Archive for January, 2011

Minneapolis Investment Realtor Declares Spring

said on January 31st, 2011 categorized under: Twin Cities Real Est

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man in yellow fieldIt’s the last week of winter.

Well, OK, so maybe we’ve got a month or three left of snow and cold temperatures.

But when it comes to the Minneapolis duplex market, as of next Monday, it’s spring. As in the spring housing market.

Ask any of us. There’s just something about the Monday after the Super Bowl that makes Realtors phones ring.

What this means if you’re a duplex seller is you don’t have much time left to beat the crowd to the market.

And if you’re a duplex investor, you’re about to face more competition for properties. More buyers always means higher prices.

Though I suppose that’s all relative. After all, the average sales price of a duplex or other kind of investment property is already lower than it’s been in years.

Call me. We’ll slather ourselves with sunscreen and beat the rush.

Comments Off on Duplex Investors Required To 1099 Starbucks

coffee cupsHidden in the text of last year’s health care bill was a small section that had nothing to do with health care and everything to do with owning duplexes.

Starting in 2012, investment property and other small business owners will be required to 1099 for all payments made to vendors they spend more than $600 a year with.

That isn’t limited to those who perform services like property maintenance.

In fact, it includes major corporations like Home Depot,Lowes, Starbucks

OK, if you’re spending more than $600 a year at Starbucks and writing it off as a business expense, you might raise other issues with the IRS. But let’s say it’s legitimate.

Guess what? Starbucks stores are franchises. So you’ll have to 1099 the owner of each store you visited.

I don’t know which thought is more entertaining; having to keep track of that or calling Home Depot and asking them to share their tax ID number.

There’s one way to solve some of this. If you use a business credit card to pay for your purchases, the credit card company will issue the 1099 on your behalf.

I wonder how much lobbying MasterCard and Visa did to get this passed.

Comments Off on What Are The Tax Benefits Of Investment Property?

Stack of hundred dollar bills laid out on top of IRS form,Don’t forget tonight’s free seminar detailing all of the tax advantages of rental property ownership.

CPA Pam Ricker will show those considering buying their first real estate investment property how doing so can save you hundreds, even thousands of dollars on your taxes.

For those who already own a rental single family home, duplex or multi-family property, she’ll offer helpful tips on how to make sure you’re doing all you’re allowed to reduce your tax liability in the coming year.

The seminar starts at 6:30 at the Keller Williams Realty office in Edina at 7401 Metro Blvd.

Traditional Duplex Sellers Gain Market Share

said on January 25th, 2011 categorized under: Twin Cities Real Est

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market shareTraditional Minneapolis duplex sellers must have realized last fall’s temporary foreclosure freeze granted them a window of opportunity, because for the week ending January 15, 2011, they were responsible for 57.14% of the duplex market’s new inventory.

In the same week one year ago, they contributed just 33.3 percent of the new listings.

While also improved, pended sales figures were nowhere near as encouraging. Traditional sellers received 27.3 percent of the accepted purchase offers for the week; up 7.3 percent year-over-year, but still a long way from ending the market domination of lender-negotiated sales.

The average off-market price for the week was $136,442. This is up nearly $11,000 over last year’s sold average for the week. However, as the average list price to sold ratio in the market is presently 89 percent, sold statistics should easily erase any apparent gains.

The number of newly listed single family homes for the week was down 22.9 percent over the same week in 2010. This was the third consecutive week of declines in new single family home inventory.

However, because of the decline in the number of sales, the total number of active listings on the market was up 6.3 percent.

Duplex Owners Can Let The Meter Run

said on January 24th, 2011 categorized under: Tenants

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Electric Power MeterThere are two types of duplexes; those where the tenants pay the utilities and those where the landlord does.

And because two comparable properties cash flow differently because of the expenses, each, of course, has a different value.

Many times the reason a duplex owner pays for all of the electric or gas in a building is because of the expense of having separate meters installed, not to mention the considerable cost of installing a second boiler, furnace or water meter.

What can a landlord do if she would like to increase her cash flow but doesn’t have a chunk of change to perform all the utility separations?

Bill the tenants.

In order to do so, the landlord must first provide prospective tenants with a notice of the total utility bills for the year on a month by month basis.

Next, she must have a fair way to split the bills and invoice the tenants. The Minneapolis duplex investors I know who do this usually divide it up proportionately according to the tenant’s share of the total finished square feet of the building. Regardless of the method, however, it must be detailed in the lease.

While it isn’t required, most landlords include a copy of the utility bill. However, the landlord must be willing to provide these bills if the tenant asks.

Billing tenants for utilities also triggers one more requirement. By September 30 of each year, a landlord who bills for utilities on a single-metered building most let tenants know in writing that there may be low-income energy assistance programs available. This written notice needs to include the phone number for that program.

Of course, the landlord doesn’t determine how tenants within the unit split a utility bill among themselves.

It’s important to note that under this rule, a landlord who causes the interruption of utility services may be required to pay tenants triple the amount of damage the interruption caused or $500, whichever is greater, as well as attorneys fees.

Comments Off on The Benefits Of Duplex Ownership: Principal Reduction

Nest eggWhen I ask the general public what the benefits of owning a duplex or investment property might be, most immediately come back with the term “cash flow”.

While that is certainly one of the reasons to own investment property, there are several others that are often overlooked, including: principal payoff, tax savings and appreciation.

Of these, principal reduction is probably the one most duplex buyers consider least when investing in real estate.

And yet, in a turbulent real estate market, it is the one that is most sure.

Every month when you pay the mortgage with the rent you’ve collected from your duplex, a portion of that payment goes toward paying off the balance of the loan.

In the first year of the mortgage alone, this is often several thousand dollars; an amount which grows over the life of the loan.

Let’s say you went out this month and purchased a $150,000 duplex. Provided it has a positive cash flow, and you manage it well, thirty years from now you will have $150,000 in equity. And that’s in the unlikely event that the property never increases in value.

That’s like saving $150,000 for retirement.

The only difference here is all you contributed was the down payment; which could be as little as $5250 if you’re an owner occupant and $37,500 if you’re an investor.

By the way, investors, that’s a 400 percent return onyour initial down payment.

Not to mention that when it’s paid off it should cash flow beautifully; which should help supplement retirement.

Next week? Cash flow, appreciation and the tax benefits of duplex investing.

Comments Off on Free Investment Property Tax Benefit Seminar Just One Week Away!

close-up pen on the moneyDon’t forget to call or email your reservation for the free seminar, “Understanding The Tax Benefits of Rental Property Ownership”, Thursday, January 27, at 6:30 pm.

If you’re just considering buying investment property, the start of the year is a great time to strategize for all the ways investment property ownership can benefit your year-end tax bill. And if you’re a seasoned veteran, planning your year in advance can help you save hundreds if not thousands of dollars.

CPA PamRicker of Ricker & Associates will be leading the seminar at my new office at Keller Williams Realty in Edina.

She will cover a number of tax related topics, including what constitutes rental income, allowable deductible expenses, how vacation rental properties are taxes as well as the consequences of selling your investment property.

Anyone is welcome to attend, I just ask that you RSVP so I can make sure we have enough literature and refreshments for all.

Hope to see you next week!

Duplex Market Breaks Resolutions

said on January 18th, 2011 categorized under: Twin Cities Real Est

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Calendar reminder to start dietThe New Year represents a fresh start to many things; weight loss goals, taxes, duplex sales…

And if duplex buyers and sellers resolved to make 2011 better than 2010, they’ve already failed.

The sellers of fifteen duplexes, triplexes and four unit buildings received and accepted purchase agreements the week ending January 8. This is three fewer than last year.

Of these sellers, 26.7% had human names and didn’t have to consult with a bank before agreeing to the transaction.

This is up slightly from last year’s 22 percent traditional sellers.

The average off-market price for the first week of 2011 was a mere $99,560. This is a decline of  22 percent from last year’s average sold price of $128,069.

There was one area where there did appear to be some kind of significant change in behavior, however.

Just 26 new duplex listings hit the market the first week of the year.

Over the same stretch last year, there were 53 newly listed properties to choose from.

Whether this is the result of sellers trying to take advantage of last year’s first time home buyer tax credit or this year’s temporary foreclosure freeze due to the robo-signing investigation, only time will tell.

It promises to be an interesting year.

Minneapolis Duplex Owners Lose Valuable Resource

said on January 17th, 2011 categorized under: Architecture

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Antique molded bricks stacked on grass.One of the best resources in Minneapolis for restoring duplexes to their original charm and character queitly closed its doors last month.

The ReUse Center just off of Lake Street, which sold salvaged building materials and architectural pieces, was closed by the non-profit organization that ran it; The Green Institute.

The ReUse Center was one of the first places to look if you were trying to replace a vintage Craftsman-era door, Victorian doorknob or simply needed a small amount of paint or tile. The Green Institute ran the retail store under the premise of keeping reusable building materials out of landfills.

In short, the Center was closed because it simply wasn’t profitable.

While there are hopes that after some business reorganization the ReUse Center can re-open next year, there doesn’t seem to be a concrete date for that to happen.

Until then, the Green Institute’s other ReUse Center, at 1723 E. Highway 36 in Maplewood remains open for now.

Of course, it’s important to note that the Twin Cities are relatively rich with architectural salvage companies. Google it. You’ll be surprised at what you find.

Comments Off on Shhh! The Secret Bottom Of The Duplex Market

Top secret stampI’ll let you in on a little secret.

If you’ve been waiting for the bottom of the duplex market to invest, here it comes.

According to expert Rick Sharga, senior vice president of the leading resource for foreclosure data, RealtyTrac, in 2011 lenders will take back more homes than in any prior year.

Approximately 5 million property owners are at least two months behind on their payments. Not all of these delinquencies are the result of owing more than the duplex is worth.

Many are a result of job losses.

Sharga says, “2011 is going to be the peak” of the foreclosure wave. It is estimated that 1.2 million homes will be repossessed in the next 12 months.

That’s repossessed. Not notified that they were in default.

In 2010, 1 million properties went back to the bank. However, 2.9 million property owners; that’s one in every 45 households in the U.S., received notice of a foreclosure filing.

Minnesota fared slightly better than the rest of the country. In December, there were 2853 properties that received notice. That’s one in 817 households.

That isn’t the best ratio in the county. And it isn’t the worst.

And most of these properties will hit the market in the next 18-24 months.

So if you’ve ever thought of investing in real estate, but wanted to wait until the “bottom of the market”, here it comes.

But remember…secrets don’t ever stay that way for long.

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