the duplex would be used as your principal residence, you can only use the value of one half of the property to qualify.
For example, if you pay $160,000, your half would be worth $80,000. If you buy a duplex for $100,000, however, your half is worth $50,000. Your tax credit would then be 10 percent of your half , or $5000.
The same would be true if you bought a four-plex for $200,000 and lived in one of the units. The value would again be $50,000, giving you a credit of $5000.
Of course, to receive this credit, you must not have owned a home in the past three years. If you’re single, you can’t earn more than $125,000 a year and if you’re married, the two of you can’t earn more than $225,000.
Purchase agreements must be signed no later than April 30, and the transaction must close no later than 60 days after that.
Call me if you want to beat the deadline.
| Discussion: No Comments »
Minneapolis Duplex Market Hints At Thaw
March 2nd, 2010 categories: Twin Cities Real Est
Believe it or not, in some sectors of the Twin Cities housing market have begun to thaw. In fact, it feels like spring: of 2006.
Realtors and our clients are once again experiencing multiple offers and having to rush to see newly listed properties before they’re gone.
Unfortunately, the bulk of this activity is in first time home buyer territory; namely, those properties below $225,000.
But there are hints in MAR’s Weekly Market Activity Report that perhaps things are loosening up. For the week ending February 20, pending sales were actually 9.9 percent higher than they were for last year. This is the first year-over-year increase we’ve seen in weeks.
With just 5.39 homes available for each active buyer in the market, a 17.7 percent increase in the number of new listings for the week may help those facing multiple offers find homes. There are 6.9 percent fewer homes available for purchase this year than there were at this point in 2009.
In the small multifamily sector, traditional sellers continued to gain ground on the banks. Twenty-five percent of the owners of properties that received purchase agreements were people, not corporations. Of those listings new to the marketplace, 48.14 percent were being sold by people with actual names.
While the number of pended duplex sales was down 38.5 percent, the good news is the average price they left active status at was $121,509. This represents a significant leap over last year’s sold price of $94,671.23.
As we head toward the $8000 first time home buyer and $6500 repeat buyer tax credit April 30 deadline, we’re sure to see even more signs of spring.
| Discussion: No Comments »
A Minneapolis Duplex Isn’t Always About The Numbers
March 1st, 2010 categories: Buying A Duplex
One of the reasons I specialize in helping people buy and sell duplexes is that each and every one, whether it’s strictly an investment property or a place for the owner to live, is that it is both an intellectual and emotional endeavor.
On the one hand, for both investors and owner occupants, the financial analysis is crucial. If you’re an investor, the property needs to meet your financial goals for a return.
If you’re an owner occupant, the numbers also need to work. Most buyers have a very specific idea of how much they’re willing to contribute in “rent” toward their share of the monthly mortgage payment.
But for both an investor and an owner occupant, the return a property gives your heart can be just as important.
There are times when owning an income property sucks. Period. And it’s times like that when a piece of woodwork, a built-in, a view, can be the inspiration to muddle through.
Make sure your duplex is a good investment. Of course. But it never hurts if it makes your heart sing too.
| Discussion: No Comments »
Watch Out For The Minneapolis Duplex Hiding Under The Bed
February 26th, 2010 categories: Buying A Duplex
Remember when you were a kid and you were absolutely certain when the lights went off in your room, a monster would crawl out from under your bed? Or, in similar darkness, every doll on your shelf turned into Chucky?
Many of today’s Minneapolis duplex buyers seem to be thinking the same way.
They’re absolutely certain they’re going to lose their jobs and shortly thereafter, their property. Or, worse yet, overpay.
Several have insisted I turn the lights on.
In some circles, fear is an acronym for False Evidence Appearing Real. And it was certainly true of those childhood fears.
It’s also true of duplex-buying fears.
I realize we’re living in economic uncertainty; a time in which caution is a well-advised strategy. However, if you adhere to your goals when you purchase a property, in all likelihood you don’t have to worry.
Most owner occupant duplex buyers have a goal of their portion of the house payment being little more than they’re already paying in rent. In this market we’re able to accomplish that almost all of the time.
What’s ironic is while everyone worries how they’ll make their house payment if they lose their job, they never seem to worry about paying the rent.
When I ask whether they plan to move in with their parents if they lose their job, they recoil in horror. I ask whether they would go to the ends of the earth to not move in with mom and dad, and the answer is always a resounding yes. So if the mortgage is the same amount as rent, what’s the difference?
More importantly, if the property cash flows with two tenants paying rent, moving home to mom and dad’s might actually prove profitable.
Fear of over paying in a property is the monster in the closet. Unless someone is paying cash for a property, the transaction with require some form of financing. Every bank requires an appraisal be conducted before it will give someone a loan. And in today’s market, no appraiser is willing to overstate a property’s value.
Simply put, the bank won’t lend you more money than a property’s worth. You can count on it.
Just like when you turn the lights on, the monsters all go away.
| Discussion: No Comments »
Don’t Count On Reduced Property Taxes When You Buy A Foreclosed Duplex
February 25th, 2010 categories: Buying A Duplex
If you want to get a muddy answer, call your local property tax assesor and ask what the city or county’s policy is on resetting the market value on a foreclosed property after you’ve purchased it.
Some time ago I heard Dakota County, for example, would not reduce a foreclosed property’s market value to the amount it sold for.
That seemed incredible to me. After all, if something has a tax assesed market value of $300,000, but sells for $150,000, hasn’t the market established that it’s only worth $150,000?
Apparently not. Well, sort of not.
Dakota County is working off of property values from two years ago. This year’s sales, for example, will be logged into their computer program. Whatever standard it arrives at is applied to all the properties in the county, calculated, and new values determined.
The following year the county then sends out a notice to property owners informing them of what their property taxes will be in the year that follows.
So, sales in 2008 were tallied, and new totals sent out in 2009. These totals informed property owners what they would be paying in 2010; giving them much of 2009 to argue against the county’s case.
In other words, if the real estate market is bad this year, we should see overall reduced market values for tax purposes, which will result in lower property taxes in 2012.
According to the assessor’s office in the city of Minneapolis, their model calculates market values on “open market arm’s length transactions”. A property is valued on whatever the comps are and, as the city realizes most foreclosures and short sales are sold at deep discounts, those transactions are largely excluded from the valuation process.
So, taxable market value is largely based on what properties offered by traditional sellers sold for. Of course, these properties are down in value too, but not nearly to the extent of those involving banks in the transactions.
Buying a foreclosed duplex may or may not result in lower property taxes down the road. And it’s important to not project any sort of savings as part of the income property analysis worksheet you do prior to writing an offer.
Clear as mud?
| Discussion: No Comments »
