Duplex Chick

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This morning I stumbled upon the worst real estate investment advice I’ve ever read.

Which was?

Not to use a Realtor in the early stages of looking for property.

The rationale?

You might get pressured into buying something.

I suppose smoking is really good for you too.

If I could make people buy property, would I still be working? Or would I be retired?

And if I were working just to “keep busy”, would it be here? Or in Malibu, where both the weather and the prices are sunnier?

Just as in every other profession, there are good agents and well, stereotypes. By en large, most of the agents left in the business are the former.

A good Realtor is your advocate. The state says she has a fiduciary duty to look out for her clients best interests at all times. If she’s a member of the National Association of Realtors, she also has an ethical duty to do so. And, in light of all of the present suffering in the real estate market, most agents believe they also have a moral responsibility to protect their clients.

A good Realtor, competent in the multi-family field, will be your teacher. She will show you how to calculate the numbers, guide you in evaluating opportunities, and continue to be a resource long after you’ve been given the keys to your first building.

A good Realtor will develop an understanding of what your ideal property looks like. When she sees one; either on the MLS or while speaking with potential sellers, you will be her first phone call.

Even in this “buyer’s market”, the great deals go from “just listed” to “sold” in a single day.  By the time buyers not working with agents see these listings on Trulia.com or Realtor.com, it’s too late;  they’re usually already sold.

Most importantly, an experienced agent will keep you from making a bad deal. And to me, there’s nothing more important than that.

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If you worked your way through all the Michael Jackson media this week, you might have heard about the report released by Reis, Inc., announcing the national apartment vacancy rate hit a 22-year high in the second quarter.

Reis, a New York based real estate research firm, also found vacancy rates rose nationally to 7.5 percent; an increase of 1.4 percent from the year before. Of the 79 markets they track, 45 showed increased vacancies.

Of course, Reis charges a small fortune for their reports. None of the information leaked to the media  so far included the Twin Cities in either the list of ten worst or best markets. We’ll have to wait for Saturday’s version of their report in the Star Tribune to know where we stand.

How does this impact a Minneapolis duplex owner?

Vacancy rates and rental income are like a teeter totter. When one goes up, the other goes down.  So it comes as no surprise that Reis says the amount of rental revenue dropped as well.

Why the increase in vacancies at a time when so many people are losing their homes?

Read the rest of this entry »

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While the media continues to report disheartening news for the national housing market, the most recent data for the Minneapolis/St Paul real estate market again suggests there may be reasons for cautious optimism locally.

With their release of the Weekly Activity Report for the week ending June 27, MAAR reports that new listings for the week were down 18.9 percent from the same period last year. In fact, the total supply of listings is down 21.3 percent from 2008.

The number of pending sales for the week were also encouraging. The 1,121 propererties that received purchase agreements was a leap of 31 percent over last year.

On a broader scale, there are now just 4.9 homes available for sale for every buyer. That’s 32.6 percent lower than last year, and a number that hasn’t been seen since 2005.

In the multi-family market, pending duplex sales were up 25.7 percent from the comparable week in 2008. Of the properties that received purchase agreements, 91 percent were lender owned or mediated, with an average off market price of $109,742.

This figure once again represents an increase in the number of short and foreclosure sales from the 2008 mark. The duplexes that pended for the same week in 2008, meanwhile, averaged a sale price of $122,389.

The number of new listings for the last week in June, however, was down an incredible 34.9 percent from last year. As supply continues to decline, we may see price improvements in the near future.

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One of the most common questions I get is, “What’s the interest rate on a duplex?”

And as I do with so many of my answers, I always begin with, “It depends”.

If you plan to live in the duplex, your interest rate will be exactly the same as it would be if you were buying a single family home to live in.

However, if you’re purchasing the property strictly as an investment, your interest rate will be anywhere from one to three percent higher.

If, for example, the going rate is five percent on single family homes, expect to pay anywhere from six to nine percent interest on an investment property.

Of course, the interest rate each person qualifies for is determined by a number of factors, not the least of which is credit scores.

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Someone asked the other day what the average heat bill on a duplex was.  I couldn’t answer.

See, utility bills like heat, electric, water and sewer are as unique to a property as they are to a single family home. The cost of each is dependent upon the number of people who live there, the square footage of the unit, the type of heat, which utilities are tenant paid and which the landlord takes care of.

If you’re buying a duplex, however, there are a couple of  ways to find out what the utility bills are.

As a contingency in your purchase agreement, you can always ask the seller to share copies of utility bills with you prior to closing.

Or, in the Twin Cities, you can simply call the utility companies and ask to tell you. Many of the power companies will give you a number that represents a monthly average. The water department, on the other hand, may offer precise figures.

In either case, it’s always wise to be fully informed of the costs involved in owning any income property before the seller gives you the keys.

Have a happy and safe holiday weekend!