Archive for October, 2010

Comments Off on Qualified Real Estate Investment Agents Become Easier To Find

cias logoOne of the best things about turmoil in any industry is it usually results in overdue changes and innovation.

The real estate market is no exception.

In the boom years, many first time and relatively inexperienced real estate investors turned to their local Realtor for guidance. And sadly, many of those agents did not have the necessary training or education necessary to help their clients follow an investment philosophy based on anything other than market appreciation.

Needless to say, when the market began its unprecedented tumble, those investors, as well as many of the Realtors who helped them crashed with it.

To ensure against this ever happening again, the Certified Distressed Property Institute have created an educational program to help properly train Realtors in real estate investment analysis and strategies.

Agents who graduate from this program will become Certified Investment Agent Specialists (CIAS). This designation will not only help educate Realtors, but also help consumers easily find trained, qualified agents to help them in short and long term real estate investments.

I believe a designation like this is long overdue.  And as such, if I miss a day or two blogging this week, it’s because I’m in Austin, Texas, as one of the first one hundred agents in the country to earn it.

Minneapolis Duplexes Take Up Skydiving

said on October 26th, 2010 categorized under: Twin Cities Real Est

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ParachuteThe Minneapolis duplex market for the week ending October 16, 2010, was a bit like falling out of an airplane at 10,000 feet. We were a bit higher than last year’s 8000 feet; but the fall hurt just as much.

The number of duplexes, triplexes and fourplexes for sale that received purchase agreements was 21. This is a drop of 16 percent from last year.

Of these, a third were brought to the market by traditional sellers. This is up 17 percent from last year.

At an average off-market price of $120,322; higher than last year’s average sold price of $111,912, the market almost appears as if it’s about to bounce. Trouble is, the average sold price right now is about 6 percent lower than the list price, making it likely prices are roughly the same.

The amount of new duplex inventory coming to the market continued to slow, with just 33 new opportunities presenting themselves for the week as compared with last year’s 42. Traditional sellers represented 45 percent of those new listings, compared with last year’s 36 percent showing.

Single family homes, meanwhile, continued to have fewer new listings year-over-year, with 2.1 percent fewer properties coming on the market than did last year.

However, the number of active MLS listings remains 11.3 percent greater than the same week in 2009. This is a direct result of the 39.2 percent decline in buyer activity from one year ago.

Next week, I hope somebody remembers to pack a parachute.

Minneapolis Landlords Get Good News

said on October 25th, 2010 categorized under: Multi-Family Property Investing

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young business woman talking with mobile isolated on whiteApartment vacancy rates in the Twin Cities just dropped to a two-year low of 4.2 percent, according to GVA Marquette Advisors.

According to GVA’a “Apartment Trends” market report, this is a considerable improvement over the 6.4 percent for the third quarter last year, and better still than the figure at the end of 2009, which was 7.3 percent.

The report studies 57 geographic submarkets across the Twin Cities. Of those, the urban markets are reporting the best statistics. The city of Minneapolis reports a vacancy rate of just 3 percent, whereas St Paul’s stands at 4.2 percent.

Suburban markets like Minnetonka and Maple Grove, on the other hand, have vacancy rates ranging from 5.5 – 5.9 percent.

GVA reports that the lowest vacancy rates are found in units that rent between $900-1000 per month. Conversely, apartments charging more than $1500 per month are incurring a 4.7 percent vacancy rate.

Overall, the average rent in the Twin Cities has not yet increased dramatically. The current %905/month average is down from last year, but up $3/month from the average in the second quarter of the year.

This is good news for landlords who have endured high vacancy rates and reduced rents for several years.

Have You Increased Your Duplex Cash Flow Lately?

said on October 21st, 2010 categorized under: Tenants

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Water tap dripping dollar bills, Water waste conceptLast night I spoke a with a long-term duplex owner struggling to decide whether or not he should sell.

His property has a positive cash flow every month, but with children and a house miles away, he no longer wants to be a landlord.

He also knows his duplex is no longer worth what it once was. Knowing that, he grudgingly leaned toward keeping it.

I asked him what his decision would be if he had a better cash flow.

His mood and his position quickly brightened.  The answer was easy. He’d keep the duplex.

I reminded him there might be ways to do just that; by reviewing the property’s expenses.

I asked if he’d shopped his insurance rates lately. No.

Had he reviewed the water bill? Installed low flow toilets or water-saving shower heads? No.

Had he increased the fees for laundry by 25 cents a load? No.

Had he passed on any rental increases? No. He was afraid his tenants would leave if he increased the rent.

I asked whether he thought they’d rent a truck and bother their friends for help moving heavy furniture over $10-25 a month. He didn’t think so.

By the end of our conversation we’d found ways to increase his cash flow by more than $100 a month.

He still didn’t want to be a landlord, but the raise in pay helped ease his pain.

Minneapolis Duplex Sellers Sleep Better

said on October 19th, 2010 categorized under: Twin Cities Real Est

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Sleeping girlWake me. I must be dreaming.

Minneapolis duplex sales just went up.

For the week ending October 9, 2010, 29 duplexes pended on the Twin Cities MLS. That’s four more than did for the same week last year.

It doesn’t sound like a lot, I know. But when you convert it to percentages, that’s an increase of 17.2 percent.

Unfortunately, 76 percent of this year’s accepted purchase agreements for the week involved a bank in the negotiations; up 12 percent over the year before.

But there was still some flying and prize winning lottery tickets left in the dream. The number of new listings for the week was down 22.4 percent from last year’s mark, with traditional seller’s putting forth a whopping 53 percent of the weeks new inventory. Last year, just 37.93 percent of the new listings didn’t involve lenders in the negotiations.

The average off market price for the week was actually $7000 higher than last year’s sold price for the week as well; the first time that’s happened in nearly a year. Of course, it’s important to remember that the pended price is based on what the property was listed for and usually higher than the sold price in this market.

While this is likely a brief, pleasant dream, the nightmare over in the single family home sector continued. New listings were down just 4.1 percent from last year. That decline would be good news if there weren’t also 44.8 percent fewer pended sales than there were for the same week last year.

That drop, by the way, is the largest in 13 weeks.

In other words, don’t look for the monsters to get out of the closet any time soon.

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lemonsDo you know how much the bank bid on your Minneapolis duplex at the sheriff’s sale?

You should, because it could make you money.

In the midst of this sour housing market, many lenders have begun to realize the duplexes they hold mortgages on are lemons, and no longer worth the amount that’s owed.

And as difficult as it may be to believe, they truly don’t want the property back as a foreclosure. After all, foreclosed properties typically net the bank far less than short sales do.

What’s more, they are in the money business, not the landlord business. It costs them even more money once they have possession of the duplex to evict and/or manage tenants.

So some banks are getting smart. They’re bidding far less than what’s owed at the sheriff’s sale. Some are even bidding at or below current market value.

What does that mean? If the delinquent duplex owner can come up with the amount bid, they can redeem the loan and have neither a foreclosure or short sale on their credit report.

For example, I am working with an owner who owes $300,000 on his mortgage. We learned today that the bank bid just $153,000 for the property at the sheriff’s sale. If my client comes up with that money and pays the bank before the end of the six month redemption period, the debt will be considered paid in full; the only hit to his credit will be a result of the payments he missed or was late on.

Of course, the bank needs to be paid some additional interest and penalities on top of this. However, I am confident we can sell the duplex for at least what the bank bid at the sheriff’s sale. I knew we couldn’t sell it for the full amount he owed.

What if we sell it for more than the bank bid? My seller pockets the difference.

For example, if we were to sell it for $180,000, estimating $20,000 in penalties and selling costs,  he would have $160,000 left over. After he paid the bank the $153,000, he would put $7000 in his pocket.

Incredible.

Unfortunately, this is not true for all duplex owners facing either short sale or foreclosure. And, as always, you know and explore all of your options before letting the property go back to the bank (which could result in tax and employment consequences to you).

However, if you’re one of the lucky ones, your bank may have just given you the opportunity to make lemonade.

Comments Off on Why A Minneapolis Duplex Short Sale Doesn’t Mean You Can’t Negotiate

saleSometimes I think buyers look at short sale duplexes and think to themselves, “The price is the price”.

But short sales aren’t all that different from traditional sales when it comes to your ability to make an offer. What a property’s listed for may not be what it’s worth.

After all, just like every other piece of real estate, it’s only worth what  willing to pay for it.

And since the buyer will have to have loads of patience waiting for the short sale to be processed, there’s usually a heavy discount involved as an incentive.

Remember, duplex owners who are selling because they’ve fallen behind in their payments are racing against a clock. In Minnesota, there is just a six month redemption period following the sheriff’s sale; which usually happens when a multi-family property owner is already six months behind in their payments.

In light of the fact that short sales can take months to negotiate, the seller is aware time is finite. This is beneficial to buyers because sellers are often willing to accept deep discounts in order to get the process moving quickly.

Short sale duplex listings typically hit the market at prices that are in keeping with the amount of time left in the redemption period. For example, if a property has not yet gone through a sheriff’s sale, the owner has a little more time in which to attempt to get a higher price.

This is important because while they will not pocket any of this extra revenue, the lender will want to see evidence there was an attempt to sell the property for more; the market simply wasn’t willing to pay it.

This brings to mind an important reminder; if you submit an offer on a short sale, both you and the seller are negotiating with the bank. The seller is charged with demonstrating to the lender they can no longer afford the property. And essentially the buyer is arguing this is the price the market will bear.

As we head into winter, this should become easier to prove.

Get Out More Than You Put In To Your Minneapolis Duplex

said on October 14th, 2010 categorized under: Tenants

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Granite CountertopI have a client who insists on putting granite counters in the kitchens of every duplex she buys.

She argues that upgrade is why her properties stay rented.

She may be right.

Most of us would agree that many of the foreclosed and short sale duplexes on the market today are in need of a face lift. But when looking at them for rehab and rental, it’s important to keep in mind the return you may or may not get on your improvements.

For example, will granite countertops mean you can charge $50 more a month in rent? Or will they just help you avoid vacancies?

And if they will generate more income, how long will it take you to recoup the cost of the improvement? For example, if the granite counter tops cost $500 to install, and they result in $50/month more in rent, they’ll have paid for themselves in 10 months.

But will granite countertops generate more income? Or would your rehab dollars be better spent fencing the back yard or installing an air conditioner?

That’s why it’s important to know who your prospective tenant is, and to consider what’s important to them when making your decisions.

My clients properties are in an outer ring, affluent suburb with a highly respected school system. They are all three bedroom units, so her typical tenants are likely to be a families with children.

While a fenced back yard might be enormously appealing, I should also share that while this suburb has very few duplexes, most of them are within a two block radius of one another.

A granite counter top may help distinguish her property from the competition. But is it worth $50 more a month in rent? Or would a fenced back yard bring a better return?

The neighborhood will decide. So too will yours. Consider its personality when you’re fixing up your duplex. Not only will it save you money at the Home Depot checkout, it will help you make more on the first of every month when rent comes due.

Minneapolis Duplex Market A Little Sore

said on October 12th, 2010 categorized under: Twin Cities Real Est

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blue pillsAs of late, the Minneapolis duplex market seems to have tendinitis in its throwing arm. It aims in the general direction of a recovery, but never seems to find an open receiver.

For the week ending October 2, 2010, just 18 purchase agreements were signed. Of those, a mere 16.67 percent did not involve a bank in the negotiations.

These 18 transactions were 33.3 percent fewer than those that pended during the same week last fall. One-third of those sales involved traditional sellers.

The good news is there are fewer new listings as well. While there were 50 new duplexes, triplexes and fourplexes on the MLS during the week last year, this year saw just 28 new listings.

Thirty-two percent of the 2009 listings were offered by traditional sellers. This year, 53.6 percent were not bank owned or short sales.

The average off-market price of $110,794 trailed last year’s average sold price of $112,530 as well.

Let’s hope the housing market finds some Advil soon.

Duplex Short Sales: The Best Buys On The Market

said on October 11th, 2010 categorized under: Buying A Duplex

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terrorWith all the news about duplex foreclosures, and the great deals people are getting buying foreclosed properties, what’s often overlooked are the tremendous values available in the short sale market.

A short sale is when a duplex owner owes more than the property is currently worth, and negotiates with his lender(s) to settle the debt for less than what is owed.

Why are they such good deals? First, most Minneapolis duplex buyers don’t have the patience for a short sale. Negotiations with the sellers banks can take as little as 30 days, and as many as 6-9 months to resolve. Few people are willing to wait that long.

Because of that, there tends to be less competition for short sale duplexes. And if you think that in this down real estate market there isn’t any for foreclosures either, you’d be mistaken.

Just last week I had a buyer write an offer on a foreclosure duplex that was in very nice condition and a highly desirable area. Her offer was one of five.

Which brings to mind one of the other reason short sale duplexes are a great buy: they tend to be in better condition than most of the foreclosures.

When properties sit vacant, as they often do in the stretch between it being foreclosed on and being brought to market, it’s almost as if their very emptiness causes them to fall apart.

Time and again, for example, I’ve seen vacant duplexes that weren’t winterized in time for the cold; and all the pipes have burst. Or, for some reason, the cold caused large sheets of paint to start falling from the ceiling. Of course, then there’s the inevitable temptation to the neighborhood kids of throwing rocks through windows…

Think of this. Winter’s a good time to sit and wait for a short sale approval. After all, by the time you get bank approval, it may once again be spring; the best season of the year to find tenants, as well as to move!

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