Archive for December, 2008

Minneapolis Duplex Buyers Still Love to Shop

said on December 30th, 2008 categorized under: Twin Cities Real Est

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While consumers reportedly stayed away from the malls before Christmas, lower interest rates seemed to put Minneapolis duplex and single family home buyers in a festive mood.
For the week ending December 20, duplex and small multi-family properties saw an increase of signed purchase agreements of 200 percent over last year’s mark. Of the 36 that entered pending status, all but one involved lender mediation. This represents a 25 percent increase over bank negotiated sales in the same week in 2007.
While sales were up, the average sales price saw no appreciable improvement. The week before Christmas in 2007 saw sales averaging $146,910. This year that figure was just $86,600.
New multi-family listings, however, remained relatively flat; up just one from last year’s mark. However, in 2007, 71 percent of those properties new to the market involved lender mediation. This year’s figure is 93 percent.
Over in the single family home sector, sales were up 20 percent over the same week last year. In fact, in the three weeks since interest rates plunged, sales are up 27.5 percent. While not as staggering a figure as in the duplex market, 57.6 percent of these transactions were lender mediated. A whopping 45.8 percent sold for less than $150,000.
New single family home listings remained flat as well. While most traditional sellers refrain from marketing their property during the holidays, banks don’t mind the inconvenience and list anyway.

Whoops! Minneapolis Duplex Sale Prices Drop

said on December 29th, 2008 categorized under: Twin Cities Real Est

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Shame on me. When I didn’t receive notice from MAR of the sales activity for the week ending December 13, I assumed they’d gone on vacation. Well, we all know what happens when we assume anything…
Pending sales of single family homes were up 36.3 percent and new listings up 2.2 percent over the same week in 2007. Forty-eight percent of the new listings involve lender mediation, while 60 percent of the sales did.
The encroaching holidays did nothing to slow the small multi-family unit market, however. Fifty new listings came on the market, down 29.5 percent from last year. Of these, 78 percent involve mediation with a lender. This is up only slightly from the comparable week last year, when 73 percent of the new listings involved lenders.
While shrinking supply is sure to drive prices up in the future, such was not the case in this report. While the number of pending sales was up 186 percent, the average sale price dropped from $164,280 for the second week of December in 2007, to $96,810 for the comparable period in 2008.
The statistics for the week before Christmas are set to arrive tomorrow. It will be interesting to see if the number of new listings continues to drop.

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Realty Times reports today that President Charles McMillon of the National Association of Realtors has written a letter to HUD Secretary Steve Preston asking that FHA’s 203(k) rehabilitation loan be made available to investors.
The 203(k) loan program is one in which the FHA issues a mortgage and rehabilitation loan at the same time, in an amount for up to 110 percent of the properties rehabilitated value.
McMillon contends that allowing rehabbers access to the program would help absorb and restore the backlog of dilapidated or vandalized foreclosure properties currently flooding the market.
HUD may be a little reluctant to do so, given they placed a moratorium on investor participation in the program in the 1990s due to several fraudulent incidents involving the program became public. To assuage Preston’s concerns, McMillan proposed investor access to the program be temporary.
Of course, with less than a month until the Obama administration takes office, it’s unlikely we’ll see any HUD action during the remainder of President Bush’s tenure. However, as Shaun Donovan, Obama’s nominee for HUD secretary, has extensive experience with housing restoration.
The proposal warrants consideration. Much of the housing stock on the market, while priced at first-time home buyer prices, is beyond the rehabilitation skills of all but professionals.

Comments Off on How to Rent That Minneapolis Duplex Fast!

It seems new investors and first-time home buyers have two big concerns about their first duplex: vacancies and the toilet.
Vacancies are a concern of any landlord. The longer a unit sits empty, the more significant the loss in revenue, and the more it costs you, the landlord.
So, how do you reduce vacancies?
While it may seem obvious, your first strategy is to buy a property in an area where people want to live. Think of the amenities you might want for yourself in a home. Do you like woodwork? Do you need a dishwasher? Access to laundry? Do you need easy access to public transportation?
Also consider the types of tenants a property might attract. For example, more bedrooms may be attractive to families; or, if near a university, a group of students. One bedroom units, on the other hand, will appeal to single people or young couples.
A fresh coat of paint and a clean, well-maintained property will always rent more quickly than those that are not. Try to make your vacant unit shine when compared to those of the competition. This doesn’t mean you need granite counter tops- just well-kept, clean, and reasonably updated.
While all of these are useful and important strategies, there is one more; the most effective of all. Lower the rent.
This is a common new landlord mistake; one I’ve made myself. It’s easy to look at competitor’s ads on Craigslist and decide your unit is superior, or to base the amount you charge for the unit on the cash you “need”.
But, but… yeah, I know. You really have to have $1000 a month for that two bedroom unit with hardwood floors. So, instead of renting it at $900, you hold out for your price. It doesn’t rent. Two months later, you lower the rent to $900 and it fills. So, while you held out, you lost two months of revenue at $900, for a total of $1800; all in the name of getting $2000. In the name of getting a whopping $200 more, you lost $1800.
Yeah, I know. It seemed logical to me at the time too.

News Flash: Interest Rates Drop!

said on December 18th, 2008 categorized under: Financing

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Today’s interest rates on a 30-year, fixed rate, conventional mortgage are 4.75 percent. My understanding is by buyinig points, the loan can be reduced to 4.25 percent.

FHA stands at 5 percent interest, fixed, for 30 years.

Of course, you need to have a downpayment or equity, a job and good credit. But this is the best rates have been in years.

Needless to say, it’s a great time to buy or refinance.

Comments Off on Aren’t There Any Good Deals on Minneapolis Apartment Buildings?






The other day I sent a listing for a four-plex to a client. While he’s not actively looking, and this one wasn’t an especially good deal, it reminded me in both appearance and location of one of the ones he already owns.
My client has invested and occupied income properties for many years. And he asked whether he was correct in not seeing the precipitous price drops in the four unit buildings that are occurring in the duplex market.
Yes and no.
Remember that old law of supply and demand? How if the demand for a product is greater, the price goes up? Well, this law applies when it comes to small multi-family properties (one to four units) as easily as everything else.
While FHA loans are available for duplexes, tri-plexes and four-plexes, most owner-occupants simply prefer duplexes. And while the amount of rent the other unit generates still played a role in a purchase, it didn’t carry nearly the weight of the more emotional nature of buying a home to live in. The duplexes that triggered those feelings typically sold for the higher prices that emotions always command. Consequently, they also rode the great wave of appreciation.
Well, aren’t there four-plexes with charm? Of course! But the prospect of coming home to three tenants with issues was and is, to many, far more daunting than the thought of simply one renter. This higher level of demand helped drive up prices during the boom years.

Minneapolis Duplex Market Warm Spot In Winter Chill

said on December 16th, 2008 categorized under: Twin Cities Real Est

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It’s been difficult to tell how the Twin Cities duplex and single family home markets have been performing the last couple of weeks due to the Thanksgiving holidays in 2007 and 2008 falling during different weeks. That changes with this week’s MAR activity report.
Of course, we Minnesotans like hunker down inside during the cold, dark winter months and we are distracted in the weeks ramping up to the holidays. Historically, housing activity reflects that. Overall in the single family home market, all the numbers were down in new listings, sales and total inventory.
The good news is pending sales for the week ending December 6 were up 27.6 percent, with 54.7 percent of these transactions involving lender-mediated short sales or foreclosures. There was little change in the amount of new inventory on the market as well, with new listings up just 0.7 percent over their mark for the comparable week in 2007.
Meanwhile, in the multi-family market new listings were down 10.8 percent from the same time last year. Of these properties new to the market, 86 percent are either lender-owned or mediated. This is an increase of 12 percent of lender-involved properties over the same stretch in 2007.
Pending small multi-family purchase agreements, on the other hand, continued their mind-numbing pace; up a full 300 percent over last year. Of the properties receiving offers, 93 percent were lender owned. Last year’s total represented 74 percent lender-mediated properties.
One non data-driven observation: several of  the desirably located, more expensive bank involved properties received offers the first week of December. Several had lingered on the market over the summer. A number of comparable short sales which were newer to the market suddenly listed as pending as well; far more quickly than it has taken most short sales to be negotiated in the past.

Comments Off on Oops! Fannie and Freddie Reconsidering Limits on Numbers of Minneapolis Duplexes

One phrase we seem to be hearing a great deal in the media as of late is “the emperor has no clothes.” It’s funny to me that we’re not hearing “the sky is falling” with equal frequency.
According to Realty Times, the illogical restrictions imposed in late summer by Fannie Mae and Freddie Mac to limit the number of rental properties an investor can own on order to obtain new financing may be on their way out.
At the time, Fannie and Freddie believed that the more properties an investor owns, the higher the likelihood of default. So they reduced the maximum allowable number of units per investor from 10 to four.
In my opinion, it isn’t the seasoned investors who defaulted; it’s those who were new and didn’t have proper guidance when they bought their investment property. But panic by one often leads to the irrational thinking of many, so the restrictions were imposed.
Of course, this move only served to bumped many smaller investors out of Fannie and Freddie’s programs, forcing them to pursue hard money lenders or leave the market altogether.
Apparently at the National Association of Realtors convention in Orlando in November, James Lockhart, who runs the Federal Housing Finance Agency, spoke twice. Those in attendance pressed him on the issue. It was effective. In a letter sent to NAR President Charles McMillan, Lockhart shared one of the agencies is re-thinking the move. It seems they’ve realized investors may play an important role in the housing recovery.

Comments Off on How to Write Off Half of Your House When You Buy A Minneapolis Duplex

While most home buyers don’t consider it, there are countless reasons buying a duplex as your primary residence can can be a better finanical decision than buying a single family home. The obvious reasons include higher mortgage interest deductions, depreciation and the rental income that helps for the mortgage.
As we approach the end of the year, however, I am reminded of some of the less obvious benefits. When someone owner occupies a duplex, she can deduct countless expenses related to the half of the property she doesn’t live in on the Schedule E portion of her tax return. For example this may include rental unit expenses like:
  • The cost of paint and repairs
  • Rental license fee
  • One-half of the property tax
  • A portion of her cell phone bill
  • Half of her mortgage interest
  • Half of her homeowners insurance
  • Tenant screening fees
  • Half of the maintenance for the exterior of the house
  • A portion of legal and professional fees
Of course, while these deductions pale in comparison to the big one, depreciation, they do help defray some of the costs associated with being a landlord; costs which couldn’t be deducted on an owner-occupied single family home.

Comments Off on Why this Week’s Minneapolis Duplex Numbers Don’t Sync Like An iPod

Oh how I wish I could just plug my calculator into my laptop and, in seconds, be able to know how the Twin Cities duplex market is doing!
But it’s week two of the market anomaly; comparing 2008’s Twin Cities duplex sales figures from the week of Thanksgiving, to the comparable week from 2007, which was the week after the holiday. If we did a side by side comparison, we wouldn’t necessarily get an accurate read. Because this year we were all eating turkey.
So we’re left with what we do know. During the holiday week, 44 new small multi-family listings came on the market. Of these, 36, or 82 percent are lender-mediated properties. Last year during the same period, there were 58 new listings, of which 79 percent were lender mediated.
Of the 31 properties that received purchase agreements this year, 24 were lender mediated. This figure represents 77 percent of the transactions. The average pending sales price of these properties was $125,740.
In the same week of 2007, 21 listings sold. Sixty-seven percent of these were lender mediated for an average sales price of $188,050.
While it looks like sales were up once again in 2008, next week’s statistics will offer a much more accurate update of recently played and purchased properties.

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