Archive for August, 2009

Minneapolis Encourages Duplex Tenants To Get Married

said on August 13th, 2009 categorized under: Legal Stuff, Tenants

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wedding ringsSometimes government rules and regulations just don’t make sense.

Take, for example, the city of Minneapolis’ rule on the number of unrelated people who can occupy a rental unit.

If a property has a zoning designation of R 1-3 (residential 1- 3 units), a maximum of three unrelated people can live in each of the units.

The number of bedrooms or amount of square footage in each is irrelevant. In other words, if you own a duplex with a five bedroom unit, you can only have three unrelated people living in it.

If the multi-family property is zoned R 4-6, however, you can have up to five unrelated people in each unit; even if there’s only one bedroom in each apartment.

Of course, if the other people occupying a unit are related by blood, marriage, or adoption, an R 1-3 property can house the family plus two unrelated people.

In a R 4-6 zoned multi-family building, a family can have up to four unrelated people living with them; again, regardless of the number of bedrooms in the apartment.

What happens if the city discovers there are more residents than allowed in a duplex? The landlord can lose his rental license.

So if you have a Minneapolis duplex, say, by the U of M or in Uptown with a couple of four bedroom units, how can you make sure you’re in compliance?

Get your tenants to marry or adopt each other.

Minneapolis Duplex Market On The Move

said on August 11th, 2009 categorized under: Twin Cities Real Est

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downtown Minneapolis and Highway 35WWith today’s release of MAAR’s Weekly Market Activity Report, it’s clear there is some movement on the Twin Cities real estate highway.

The Realtor’s association reports the number of new single family home listings for the week ending August 1 are down 12.2 percent over last year’s numbers. While the number of sales has leveled off, they are still outpacing last year’s mark by 20.9 percent.

The homes that are selling are doing so at a slightly faster pace than last year, staying on the market 137 days as compared to last year’s 146. What’s more, they are now selling for, on average, 94 percent of their list price; a jump of three percent  since the year began.

Postive trends appear to be emerging in the multi-family market as well. Pending sales for the week were up 14.7 percent from the same week in 2008, at an average off market price that was $13,937 higher than last year’s.

Of these properties that received purchase agreements, 82 percent were lender owned or mediated. This represents a week over week decline of 6 percent.

New inventory reflected similar patterns. New duplex listings on the Minneapolis market was down 22.7 percent from the same week last year. Of those new offerings, however, the number of bank-involved properties was up 7.36 percent.

Minneapolis Duplex Owners Throw Money Down The Drain

said on August 10th, 2009 categorized under: Buying A Duplex

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washing machineI’ve been showing a lot of duplexes lately, and I think I’ve noticed a trend. Duplex owners everywhere seem content losing money.

How so?

Nobody seems to have coin-operated washers and dryers any more. 

I suppose it could be argued that with just two units, there’s no point in the hassle. Or, if the building is owner-occupied, why bother with the keys and the coins for just the one?

Because each unit can be worth $20-25/month in additional revenue; which is about enough to cover the water bill for that tenant’s unit. And while I don’t have any scientific data to back me up, I’ll bet people do more and smaller loads of laundry if they don’t have to pay for it.

Not to mention that $25- $50 a month times 12 months of laundry equals additional annual income of $300-$600. If area properties are selling at an average of 10 times their gross annual rent, laundry income can represent added value in a list price of $3000-$6000.

If you’re buying a building without appliances, coin operated units aren’t hard to find. Check the Yellow Pages or call me and I’ll help you track one down.

You’ll get your investment back before the spin cycle.

Nancy Drew Helps Solve Minneapolis Duplex Mystery

said on August 7th, 2009 categorized under: Buying A Duplex

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ND PCB box mech.inddLooking for income property in today’s foreclosure-cluttered market sometimes requires myself and my clients to learn from Nancy Drew.

The scene of the crime is an abandoned and often neglected property. There are few, if any, witnesses, no paper trail of seller’s disclosures or signed leases, and absolutely no one to ask anything about the property.

So, like any good detectives, we use our heads.

This week, the building in question was a vintage triplex in a highly sought-after neighborhood, with tons of vintage charm and amenities. It sold for nearly twice what it will be on the market for just a few years ago, and now, represents a once-in-a-lifetime opportunity.

It’s been over a year since I saw it as a short sale. And of all the properties I see week after week, it was one of a handful that will always stand out in my mind.

As part of doingdue diligence on the property, I called to verify the  gas, water and electric bills with the appropriate utility companies.  I was surprised to learn the property only had two electric meters. (Hey, I can’t remember everything.)

This clue got me to thinking.  While two of the units were clearly built as part of the building, the third was obviously an afterthought.  It wasn’t long before it occurred to me the unit may not be legal. So I called the city.

The building zoned R2 (ok for two units), meaning the property would need to be rezoned to allow for the third. This can be a lengthy process, requiring, among other things, a specific percentage neighbors to sign off on their support on it.

Worse yet, the non-conforming unit wasn’t licensed or built with a permit. Having city inspectors approve the construction after the fact will likely require dismantling walls so they can verify it was wired, plumbed and framed correctly.

In other words, it may have to be rebuilt. From scratch.

OK, so while those are certainly obstacles, it’s still a great building. And in the end, overcoming those challenges will result in a big pay day, right?

Yes.

But there’s one more problem.

Read the rest of this entry »

Minneapolis Duplex Owners Answer “D: None Of The Above”

said on August 6th, 2009 categorized under: Home Repair

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3d human with a red question markSometimes I think I should write questions for “Who Wants To Be A Millionaire

See, I get a lot of questions I can’t answer in my job. They range from, “Why did the seller think put a toilet in the closet?” (Answer: “I dunno”) to “How much does it cost to put a new boiler in a 4500 square foot triplex?”

While I don’t think I’ll ever have an answer to the first question, from time to time I’ve been able to answer the last by calling a contractor friend for a favor…or 12. I swear, sometimes I can (understandably) actually hear them roll their eyes over the phone.

In an attempt to answer without using my “Phone A Friend” lifeline the other day, I stumbled on one of the most useful websites I’ve ever found.

It’s actually called Whatitcosts.com.

Need a wedding dress? They can give you a ballpark idea of what you’ll need to spend. But more importantly, to this conversation anyway, they can give you ranges for any kind of home improvement you could think of.

While not exact, the prices the site provides are in keeping with figures local contractors have shared.

How much for the boiler? Now I can answer. Anywhere from $3500 – $7000 (dependent on energy efficiency, BTUs, etc.).

I don’t think, however, I’ll ever have an answer as to why some owners make some of the “home improvements” they do.

Minneapolis Duplex Market Tightens

said on August 4th, 2009 categorized under: Twin Cities Real Est

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SpannerTo many Realtors and first time home buyers shopping for property it feels as if the market has begun to tighten.

Both entry-level homes and duplexes are selling in multiple offers. And in many cases, an offer that’s $10,000 or even $20,000 over list isn’t getting the job done.

In the duplex market, that may well be due to a lack of supply. For the week ending July 25, 2009, just 44 new multi-family listings came on the market.  This represents a drop of 54.6 percent from the number of new listings for the same week just one year before.

Meanwhile, the percentage of lender-mediated properties new to the Twin Cities duplex market appears to have leveled off: up just one point from last year to 77.27 percent.

Duplex owners do seem to be making some inroads in the marketplace, accounting for almost one-fourth of the pended sales as opposed to last year’s 11.43 percent.

Better yet, the average off market price for the week was a whopping $171,841 (buoyed by the sale of a $999,900 duplex). The mark for the same stretch in 2008 was paltry by comparison at $103,464.

According to MAAR, the single family home market is changing as well. There are just 4.88 homes on the market for every buyer; a figure that is 34.8 percent below the amount of available inventory at this time last year.

Meanwhile, purchase agreements signed for the week were up 21.4 percent week over week, with the number of new listings down by 9 percent. Overall, there are 21.7 percent fewer listings in the marketplace this year.

Eight Ways to Paint Your Minneapolis Duplex Green

said on August 3rd, 2009 categorized under: Legislation, Tax Credits

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Environmentally firendly houseIt’s not easy going green.

Oh, we all know there’s a push to do it. But let’s face it. It’s downright expensive. Where are you going to get the money?

Well, thanks to a salad bar full of recently passed and pending green legislation, it will soon be easier to finance these projects than ever.

Let’s start with the green opportunities already available to Minneapolis duplex owners:

  • Energy Efficient Mortgage (EEM) -Already in place, this FHA-backed mortgage allows a buyer to purchase or refinance a principal residence of one to four units and incorporate the cost of energy efficient improvements into the mortgage. Best of all, the borrower does not have to qualify for or make a down payment on the additional funding.

The energy efficient improvements must be cost effective. In other words, you have to prove the cost of the improvement is less than the total value of the energy it will save you over its useful life.

As part of the American Clean Energy and Security Act now before Congress (more widely heralded for it’s cap-and-trade” carbon emmissions program), proposed additional incentives include:

  • The FHA would directed to insure a mimimum of 50,000 new Energy Efficient Mortgages during the next three years, with the definition of an energy-efficient house being one where energy consumption is reduced by 20 percent after renovations.
  • Freddie Mac and Fannie Mae would be required to increase the qualifying incomes of mortgage applicants by at least one dollar for every dollar of projected energy savings from efficient design, green construction or renovations. (Think of this as somewhat like being able to use 75 percent of a property’s rental income to help you qualify for a loan to buy it; except this is dollar for dollar).
  • Loan applicants who live close to mass-transit lines or employment centers would receive similar concessions on their qualifying incomes.
  • Appraisers would be required to consider energy improvements as part of a duplex’s appraised value.
  • State governments would ensure property owners who go “off grid” by no longer using utility companies to provide power are not denied property hazard insurance.

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