Archive for November, 2010

Comments Off on Let Your Minneapolis Duplex Send Your Kids To College

diplomaI was visiting with a friend the other night who was lamenting the poor returns on the 529 college savings plans he had selected as a mean of planning for his childrens’ college educations.

The returns he was getting were miserable.

Of course, I asked whether he’d considered real estate as a tool for saving for college tuition.

With today’s depressed property prices and historically low interest rates, many single family homes, duplexes, triplexes and ing flowing better than they ever have.

In fact, many investors are finding they can actually finance the duplex with a 15-year mortgage at monthly payments just slightly higher than those on a 30-year amortization schedule.

As a result, many parents of young children are realizing real estate is a wonderful way to supplement or grow college funds.

If your children are young, and you purchase an investment property on a 15 year loan, it will have a significant cash flow by the time your kids are college age.

At that time, you can do one of two things; sell it or harvest the equity to have a lump sum for tuition.

Provided you purchased the property right and it cash flowed from the beginning, the only money you will have into it is the down payment. For 15 years, tenants would have been making contributions to your childrens’ college fund simply by paying rent.

Let’s say you bought it for $150,000. Fifteen years from now, even if the property never went up in value, you would have saved $150,000 in the college fund.

And while things are bad now and promise to be for some time to come, odds are that 15 years from now, that investment property will have appreciated somewhat in value.

Remember, you don’t have to buy the most expensive property to get started as an investor. There are many townhouses and condos on the market at affordable prices that would cash flow and be an excellent place to start your investing career.

And by the way, while this web site may be called Duplex Chick, I can write offers on condos too.

Comments Off on Why Real Estate Is Still A Great Investment

Business papers and red pencilIn the economic downturn of recent years, both the stock market and real estate have experienced unbelievable volatility; so much so that it’s difficult at best to know where to invest for long term financial wealth and security.

And the returns on more conservative investment vehicles like bonds and CDs haven’t fared much better.

In fact, according to the Certified Distressed Property Institute, over the last 10 years, bonds have experienced an average rate of return of 4.46 percent. Certificates of Deposit (CDs), on the other hand, have averaged just 3.32 percent.

What about stocks? At the start of the decade, the S & P 500 Index stood at 1469.25. By July of 2010, the Index had dropped to 1027.37; a decline of 30.08 percent.

So what’s been the best investment over the last 10 years?

Real estate.

And no, I haven’t been drinking.

According to the National Association of Realtors, the average sales price for a single family home in 2000 was $138,000. In the last decade, the average sales price for that same property rose to $179,600.

That’s an increase in value of $41,600 or 30.14 percent.

Yes, we’re experiencing what may well be the greatest downturn in real estate values in our lifetimes. But those numbers are based on appreciation and inflated, speculative values.

What if we valued real estate simply for its cash flow?

For example, let’s say you used your self-directed IRA to go out this week and buy a three bedroom house for $100,000. (Remember, you don’t need to buy a duplex or an apartment building to be a real estate investor.)

You are able to rent the house for $1200/month. After taxes, insurance, maintenance and vacancy rates, you net $700 a month in positive cash flow, or $8400/year.

Over ten years, you’ll have pocketed $84,000; even if rents never increase and property never appreciates.

Can you predict returns on stocks with equal confidence?

Historically low interest rates and a surplus of foreclosures and short sales on the market make this a terrific time to re-examine investing in real estate.

And, as we head into that long Minnesota winter when historically there have always been fewer people shopping for real estate investments; the deals are sure to be plentiful.

Minneapolis Duplexes Run Negative Campaign

said on November 2nd, 2010 categorized under: Twin Cities Real Est

Comments Off on Minneapolis Duplexes Run Negative Campaign

VoteI think all the Minneapolis duplex buyers were busy filling out absentee ballots the week ending October 23; because they sure weren’t out buying properties.

Just 18 duplexes received purchase agreements. Of those, two did not involve lenders in the negotations.

For the same week last year, 33 properties received offers, with seven of those being brought to the market by traditional sellers.

The number of new listings for the week was down as well, with 44 coming to the market; 12 fewer than did for the week last year. Of these, the percentage of traditional sellers dropped nearly 8 percent year over year; contributing  just 38 percent of the new inventory.

The week’s average off-market price of $96,336 was down $7000 from last year’s sold price. This is a number sure to shrink further when those properties move from pending to sold status.

The single family home market didn’t poll any better. The number of newly signed purchase agreements for the week were 34 percent less than last year.

New listings were down as well; trailing last year’s by 8.9 percent. This would be good news except that the amount of active inventory already on the market is already 11.5 percent higher than it was at this point last year.

I’m sure that next week when all of the “good” politicians have beaten the incumbants, everything will be different.

Sarcasm intended.

Comments Off on Buy Duplexes Through A Self-Directed IRA

dollar chrome symbolWith duplex financing more difficult to get and available properties at unbelievable values, many investors are turning to self directed individual retirement accounts (IRA) as a means of financing their acquisitions.

While IRAs exist in a variety of forms and are a method of sheltering retirement savings from certain taxes and lawsuits, it is through a self-directed IRA that an investor may directly choose the investments of the IRA.

Investors may roll over funds from other retirement accounts into a self-directed IRA, where they may invest in anything except life insurance, S-corporations and collectibles.

In other words, the IRA may be used to purchase real estate. However, it’s important to note there are some restrictions in doing so.

Property must be purchased in the name of the IRA, which acts as a trust. Profits and positive cash flow are deposited directly through the IRA’s custodian, which may not be the investor. The custodian also distributes funds to pay bills.

Self-directed IRAs are allowed to purchase real estate in a number of ways; either using all cash, by partnering with another investor or trust, or via leveraging.  For all intents and purposes, the self-directed IRA can invest just as a person would, but the funds are protected by the trust.

Many investors find by using their IRAs to invest in real estate that they earn a steadier appreciation than they would with a stock, in addition to cash flow, which helps boost the return on the investment.

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