Archive for July, 2008
Comments Off on Is Foreclosure Relief on the Way for Your Twin Cities Duplex?
President George W Bush signed into the law The Housing Stimulus Bill yesterday. Within five minutes, I received countless emails and phone calls inquiring as to what it all means.
I’ll address as many as I can over the next several days.
First, will it end the foreclosure crisis this year? Probably not.
The program won’t take effect until October 1, though being a government endeavor, it’s likely it won’t be fully operational until next year. And, not everyone who’s in trouble is going to qualify for assistance. The program will help up to 400,000 troubled borrowers. Some economists feel millions of homeowners may in fact be at risk.
Eligible recipients must have spent 31 percent of their monthly income on their mortgages. The loan needs to have originated before January, 2008, and of course, the borrower still needs to have the income to qualify for the loan. And, the relief is limited only to properties that are the borrower’s primary residence.
The bill will also allow those who do to cancel their old mortgages and replace them with a 30-year-fixed-rate loan for as much as 90 percent of the property’s appraised value. The lender would have to agree to write down the amount of the loan to 85 percent of its current value. This loan, would in turn, be guaranteed by the FHA.
In exchange, the lender would get to share half of the home’s appreciation over time. So, if the property goes up in value $100,000 over the next few years, the bank would get half of that profit.
Of course, the decision as to whether or not to do the loan still remains with the bank.
For more comprehensive highlights of the housing bill, please see the National Association of Realtors synopsis.
Comments Off on Twin Cities Duplex Sales Remain Strong
Time once again for MAAR’s weekly activity report.
Pending single family home sales for the week ending July 19 were, believe it or not, ahead of the same week last year by 3.9 percent. At the same time, new listings dropped 13 percent. Are these the signs of a changing market? Too soon to tell.
If the media reported the continued strength of duplex sales, we’d probably all have a different attitude about the state of the real estate market. In the week ending the 19th, there were 39 purchase agreements reported. This is a 260 percent increase over last year’s 15. Of the 2008 sales, a staggering 92 percent were lender owned or short sale properties. Last year’s figure consisted of 60 percent lender owned transactions.
An interesting piece of trivial information is the highest priced duplex that pended last week was at $474,615. The lowest at $7500.
I have noticed in recent weeks that it seems as if the jump in foreclosure properties in the marketplace happened right around this time last year. It will be interesting to track the ratios in the coming months, as I imagine it will forecast a significant shift in the market.
Comments Off on Should You Hire A Management Company for Your Twin Cities Duplex?
First time investors often ask whether I can recommend a good management company for their first duplex, triplex or fourplex. While I can certainly make suggestions, it usually doesn’t make sense to hire someone.
Most management companies charge between five and ten percent of your gross operating income (annual rent collected). Properties with fewer units typically don’t have as large of a cash flow as large apartment complexes. Therefore, five to ten percent of the gross revenue on a duplex can be the equivalent of half of your profit.
For example, if a duplex generates $30,000 a year in income, and let’s say that after expenses and the mortgage is paid, the owner is left with a positive cash flow of $3000. As the property management company earns their pay off of the gross, not the net, they would be entitled to five percent of $30,000, or $1500. That is half of the positive cash flow!
Another reason to manage your first income property yourself is for the experience. Investment property ownership isn’t for everyone, and you may find it doesn’t suit you.
However, if investing is something you enjoy, and you grow your property portfolio over time, the lessons learned from managing will enable you to keep an eye on the management company you hire.
Comments Off on How to Determine Rent and Vacancy Rates for Your Twin Cities Duplex
I get asked a lot of questions in my job; questions like, “How much rent could I get for a three bedroom unit? Are studio units more popular by the University of Minnesota, or do students prefer one bedrooms plus dens?”
I’m glad my clients ask these questions. It tells me they’re remembering what I told them: two of the most important factors to consider when calculating whether or not to purchase a Minneapolis or St Paul duplex are rents and vacancy rates.
Of course, the next question I get asked is how to locate that information. My answer is always the same: the Star Tribune and Craig’s List.
Every Saturday the Star Tribune includes their “Homes” section. It’s often filled with useful information, not only for single family home owners, but also investors and multi-family home owners. Throughout the month, they periodically publish a rental section inside of “Homes”. Right next to or below the “Renting and the Law” column, the Trib publishes a rent sampler. The rent sampler is a chart of the average rents and vacancy rates for types of apartments in various Twin Cities locations.
The newspaper gets this data from a publication called Apartment Trends, which is published by GVA Marquette Advisors.
While this information is useful in quickly getting a bird’s eye view of a neighborhood, it is dated. Last weekend’s chart, for example, was gleaned from information through March. That’s where Craig’s List comes in. Read the rest of this entry »
Comments Off on Twin Cities Home Sales Hold: Duplex Market Still Sizzling
Several of the trends spotted in last week’s MAAR Market Activity Report continued for the week ending July 12.
New listings of single family homes were down 11.5 percent from their mark during the same period last year. In all, over the last three months about 4000 fewer homes have come onto the market than the number that did in the same window a year ago. Overall, the total number of properties for sale is down 4.7 percent from this time last year.
Pending sales showed a slight increase of 1.8 percent year over year. It appears, for now anyway, there continues to be a leveling off of buyer activity. The number of pending sales for the last three months is down about 300 transactions, with is a decline of 2.7 percent.
The small multi-family market, however, continues to outperform its single family sibling.
For the week ending July 12, 41 executed purchase agreements were reported. This represents an increase of 273 percent over the same time last year. A full 87.9% of the transactions this year involved either a short sale or foreclosure property. The 2007 sales for the same week were included just 30 percent lender-involved properties.
Listings for multi-family properties were also down eight percent over those from one year ago.
Comments Off on Media Reports “Twin Cities Duplex Prices to Fall Until 2009!”
Gasp! 2009? Why, that’s a whole year!
Or is it?
It’s almost August. Let’s see: August, September, October, November. Count ’em. Four months.
I’m just having a little fun with the media. In this time of constant reports of doom and gloom, it helps.
Oh. And by the way…I also saw a tabloid headline last week that screamed that Cher had to have a quickie wedding.
Why? Was she pregnant?
Cher is 62 years old.
said on July 18th, 2008 categorized under: Tenants
Comments Off on Eight Ways To Screen Prospective Tenants for Your Minneapolis/St Paul Duplex
One of the biggest challenges landlords face is finding great tenants who not only pay their rent on time, but also take care of your property, communicate with you and are generally respectful.
Most landlords run a credit and criminal background check on any prospective tenant through companies like the locally based ASP Screening. The applicant must give you written permission to gather this information; which can be achieved by using MHA‘s standard application.
For a nominal fee, usually about $20, these companies can almost immediately provide you with an individual’s complete credit report and a state by state criminal record. It is common to ask an applicant for this processing fee up front. This accomplishes several things: it proves they are serious, tends to weed people out who know their past is suspect, and reimburses your expense.
While these reports are useful, they often don’t contain invaluable information like evictions? Why? In Minnesota, the court costs of filing an eviction notice, then having it reported to the credit bureaus is hundreds of dollars. As a result, landlords often offer incentives for a delinquent tenant to vacate the property. Carrots they dangle include not reporting the rent delinquency to the credit bureaus, leaving the renter’s record clean and the next property owner they rent from exposed.
In addition to these reports, it’s imperative to call as many of the tenant’s previous landlords as possible, their employer, and any references you can procure outside of family members. After all, no matter how difficult anyone’s son or sister may be, family ties are always stronger than the most airtight of leases.
While all of these efforts are scientific, it’s also a good idea, on occasion, to trust your gut. I had once had an applicant who, while everything checked out, seemed off. I couldn’t put my finger on it, and by law, couldn’t reject him “just because” (or discriminate against him in any way). So I Googled him. Turns out he took a butcher knife to his family in a state I didn’t pull a criminal background check in.
Finally, there’s a new way to screen for all of the things that don’t show up via conventional means. KPIC, a CBS affiliate station in Roseburg, Oregon, recently reported on a new web site where landlords can share all the intangibles on undesirable tenants. For a subscription fee of about $30, DoNotRentTo.com lets you search for reports of an applicant trashing a place, was noisy, or exhibited any other sort of undesirable behavior.
This site also affords you an opportunity to report tenants whose behavior was unacceptable while living in your property.
While this site seems as if it could potentially be libellous, it does require the landlord be able to provide documentation of any incendiary events.
No system is perfect. But these are good places to start.
Comments Off on How To Buy A Twin Cities Duplex and Finance the Repairs in a Tough Lending Market
One of the biggest hurdles buyers face when considering a foreclosure property is the amount of repairs many require simply to be inhabitable. After making the down payment, where does the cash come from to replace the blown radiators or copper pipes, or even to simply paint?
It’s hard to believe, but the FHA is coming to the rescue with what has been christened a 203K Streamline Renovation loan.
Basically, the product is for owner-occupied 1-4 unit properties. It allows buyers to include and finance the cost of up to $35,000 in repairs right into their mortgage.
The loan is included in a single mortgage on the property, which can be for up to 110% of the value of the property after the repairs have been completed. For example, if a property is purchased for $100,000, and after repairs are made an appraiser feels it will be worth $120,000, the buyer can obtain financing for the repaired value.
What can be included? Almost anything: heating and cooling systems, plumbing, appliances, painting, kitchen remodels and a plethora of normal improvements one would make to a home.
Is it only for the neighborhoods where revitalization projects like City Living are an option? No. The loan can be used anywhere.
There are only a couple of restrictions to the loan. Basically, the improvements must begin within 30 days of closing, and be completed within six months.
The work must be performed by licensed contractors. The contractor is given one half of the money when the job begins, and the balance upon completion. The FHA wants to be sure the contractor is legitimate and isn’t going to run off with the funds without doing the work. Therefore, they do require the homeowner to use a contractor they’ve approved. Home Depot, Lowes and Sears are all nationally approved contractors.
These loans should help a lot in getting some of the foreclosure properties sold. So why isn’t everybody aware of and using them? Nobody knows about them.
While others are working on it, to date, the only lender in the Twin Cities who offers the 203K Streamline Renovation loan is Wells Fargo.
Comments Off on Twin Cities House and Duplex Sales Improve
Last night MAAR released it’s weekly activity report for sales ending the week of July 5.
The number of duplexes that received accepted purchase agreements last week was double those from the same time last year.
Thirty properties moved to pended status. Of these, 83 percent were either bank owned or short sale transactions. This figure represents an increase of 20 percent over those involving financial institutions last year.
I also once again saw a number of quality seller owned properties that had been lingering move from active to pending.
Meanwhile, in the single family home division, there were 735 signed purchase agreements, which represents an increase of 7.3% over the same week a year ago. New listings were up as well, increasing 2.5% over this time last year.
Two other factors bode well for sellers: the average number of days on the market fell to 147, and the percent of the original list price received rose to 92.8 percent.
However, there were some discouraging signs as well. The months supply of inventory increased to 10.6 months, up 11.0 percent from last July, while due to an increase in interest rates, the housing affordability index slipped to 148.
Comments Off on Sorry for My Absence
Sometimes real life gets in the way of blogging.
A big storm blew through my neighborhood last week. And my neighbors suffered a great deal of damage to their property.
All of us were without power and water for three days; which makes it tough to get on the Internet to blog.
Hopefully, all will be back on track soon.