Archive for July, 2008

Comments Off on Not Every Realtor Is Qualified to Help You Buy or Sell Your Twin Cities Duplex

Shark and GuppyOver the past few weeks, I have been reminded that just because someone holds a real estate license, they are not necessarily qualified when it comes to buying or selling multi-family housing.

I saw evidence of this over and over during the boom years. Countless Realtors sold their clients over-priced properties that didn’t cash flow.

I see many of those properties re-listed now. The MLS information almost always reflects a short sale or foreclosure, which makes me angry. I truly believe if the buyer had competent representation, the foreclosure could have been avoided (because the property would not have been purchased at that price in the first place).

Many of those types of agents have been shaken out of the business this year. As a result, most of the Minneapolis and St Paul duplexes that sell today make financial sense. However, I don’t think anyone can sound the all clear alarm just yet.

The other day a property came on the market that I thought might be suitable for a client. As I studied the MLS listing, however, I noticed while it stated that the tenants were responsible for their own fuel costs, the seller was also reporting annual heat and electric expenses of thousands and thousands of dollars. Certainly a mixed message there.

I called the listing agent for clarification. It seems the property owner had called the power and gas companies, gotten the annual totals for both units and reported them to the agent. While the tenants were in fact responsible for paying for everything but water and sewer, the data reported the owner was. As I’ve explained before, if the landlord pays for heat, the property has a different value. The listing agent didn’t understand.

I also recently received an e-mail from an agent who had property their client wanted to do a 1031 or Starker exchange with. The agent did not explain what the property was, so I called with the hope that it would be multi-family housing. It was a chunk of land. And it was the agent’s understanding that a 1031 exchange was a straight up trade of one piece of property for another. Nope.

When getting a real estate license, the educational background for the state test is broad and general. After that, it is up to individual agents to pursue continuing education courses and expertise in an area they’re interested in. Commercial and multi-family properties, as well as land for development, each have their own unique sets of challenges and rules.

It is absolutely essential that you work with an agent who understands the nuances of the investment you’d like to make. After all, not every foreclosure is the result of predatory lending.

 

 

Comments Off on Buy A Twin Cities Duplex for A Bigger Home

Summit VictorianOver the last year, I’ve started to see different kinds of buyer walking through the duplexes I hold open on Sundays. I like to think of them as genius’. Completely independent of one another, several have had an idea I’d never considered: reconverting a duplex into a single family home.

Primarily in the Victorian era, many Twin Cities homes were built which, even by today’s standards, are mansions. In the century or more since their construction, countless property owners who couldn’t fill the homes with their own families divided the home into more than one unit.

These conversions are usually quite obvious. The upstairs unit typically has a compartmentalized feel. The living room is down the hall and the size of a bedroom and the kitchen shoved into a back corner somewhere, more often than not lining up with the home’s plumbing stack.

More often than not, these duplexes, triplexes and fourplexes are located in one of the popular waterhoods: walking distance from a lake, river or creek and its accompanying amenities.

These neighborhoods are popular and have a high demand for properties. As a result, single family homes have become cost-prohibitive for many growing families.

Why not convert some of those awkward duplexes back into their original use?

There are presently several foreclosure and short sale duplexes on the market that, were they still single family homes, at or near their present prices, would have sold already even in a down market. In a restored condition, the long term up side would be tremendous.

Granted, they’re going to take money to repair and reconvert. But remember, one of the best things about buying a multi-family property is 75 percent of the rental income may be used to help a buyer qualify for a loan on the property. The property does not need to be occupied; an appraiser can simply make an estimate of the market rent.

A buyer can choose to convert the property immediately, or, rent one of the units while living in and working on the other. The rental income would help offset the expenses of the restoration.

Let me know if you’d like to see one.

Twin Cities Duplex Sales Up Again

said on July 8th, 2008 categorized under: Twin Cities Real Est

Comments Off on Twin Cities Duplex Sales Up Again

sunshineMAAR offered an interesting insight in today’s weekly activity report. At least I thought so.

For 10 of the last 12 weeks, pending sales of single family homes have been within five percent of where they were at this time last year; either above or below. While I certainly noticed the market slowing last year, I don’t recall there being quite the same sense of gloom.

For the week ending June 28, forty-three fewer single family homes sold than for the same time last year. New listings remained relatively flat, with just six more homes coming into the marketplace; an increase of only .3 percent.

In all, MAAR reports new listings in the last three months are down 13.6 percent from the same period last year. The result? A reduction in the number of houses available for every buyer presently shopping for a home. There are currently 8.11 houses on the market per buyer; a figure which is down from last July’s 9.76 per shopper.

Meanwhile, the small multi-family housing market continued at its robust pace. Pending sales were up 257% over the same week last year (from 14 to 36). New listings were also up 10 over last year (from 76 to 86), for an increase of 13%.

Nothing scientific here, but I have begun to notice that almost all of the good properties I saw over the winter and spring months, which were probably 5-10% overpriced, are beginning to sell.  That’s great for the market and the sellers, but it also means there are now fewer to choose from.

Change the Numbers When You Rent Your Twin Cities Duplex

said on July 7th, 2008 categorized under: Tenants

Comments Off on Change the Numbers When You Rent Your Twin Cities Duplex

Security DepositOne of the most valuable lessons I’ve learned as a landlord is to make sure that the amount I charge for a security or damage deposit is a different amount than the monthly rent. This helps tenants understand that it is, in fact, for something other than the rent.

I can’t even count the number of times tenants have given me proper notice, then not paid the last month’s rent. When I approach them for it, the answer is always the same, “just take it out of my security deposit.”

That would be fine if I knew with certainty that the place will be left clean and in impeccable condition. Most of the time, it’s not. And if I’ve allowed the security deposit to be used in lieu of rent, I’m forced to pay for any repairs for damages caused by the tenant out of pocket. In order to be reimbursed, I then need to pursue the matter in court.

Simply making the amount different than the rent, along with offering a clear explanation that it may not be used for rent, helps prevent this misunderstanding.

Comments Off on How to Find Hidden Cash When You Buy A Twin Cities Duplex

Hidden TreasureI do a lot of math in my job. Which is funny, considering my history with high school algebra.

Whenever I find a duplex I think may be of interest to a client, I quickly do an investment property analysis worksheet before I send it on.

I do this exercise regardless as to whether the property might be suitable for an investor or an owner occupant. All have highly personalized goals. Some want a certain rate of return on their money. Others want to be sure their portion of the house payment stays within the confines of their budget.

I’ve had to add a calculation to my worksheet this year: property taxes.

I’ve always counted the taxes as an operating expense. That’s nothing new. This year, however, I’m calculating how much they are likely to drop on January 1, 2009.

Yes, I said drop.

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Comments Off on How Much Did That Minneapolis Duplex Sell For?

Red keyThere are several questions I get asked repeatedly in my job. One of the most common is, “What did it sell for?”

I usually hear this when a client was interested in and missed out on a property that just went from “Active” status on the MLS to “Pending”.

The trouble is, I can’t answer this question. At least not right away.

When a property owner has accepted an offer, there is a gap between his or her signing the document and the sale closing. Unless the buyer is purchasing with cash or a contract-for-deed, it usually takes 30 to 60 days for the a loan to be readied in order for the property to change hands.

In this waiting period (which is called “escrow” in states like California), there is still a possibility that the sale may not come together. The buyer may be unable to obtain financing, suddenly receive notice of a job transfer…while not necessarily common, things do happen.

Were either the buyer or seller’s agent to share what the final negotiated sales price was during this time, and the transaction not close, the seller’s position in the marketplace could be seriously compromised.

How so?

Well, it would be public knowledge what the seller “would take” for the property. If he then needed to put his duplex back on the market, he would not be able to do so at a price higher than the one he had just agreed to; at least not without looking greedy.

I can eventually tell you what that duplex sold for…just as soon as the keys change hands.

Twin Cities Duplex Sales Continue Healthy Pace

said on July 1st, 2008 categorized under: Twin Cities Real Est

Comments Off on Twin Cities Duplex Sales Continue Healthy Pace

Dan PatchAs it does every Monday, the Minneapolis Area Association of Realtors (MAAR) released its weekly activity report last night for the week ending June 21.

New listings continued their decline from last year, dropping 10.6 percent when compared to the same week last summer. This has been the trend for the last 16 weeks. In all, the total number of homes for sale in the metro area is down 2.6 percent from the same time last year.

Pending sales were also behind those of last year: 1.8 percent. This has been the case for nine of the last eleven weeks.

The multi-family market, however, continues its surge. Pending sales for the same week were up 150% year-over-year.

Something of interest is this time last year seemed to show a spike in the number of transactions involving either short sales or bank owned properties. Last year at this time, 45.45% fit in this category. This year, a full 87.8% of the pended properties involved a lender negotiated sale. While this is still an increase, it is not nearly as grand as I have reported in previous weeks.

Meanwhile, new listings for the week numbered 49 this year; a drop of 56 percent over the same time last year.

Nothing scientific here, but a trend I have personally noticed is well-priced, owner-occupant type properties, whether bank or privately owned, seem to be moving at a healthy clip. Inventory of these types of properties isn’t as plentiful as it was a few weeks back, and if open house traffic is any indication, there are plenty of buyers looking

 

 

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