Archive for February, 2011
said on February 28th, 2011 categorized under: Financing
Comments Off on Why Fannie Mae And Freddie Mac Should Be Every Real Estate Investor’s Favorite Aunt And Uncle
In recent weeks the Obama administration has released options for reducing the government’s involvement in the Government Sponsored Entities Fannie Mae and Freddie Mac.
On the surface, this makes sense. Fannie and Freddie have served as clearing houses for many of the country’s troubled mortgages and to date, bailing them out has cost taxpayers nearly $150 billion.
But guess what?
Fannie and Freddie’s funeral could also be that of the multifamily housing market.
Let’s put it this way. They’re kind of like your rich old aunt and uncle, who will give you a loan when no one else will.
In fact, last year the two agencies were responsible for $32 billion in loans to multifamily investors. That’s more than 60 percent of all the multifamily loans made last year. That figure was even higher in 2009, when they were responsible for 80 percent of rental property debt.
You see, when all of the capital makets (the folks who buy up mortgages) bailed on the real estate sector, Fannie and Freddie did not. And their faith in the multifamily housing market has been rewarded.
According to Fannie Mae data, just .80 percent of the loans in their multifamily division were 60 days or more delinquent. Compare that with 13 percent of the apartment loans backed by commercial mortgage backed securities, and the four percent of bank loans that are 90 days or more late.
In other words, when it comes to their multifamily, Fannie Mae and Freddie Mac loans are out-performing the rest of the market. This in turn has attracted investors in their product, which kept the money flowing in to the rental market, which then resulted in lenders being able to offer long term, fixed rate loans to duplex and investment property buyers.
What would happen to our ability to buy duplexes and investment property if Fannie and Freddie died suddenly?
I suspect it might feel a little like being left out of their will.
Comments Off on How Baseball Can Teach You All You Need To Know About Duplex Investing
I learned how to buy a duplex or investment property from a Minnesota Twin.
Now, this has nothing to do with stealing second or grand slam. Not even metaphorically.
But the best and most entertaining teacher I know when it comes to “doing the numbers” on investment property just happens to be a former catcher for the Twins.
And it was in one of his classes that I learned how to protect myself financially.
Now you can learn from him too.
Tom Lundstedt will be teaching a class for Realtors and their clients Thursday, March 17, at the Westin Hotel in Edina.
The seminar starts at 6:30 and generally runs about two hours.
Whether you’re an experienced investor, first time duplex buyer, or have even just considered investing in real estate one day, this seminar will not only keep you laughing, but arm you with the tools to protect your financial future now and in the future.
Here’s the best part. If you come as my guest, it is absolutely free to you.
Still not convinced?
Then let me say this: in life, we get but a handful of great teachers.
Tom is one of mine.
Please email or call if you’re interested in attending.
Seating is limited, and I need to submit a head count prior to March 15.
Comments Off on Duplex Sales Changing Seasons
This week’s Minneapolis duplex market report is a little late, but as they say, better late than never.
The good news is, the week showed signs of spring.
For the week ending February 12, 2011, there were 20 duplexes, triplexes and four-unit buildings whose owners received and accepted purchase agreements. Of these property owners, 40 percent either had names that belonged to traditional sellers who did not have to consult large lenders about the transaction.
This is off slightly from the 25 small multi-family properties that pended during the same week one year ago. The silver lining here is for that stretch, just 16 percent of the pending sales did not involve a lender’s input in the transaction.
This increase in traditional seller market share resulted in an off-market price of $148,978; a significant improvement over last year’s $118,006.
In another bit of good news, the amount of new inventory to the market was down substantially. While 54 new investment property listings hit the MLS for the week last year, 2011 saw just 27 new properties hit the market.
Tightening inventory will eventually result in higher average sales prices. This is great news if you’re thinking of selling, but should also get your attention if you’ve been waiting to jump in and buy.
The single family home market also saw a drop in the number of new listings; down 24.9 percent from one year ago.
In an interesting twist, the number of signed purchase agreements for the week was down just 0.1 percent from the same week one year ago. Remember, last year’s buyers had the added incentive of an $8000 first time home buyer tax credit.
This promises to be an interesting spring.
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You may have noticed that several months ago the real estate broker’s logo on this page changed.
This happened because I moved my real estate license to Keller Williams Realty.
All Realtors are independent contractors. What this means is we are not “employed” by a real estate company, but rather, are self-employed, independent business owners who chose to affiliate with a company. (It’s much more complicated than that, but this explanation will do for now.)
I elected to move my business headquarters to Keller for a number of reasons. Among these was their cutting-edge technology and training, of which I have seen no equal in the real estate industry.
I am on my home today from the national Keller Williams convention, where the company debuted its latest technological innovation.
With a goal of going green and creating a nearly paperless company, Keller has implemented a program called eEdge, which will allow agents, duplex clients, loan officers and title companies to sign, store and exchange documents electronically through a secure password-protected cloud.
This will eliminate the need for endless faxes, help clients track and easily access important documents, and greatly reduce the time demands of scanning and faxing.
While officially launched, the entire program will be rolled out over the spring months.
I can hardly wait to eliminate paper and files from my office. But I have to wonder, instead of complaining about all the paperwork, will I start saying I have too much screen work?
Comments Off on Got Duplex Questions? Just Ask
As everybody’s snow bound today, I thought it would be a good time to ask what questions you’d like answered.
What is it you would like to know about buying, selling or owning a duplex or investment property that you haven’t been able to resolve.
Is it how to determine the value of your property? How to evict a tenant? Or how to be sure you’re making a wise investment or getting a good value when you buy your first duplex?
Whatever it may be, just ask.
That’s what I’m here for.
Comments Off on Nothing Scientific, But The Real Estate Market Is Changing
I can’t say this enough. The real estate market is changing.
Last week I received multiple offers on two duplexes I had listed within five days of them going on the market.
Every Realt0r I’ve spoken with is suddenly busier than they’ve been in years.
And this seems to be true in everywhere.
I am en route to a national Keller Williams conference in Anaheim and decided to stop in and see my snowbird parents who winter in Scottsdale along the way.
Yesterday they wanted to look at open houses in a high-end, gated community. As that market is completely foreign to me, I was willing to go along.
Every single agent I spoke with told me they hadn’t been this busy in years. In fact, since January 1, this particular neighborhood had seen 25 properties go under contract.
They sensed, as do I, that there’s somehow a renewed sense of optimism in the air. It isn’t anything we can measure, but things feel different.
Granted, we’re not out of the woods yet. RealtyTrac is still forecasting that 1.25 million homes will go back to lenders nationally this year. This figure represents a 25 percent increase over last year.
In other words, don’t count on any real appreciation in property values until that bank owned inventory works its way through the system; which could take years.
However, if you’ve been waiting for the “bottom of the market” to start your investment career or buy your first duplex, don’t wait too long.
Things are changing.
Comments Off on Why Your Realtor Likes To Feel Used
Most people think they only time they should speak with a Realtor is when it’s time to buy or sell a duplex.
They should call us often.
And not because we might be lonely. But rather, because we like to feel and actually are, useful.
Realtors are not only familiar with market trends, but because of our daily hands-on involvement with property, we’re also an invaluable resource for information about community happenings, names of good contractors, specialized attorneys and accountants, updated vacancy rates, property management tips, and almost anything else you could need relating to your property.
Best of all, if we don’t have the answer, it’s more than likely we’ll track it down for you.
Use me. It makes me feel as if I’m contributing something.
I like it. Really
Unless, of course, we’re dating.
Comments Off on Is Perception Reality In Duplex Sales?
Every Tuesday I try to report the cold hard facts about the Minneapolis duplex market, based on the numbers I pull from the regional multiple listing service.
And while generally speaking those figures are a good measure of what’s happening in small investment property real estate, they don’t always paint a complete picture of the marketplace.
For example, every single Realtor I’ve spoken with in the last two weeks has experienced a perceptible explosion in their business.
Listings have started selling in a matter of days. Our phones are ringing incessantly.
And yet, for the week ending February 5, 2011, the numbers don’t necessarily support what we’re all feeling.
For example, just 16 duplexes received and accepted purchase agreements that week. Of those, just 12.5 percent belonged to traditional sellers. The average off-market list price was $77,880.
During the same stretch a year ago, 27 Minneapolis and St Paul duplexes and small multi-family properties achieved pending status. Of these, just one of those purchase agreements was signed by a traditional seller. The average sold price for that group of duplexes, however, was $121,280. How much of that average sales price was driven by the 2010 first time home buyer tax credit is anybody’s guess.
There were 30 new investment property opportunities on the market in the first week of the month. Seventy-three percent were offered by banks or will involve bank negotiations in any transaction.
While this is a drop of week-over-week new inventory of 30 percent, the bank-involved share of the market increased by three percent.
Comments Off on Why An FHA Appraisal Is Not A Duplex Inspection
It seems there’s some confusion about what, exactly, an FHA appraiser does and how that differs from a home inspector.
First, what is FHA? FHA is the division of the federal Department of Housing and Urban Development (HUD) that insures residential mortgages of one to four units.
When a buyer chooses to get an FHA loan, he or she is usually able to purchase a property using a down payment of as little as 3.5 percent, in exchange for agreeing to make a monthly mortgage insurance premium payment.
An FHA appraisal is conducted by a regular duplex appraiser. His or her primary job is to determine whether or not the property is worth the amount you’ve offered to purchase it for. That appraiser is also simply required to check whether or not the property meets FHA’s minimum criteria for them to be willing to insure the mortgage.
Some FHA red flags include things like peeling paint, broken windows and leaking plumbing. If the appraiser finds these things, he or she can require them to be repaired or replaced before telling the bank it’s OK to issue the loan.
A home inspector, on the other hand, is an independent contractor who goes through the duplex with a fine tooth comb on your behalf, looking for any immediate health and safety concerns, as well as anything that may be in imminent or future need of repair.
For example, a roof may be in good enough shape for the FHA appraiser to accept. However, the inspector can tell you the roof is nearing the end of its useful life and will need replacement.
An appraiser will check to see if a furnace is working.
A good home inspector will look to see if there’s a cracked heat exchanger in that same furnace which is emitting carbon monoxide and can kill you.
An appraiser will tell you if you’re overpaying for a duplex.
An inspector will tell you whether or not you’re going to have to put a lot of money into it.
A good inspector should give you an extensive report of the issues he or she found with the property. I have yet to see a perfect inspection report, so know that there will always be items for you to note.
Most will probably not be worth asking the seller to address. In fact, the most important are those that will concern the health and safety of you and your tenants.
Consider the rest a “to do” list.
Comments Off on Minneapolis Investment Property Sales Experience Heat Wave
Sometimes little improvements are everything. For example, ten degrees doesn’t usually mean much. Until it’s -14 degrees anyway. When the temperature climbs to -4, it feels like a heat wave.
The Minneapolis duplex and small investment property market is a little like the weather. Right now it’s cold. It’s going to continue to be cold for a while. But we all know winter, like the housing crisis, will eventually come to an end.
For the last few weeks, it’s seemed like a 10 degree heatwave in the Minneapolis real estate market. For the week ending January 29, the average price a duplex left the market at was $133,525.
This looks like sun screen territory when compared with the sold price for the same week last year of $82,154.
Of the week’s market departures, 38.9 percent belonged to traditional sellers. This is up 7 percent from last year.
There was a virtual traditional seller heat wave in the properties fresh to the market. They were responsible for 26.9 percent of the week’s new inventory. Last year, every new listing for the week was offered by the banks.
The single family market also celebrated something of a temporary thaw. That is, when viewed in context of the near arctic blast of the last few years.
Purchase activity for the area was down 2 percent year-over-year, which, oddly, indicates a warming trend in that it’s the smallest drop in this category in two months.
Of course, without the incentive of a tax credit, it will be difficult to keep up with last year’s early spring market. However, sales do resemble those of 2009. That wasn’t exactly the best year on record, but at least we haven’t experienced more of a dip.
New single family home listings were also down 16.9 percent from last year. Less inventory should eventually help warm the market.
Overall, things are a bit better, but not great.
And while winter in Minnesota is drawing to an end, we have a long way to go before the housing market will feel like spring.