Archive for February, 2009

Stop By And Say “Hello”

said on February 27th, 2009 categorized under: Twin Cities Real Est

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I’ll be having an open house at 5933 Chicago Ave S in the Nokomis neighborhood on Sunday from 1-4. If you’re in the neighborhood, feel free to stop in and introduce yourself.

How To Reduce Property Taxes On Your Minneapolis Duplex

said on February 27th, 2009 categorized under: Buying A Duplex

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Piggy BankOne of the challenges we’re facing as the result of the decline in values of Minneapolis and St Paul duplexes is high property taxes that reflect a market value that’s no longer accurate.

This often translates into a little sticker shock when a duplex is a terrific deal, but has insanely high taxes. These are, of course, based on a county computer-generated market value that for whatever reason, doesn’t consider the reality of today’s market.

Well, there is a solution.

In fact, a client called me the other day to tell me just how easy it is. While you can find all of the fine print at http://www.taxcourt.state.mn.us/, the highlights are, basically, you have to be prepared to prove to the tax court that your property is worth what you say it is.

This too is easy. Simply bring in your HUD statement from closing, and/or a copy the appraisal the bank ordered for your loan. There’s a court filing fee ($240 for Regular Division or $150 for Small Claims) that’s fully refundable, and a petition to fill out and “serve” to various upon county officials.

If you have an income-producing property (such as a duplex, triplex or fourplex), you also need to satisfy a few more requirements after you file and serve the petition. Namely you have to provide the County Assessor with financial information about the property, such as income and expenses or anticipated income and expenses. If you don’t, the petition may be dismissed.

Many of the cases people file are resolved without a trial. My client ended up visiting with the Hennepin County Tax Assessor, who agreed she should realize a reduction in the assessable market value of her property.

How much did she end up saving? $1500 a year.

There is a deadline to be aware of, however. Property tax appeals must be filed on or before April 30th the year the tax becomes payable.

It’s Cheaper To Own A Minneapolis Duplex Than Rent

said on February 26th, 2009 categorized under: Buying A Duplex

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Mortgage and down paymentThere was a story in the Wall Street Journal yesterday that confirmed something I’ve known for a while. Renters have lost their edge on homeowners.

In other words, in many places, it suddenly is much more cost effective to own than rent.

The last few years, this hasn’t been the case. As prices of  Minneapolis and St Paul duplexes soared, the difference between average monthly mortgage and rent payments grew.  More and more potential buyers became priced out of the market, and increasing numbers of owners lost their homes to foreclosure, vacancy rates declined.

According to Newport Beach, Calif. based  real estate consultants Green Street Advisors, over the last 18 years, after-tax mortgage payments have averaged 26 percent more than rent payments. At the height of the housing market, this jumped in some places to 66 percent more.

By the end of last year, however, average monthly rent in the biggest 50 metropolitan areas in the nation was $1045.  After tax mortgage payments, meanwhile, were $1300, assuming interest rates of 5.5 percent on a 30-year fixed note.

Most of the first time buyers I’m working with today are in fact finding they can actually own a duplex for about what they’re paying in rent. 

I can think of one south Minneapolis property on the market right now that achieves exactly that. It’s in decent shape and a sought-after neighborhood.

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Shoppers Flock to Minneapolis Duplex Clearance Sale

said on February 24th, 2009 categorized under: Twin Cities Real Est

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SalesLow interest rates and the promise of an $8000 first time home buyer tax credit helped shoppers realize there’s a clearance sale at the Twin Cities duplex mall and they are taking advantage of the savings.

For the week ending February 14, 2009, the number of duplexes that pended on the MLS was up a full 20 units over the same time frame in 2008. That doesn’t sound like much until you realize it’s a full 205 percent increase over the number sold last year.

Of the 2009 pended duplexes, 92 percent were lender mediated. This too is an increase over the 2008 figure, when 84 percent involved the bank in the negotiations. 

Last week’s happy trend of a higher average sales price in 2009 proved short-lived, however.  For the second week of February, 2008, properties averaged $135,290 per sale.  Markdowns continued in this year’s comparable week, however, clearing the shelves at $109,260.

New inventory also continued to trickle in, down 37 percent week over week. While 78 percent of the properties new to the market were bank owned, this is only a slight increase over the 74 percent that were last year. Both figures are down considerably from the consistent 90 plus percent figures we saw through late fall.

Bargain shoppers continued to take advantage of price slashing over in the single family home sector as well. Pending sales were up 17.1 percent over last year. In fact, over the last three months, there have been 1200 more pending sales than last year. Of these, 60.3 percent were lender-mediated.

While we are headed into the spring housing market, it’s important to note there are actually far fewer houses for sale now than there were last year. Inventory is down 4000 units, or nearly 14 percent from their mark at this time in 2008.

Looks like the shelves are starting to clear.

Comments Off on How To Pick The Right Realtor To Help Buy Your First Minneapolis Duplex

I've got my keys and my houseOver the last few weeks, a number of readers  from all over the country have about the $8000 first time home buyer tax credit, whether it applies to a duplex or multi-family property, and if so, how much of it does so.

I’m not bothered by the questions. In fact, I love to help. However, I am embarassed for my profession that many of these questions came from people already working with Realtors in states where I’m not licensed.

Your Realtor is not only your guide to seeing property, but he or she is also responsible for looking out for your best interests. And while there are many good agents working in the residential market, not all of them fare as well when it comes to duplexes and small multi-family properties.

And an agent who doesn’t know what they’re doing can result in you ending up in foreclosure.

How so?

Well, for example, many agents simply don’t know how to do income property analysis. They may say something cash flows; but use projected (not actual) rents in their calculations. Or, worse yet, have done the math without including the mortgage as an expense.

Many of the foreclosures we’re seeing in this sector of the market are the result of justexactly that.

How can you tell if an agent knows what she’s doing? Here are a couple of easy questions which will let you know in a hurry if they’re in over their heads.

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How To Get Paid $34,000 To Buy A Minneapolis Duplex

said on February 20th, 2009 categorized under: Buying A Duplex

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House of money with golden keyIn all the excitement over the first time home buyer $8000 tax credit, I’d almost forgotten that really, there’s even more money available for first time Minneapolis duplex buyers.

How are you going to get paid $34,000?

Easy.

This year, of course, the government will pay you up to $8000 to buy your first home; regardless of how much you pay in taxes.

However, there are four other major financial benefits to owning multi-family income property: rental income, principal reduction, tax savings and appreciation.

What does this mean?

Well, for illustrative purposes, let’s say you buy a $200,000 Minneapolis duplex and finance 96.5 percent of it on an FHA loan at 5 percent interest. This means your monthly payment, without taxes and insurance will be $1036.

Of course, you live in one half.  And let’s say the other side is rented for $1000.

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splashing in puddlesAs the mud settles in the puddle of the first time home buyer tax credit, some of the cloudier issues have begun to clear. 

The other day a reader asked me to point him to actual documentation that an owner occupied duplex qualified for the first time home buyer tax credit.

He also asked whether he was inferring correctly from IRS literature that he could only take half the purchase price of the duplex and use that as the basis for the tax credit.

Well, I’ve polled some accountants and it’s unanimous.

Melanie Schlomann at Abdo, Eick & Meyers LLP says of the type of property, “The important point is it has to be a main home.” She directed me to the definition of “main home” found on IRS Form 5405 which reads:

Main home. Your main home is the one you live in most of the time. It can be a house, houseboat, house trailer, cooperative apartment, condominium, or other type of residence.

“The form instructions for the credit specifically state the credit is available for any first time home buyer purchasing their ‘main home” she adds. “There is no specific clause that states the answer. Many tax laws are open to interpretation and from what I read, a small multi-family residence would qualify”. 

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Comments Off on Drum Roll Please…Prices Up In Minneapolis Duplex Market

lil drummer boyIn the 8 or so months that I’ve been compiling statistics for the Twin Cities duplex market, I have a first.

Drum roll…

The average off market price of small multi-family properties that accepted purchase agreements during the week ending February 7 was higher than the sales price of properties during the same period in 2008.

Pended properties for the first week of February, 2009 went off the market at an average price of $106,051. This is a jump of over $10,000 from the 2008 period, when the average sales price was $95,275. Of the those that received offers this year, 97.6 percent  involved a lender mediated sale. In the same week in 2008, just percent were foreclosures or short sales.

While the amount of new inventory dropped 13.3 percent, it is a supply that continues to be dominated by foreclosures. Of the 78 new listings for the week, 79.5 percent will involve a lender in any purchase negotiations. Just 61 percent of last year’s new inventory involved the bank.

The good news continues in the single family home market as well. While the number of new listings rose with the start of the spring housing market, they nonetheless lagged 16.2 percent over last year’s mark. Meanwhile, sales were up 17.5 percent. 

This decreased supply and increased demand has served to reduced the Months Supply of Inventory to 7.7 months; down 13.5 percent from last year. A housing market is considered to be balanced between buyers and sellers when the Months Supply of Inventory is 5.

With the first time home buyer tax credit on the horizon, it promises to be an interesting spring.

Comments Off on The Simple Version of the $8000 First Time Home Buyer Tax Credit

pencil isolated on whiteDean Schifflerof Burnet Home Loans sent out a handy chart to the agents in our company today. It really helped clear up the mud around the first time home buyer tax credit offered in the economic stimulus package.

Here, in essence, is the tax credit defined:

  • Amount of credit: Lesser of 10 percent of cost of property or $8000.
  • Eligible Property: All principal residences.
  • Income Limit: Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Credit phases out above those caps.
  • First-time Home Buyer Only: Defined as someone who has not owned a principal residence in the last three years.
  • Repayment: No repayment for purchases on or after January 1, 2009 and before December 1, 2009.
  • Recapture: If the home is sold within three years of purchase, the entire amount of credit is recaptured on the sale. This applies only to homes purchased in 2009.
  • Termination: December 1, 20009. In other words, you have to have closed on the property by this date.
  • Effective Date: All revisions are effective as of January 1, 2009.

I hope that helps.

Yes We Can! Home Buyer Tax Credit May Change Again

said on February 13th, 2009 categorized under: Legislation

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rolling 02I don’t know about you, but I’m starting to get dizzy. 

The Atlanta Journal-Constitution  is reporting that the $15,000 home buyer tax credit, which was replaced with a reduced first time buyer tax credit in the economic stimulus package may not be dead yet.

Our hero, Georgia Senator Johnny Isakson, who sponsored the $15,000 tax credit amendment in the Senate’s version of the package told the Atlanta Journal-Constitution he will continue to push for it in a standalone bill. 

Isakson said, “Quite frankly, there is so much outward support for what we did…that I wouldn’t at all be surprised if you didn’t see it come back in some form with a Democrat’s name on it.”

According to a survey taken by the National Association of Home Builders of 1200 registered voters, two thirds of Americans support the $15,000 tax credit for all home buyers. What’s more, one-third of those polled and 61 percent of renters said they’d be more likely to buy a house if the credit were passed.

A coalition of housing industry companies called Fix Housing First is continuing to urge Congress to consider the credit, believing it would have created thousands of jobs and pumped much-needed money into the economy.

I’m inclined to agree. When the proposal was under consideration, my phone rang like crazy. Potential Minneapolis duplex buyers just aren’t as excited about the amended $8000 first time home buyer tax credit.

Perhaps that’s because there are a lot of people out there who would like to buy or sell; they simply don’t qualify for the credit because they’ve owned a home in the last three years.

Congressional arguments against the credit largely centered on the fact that it would have added $35.5 billion to the cost of the economic stimulus package.

What can we do? Keep writing and calling our Representatives and Senators.  Given enough pressure from constituents, anything’s possible.

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