Archive for March, 2009
Comments Off on Warming Trend In Minneapolis Duplex Market
In spite of what we’re hearing in the national media, there continues to be a spring thaw in to the Twin Cities real estate market.
According to MAAR’s weekly sales activity report, pending sales of single family homes in the Twin Cities for the week ending March 21 were 13 percent higher than the same week last year. Meanwhile, the number of new listings on the market showed now appreciable increase.
The latter means that to date, there are 3,000 fewer new listings on the market than this time a year ago. During the same stretch, 58.1 percent of pending sales have been lender-mediated short sales or foreclosures. Of the new listings, 37.1 percent involve lender mediation.
Similar trends continue to emerge in the small multi-family market as well. Duplex sales for the week were more than twice what they were for the same stretch in 2008. Of the 55 properties that received purchase agreements, 94.5 percent were lender-mediated. This is a slight increase from the 91 percent that were bank owned for the week in 2008.
The average off market price for the third week in March was $106,488. While a decrease from the week over week figure for 2008 of $112,086, the figures are much closer than they’ve been in previous months.
The appearance of new inventory in the multi-family market continued to slow as well. Of the 50 new listings for the week, 78 percent are bank owned or mediated. In 2008, 74 new listings appeared on the market, of which 66 percent involved a lender in negotiations.
Lower interest rates and the $8000 first time home buyer tax credit should help the warming trend continue.
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The National Association of Realtors announced today that the combination of investment and vacation home sales dropped to just 30 percent of all new and existing home transactions in 2008.
While I don’t track vacation property data, the news about investment properties was not a surprise.
The survey doesn’t differentiate between rental homes and multi-family rental properties. However, many of the characteristics described are certainly in keeping with Minneapolis duplex trends.
NAR reports that more than four out of every 10 investment buyers paid cash for their properties. Most indicated they were making the buy as a means of diversifying their investment portfolios.
Of all the homes purchased last year, 21 percent were investment properties. While the total volume of sales dropped 17.2 percent to 1.12 million in 2008 from 1.35 million in 2007, the overall market share of activity remained unchanged from the year before.
Primary residence sales dropped 13.2 percent from the mark of 4.34 million in 2007 to 3.77 million in 2008.
On average, the typical investment property sold for $108,000 last year; 28 percent below the median price of $150,000 set in 2007.
Lawrence Yun, NAR chief economist said, “Given that most people become interested in buying a second home in their 40s, the bulge of the population approaching middle age should drive the second-home market over the next decade.”
Yun’s remarks were based on Census data indicating there are currently 39.2 million people between the ages of 50 and 59 in the U.S. An additional 44.8 million are between 40 and 49, with 40.7 million more between 30 and 39.
Last year’s typical investment property buyer had a median age of 47, earned $85,0000 and purchased a property relatively close to home; specifically within a median distance of 19 miles.
When asked why they purchased an investment property, 58 percent said to provide rental income; 38 percent to diversify their portfolio; 19 percent for use by a friend, relative or family member and 15 percent said to use for vacations.
Comments Off on How To Un-Condo That Minneapolis Duplex
In the boom years of the housing market, one of the hot things investors loved to do was buy an apartment building or duplex, rehab and break them up legally, and sell them as condominiums.
To accomplish this, they created what is known as a common interest community, or CIC, whereby they legally divided the units, leaving each with its own property identification number or PID.
Banks require any property they lend on to have a single PID. So what’s the big deal?
Once Humpty Dumpty’s fallen off the wall, how do you put the pieces back together again?
While many investors drafted the legal paperwork to “condo” their building, many of them utterly failed in the endeavor.
Some of those properties are coming on the market as foreclosures. But the lenders aren’t selling the units individually. They’re marketing them as whole buildings that just happen to have several PIDs.
How does that effect the purchase of the property?
I suppose an investor could, say, on a fourplex, have her Realtor draft four separate purchase agreements. She could then buy each unit individually, and obtain four mortgages.
Or, she can ask the Seller to file what’s known as a CIC Termination. Drafted by an attorney, this termination can only be achieved if 80 percent or more of the owners in the building agree to do so.
In the case where the bank owns the entire place, it shouldn’t be difficult to get a majority vote.
The owner then files for a single deed at the county recorder’s office, regaining a single PID to allow for one mortgage on the property.
This doesn’t mean the property can’t be developed as condominiums at some point in the future. The legal break-up would simply have to be done all over again.
said on March 26th, 2009 categorized under: Financing
Comments Off on A Cartoon Explains Credit Crisis in the Minneapolis Duplex Market
[youtube]http://www.youtube.com/watch?v=Q0zEXdDO5JU[/youtube]I came across a simple, two-part explanation of the credit crisis this morning that I thought I should pass along.
The video was done as part of a Media Design Program thesis by Art Center College of Design student Jonathan Jarvis.
Here’s part two.[youtube]http://www.youtube.com/watch?v=iYhDkZjKBEw[/youtube]I think the kid’s got a big future.
Comments Off on Minneapolis Duplex Sales Cause Math Anxiety
It’s Tuesday, which means MAAR released it’s weekly report of real estate activity in the Twin Cities metro area.
It also means I spend half the day doing the calculations that MAAR doesn’t; all of the statistics for the multi-family housing market for the week ending March 14, 2009. More specifically, it means I spend a great deal of time making sure I’m right.
After all, duplex sales can’t keep going up, can they?
The number of small multi-family properties that accepted purchase agreements for the week sales were up 25 percent from their mark in the comparable week last year. Of these, 91 percent were lender mediated, up from the 83 percent that were last year.
While the average off market price for the week was still well below the 2008 mark of $152,000, the average pended price of $95,460 is much healthier than we’ve seen most of this year.
Meanwhile, the number of duplexes new to the market fell by almost half. Of this year’s total, 69 percent were bank owned. This is down slightly from the 71 percent that were last year.
Tallies over in the single family market caused a bit of tension as well. While sales tapered off slightly for the week, they are still 14.9 percent higher than last March at this time.
The number of new listings was down this year as well, dropping 13.9 percent week over week. For the year, the total number of active listings is down 14.7 percent.
Let’s hope the numbers keep climbing. I can handle it.
I’ve got a huge bottle of Advil…
Comments Off on Lose Your Fear of Buying A Minneapolis Duplex
Interest rates are at historic lows.
With an unprecedented number of foreclosures, there is a plentiful supply of wholesale-priced duplexes on the Minneapolis market.
And still, people don’t invest in real estate.
Oh, we all know what we’ll be saying five, maybe even ten years from now. “I woulda bought that Minneapolis duplex…I shoulda bought that Minneapolis duplex,” and finally, “I coulda bought that Minneapolis duplex back when…”
The odds are we will never see another opportunity like this in our lifetimes to invest in real estate.
And we all know most people make the bulk of their retirement money by investing in something; even if it’s simply the money from investing in a home of their own.
Wait. The bulk of their retirement fund usually comes from real estate?
So why don’t people buy more real estate?
Read the rest of this entry »
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It’s getting close to April 15, so it’s a good time to consider strategies to maximize your tax savings on your Minneapolis duplex.
First, you’ll need to report the income from the property, as well as expenses, on your tax returns.
A good way to simplify this process, is to keep a checking account specifically for your landlord activity.
So what tax deductions can you take as a landlord? Of course, you should consult a certified public accountant for expert advice, but general categories include:
Repairs and Routine Maintenance – if you repair the property, or buy supplies to do so, you may deduct the cost of both.
Depreciation – this is wear and tear to the part of the property you rent out, and allows you to defer taxes until you the time you sell.
Maintenance for Vacant Units – while you can’t take a deduction for the income you lose while a unit is vacant, you can take a deduction for expenses incurred to manage and maintain those units during vacancy.
Wages and Fees – You can deduct the wages you pay people you hire to maintain the building, as well as those you pay to professionals like lawyers or accountants.
Property Taxes And Local Services – As a landlord, you can deduct charges for utilties like water, sewer and trash, as well as local taxes or assesments for street or community improvements.
Insurance Premiums – You may deduct at least a portion of the cost or your insurance premiums.
Expenses for Rental Items – If you rent appliances for the unit, or carpet cleaning machines or lawn mowers to maintain the property, you may deduct those expenses.
Travel and Transportation – If you track the cost and mileage you log to manage your property or collect rent, you may deduct it.
Utitilies – If you install an extra phone line to conduct business related to your property in your office or home, you may deduct that cost. You can also decut the cost of any utilities you provide to the tenants.
Outdoor Painting or Siding – This is at least partially tax deductible.
Explore every category. After all, that’s one of the many reasons you bought a duplex!
Comments Off on Fannie and Freddie to Help Minneapolis Duplex Owners
Are you upside down on your small multi-family property due to the decline in values in the real estate market?
Hang on. Some help was on the way. It seems there was some good news hidden in the guidelines issued last week for the upcoming refinancing campaigns from Fannie Mae and Freddie Mac.
When the program was first announced, it appeared that small multi-family investors and people with second homes wouldn’t be allowed to participate. The guidelines however, included you after all.
According to Kenneth Harney of the Washington Post, the new programs, which are being undertaken at the urging of President Obama’s administration, would allow you to refinance provided you have a solid payment record, the balance on your loan doesn’t exceed the value of your property by more than 5 percent and your loan is either owned by or contained in a mortgage bond guaranteed by either Fannie or Freddie.
It gets better.
Both companies plan to waive their usual minimum credit score requirements for most people who apply. Oh, they’ll still pull your credit. But there’s no specific minimum score necessary to refinance.
There’s also no mortgage insurance. If your loan originally required the insurance, you still have to have it. However, borrowers who never had mortgage insurance because they had 20 percent equity before the decline in market value will not be required to purchase new coverage.
Read the rest of this entry »
Comments Off on Minneapols Duplex Sales Set Embarassing Record
We set a record the week ending the March 7, 2009.
But I don’t think it’s one we want a trophy for.
One-hundred percent of the 44 duplexes, triplexes and four-plexes that received purchase agreements in the Twin Cities metro area were either lender owned or mediated.
We know then what happened to the average off-market price, right?
It plummeted to $62,394; down 27 percent from the average price over the same stretch of time in 2008.
Now before we go looking for some anabolic steroids with which to improve the market’s performance, there is also more encouraging news.
The total number of small multi-family properties that pended week over week was up 209 percent. New inventory was down 33 percent. And, of the new market offerings, 83 percent were bank mediated. This was also a decline from the previous year, when 96 percent were involved lender negotiations.
According to MAAR, the single family Minneapolis and St Paul housing team fared better. Pending sales were up 24.7 percent over the same time last year, with 56.6 percent of these involving lenders mediations.
Supply continued to tighten meanwhile, with the number of new listings down 12.6 percent, bringing the total number of active lisitngs for the year down 14.9 percent from last year.
With the warming weather, first time home buyers and investors should be able to log more outdoor miles and help improve performance.
said on March 16th, 2009 categorized under: Financing
Comments Off on Do I Have To Live In My FHA Financed Minneapolis Duplex Forever?
With the federal government offering first time home buyers up to $8000 to buy a home (including duplexes and multi-family homes) by December 1, it’s a great time to consider investing in real estate.
However, with most conventional investor loans now requiring a minimum of 20 percent down and points at closing to buy down interest rates, it’s an even better time to explore FHA financing.
An FHA loan requires the borrower to have a down payment of just 3.5 percent, and that she live in the duplex she’s buying.
What if you don’t want to live in a duplex forever? What if you were hoping to move out some time in the future to buy a single family home, while keeping the duplex as an investment?
Will the FHA Police come looking for you?
Relax. There’s no FHA Police. I made that up.
According to Dean Schiffler of Burnet Home Loans, there is an unwritten rule with FHA loans that the owner should live in the property for at least one year. And if she doesn’t?
The lender may perceive her promise to live there to have been fraudulent. This could conceivably result in penalties and fines, jail time and foreclosure.
So is it possible to get an FHA loan for an additional property? Well, since it’s a requirment for FHA financing that you live in the duplex the loan is on, yes and no.
If the first property you bought has either appreciated in value or you’ve paid off enough of the mortgage to have at least 20 percent equity, you may qualify for a second FHA loan.
There are other exceptions.
If your family has suddenly heralded the arrival of octuplets, squeezing out of your two bedroom unit, or your job transfers you a distance that renders commuting to work unreasonable, the lender may grant a second FHA loan.
Of course, it’s always a case by case basis and not something to necessarily count on. A qualified loan officer should be able to guide you toward a reasonable solution.