Archive for April, 2011

Comments Off on The Minneapolis Duplex Behind Curtain Number 3

lets-make-a-dealThe other day I got a call from someone on the west coast who wanted to buy one of my duplex listings.

He thought it was a good investment.

He’d never seen it.

Why would he want to invest in Minneapolis duplex?

He thought it was a good deal.

But really, his call was more like the old tv game show, “Let’s Make A Deal”.

You just never know what’s behind curtain number 3.

In fact, last spring I found just that when a southwest Minneapolis duplex came on the market last spring at an unbelievably low price.

I looked at it quickly as I could so my clients wouldn’t miss out on a great deal. It turned out most of the back half of the duplex was missing. It seems there had been some kind of fire…

Needless to say, you should never buy real estate you haven’t even seen.

The second thing the call reminded me of is how very important it is to own investment property you, a trusted friend or family member can drive by now and then, night or day, just to check on it.

Most of the time, there won’t be anything wrong; except maybe a wayward piece of trash in the yard.

Other times, you’ll discover leaking plumbing tenants didn’t want to bother you with, perhaps a broken window or, even, that one of your units has six people living in it (and using water) instead of just the two people you leased it to.

Those problems are more quickly and easily remedied if they’re discovered shortly after they occur…not months or even years later, when you finally carve out a weekend to visit your property.

Comments Off on Why Jake Locker Should Buy A Minneapolis Duplex

Heisman Trophy winner Cam Newton

Heisman Trophy winner Cam Newton

With tomorrow night’s NFL Draft, 32 young men are set to become millionaires.

According to Sports Illustrated, within two years of the eventual end of their professional football careers, 78 percent of them will have gone bankrupt.

Why?

For some it will be an excessive lifestyle. Others will ignore meetings with professional money managers and opt instead to invest in wild inventions and business ideas brought to them by friends.

Imagine, for a moment, if they listened to one small piece of advice, and simply took one million dollars and invested  in real estate.

One million dollars is enough for a 25 percent down payment on $4 million in real estate. Most duplex  investors I’m working with are getting double digit cash on cash returns on the money they invest. For this exercise, let’s conservatively call it 12 percent.

A cash on cash return of 12 percent per year on a $1 million investment is $120,000– annually.

This is before we calculate the amount of taxes a draft choice would save due to investment property benefits like depreciation and the mortgage interest deduction.

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Minneapolis Duplex Sales A Matter Of Perception

said on April 26th, 2011 categorized under: Twin Cities Real Est

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4 more duplexes sold in MinneapolisFour doesn’t seem like a lot of Minneapolis duplexes, triplexes or small multi-family properties, does it?

But that’s exactly how much pended sales for the week ending April 16, 2011 went up over the same week last year. 

Of course, when you view this as a percentage, perceptions change. Four more duplexes represents a 16.7 percent increase in pending sales.

Of these, 41.7 percent were brought to the market by equity, or traditional sellers. The balance involved lenders in the negotiations.

Sure, that means duplex short sales and foreclosures are still dominating the Minneapolis and St Paul markets. However, during the same week last year, just 20 percent of the pended sales didn’t involve bank negotiations.

So traditional sellers doubled their share of the market. And this helped boost the average off-market price to $133,734. This is well-above last year’s sold price of $103,553 for the week. Even when these transactions close, it is likely the average price will still outpace that of the week for 2010.

Traditional sellers brought 42.2 percent of the new listings to the market for the week, this is down just .6 percent from their contributions to the market in 2010.

It’s interesting to note, however, that there were 18 fewer new listings for the week this year. That translates to 28.6 percent fewer new properties on the market for buyers to choose from.

This trend holds in the single family home market, where new listings for the week were down 21.5 percent from the same week in 2010.

In all, there are 15.4 percent fewer homes on the market for buyers to choose from than a year ago.

Of course, this year’s absence of a first time home buyer’s tax credit also resulted in 18.6 percent fewer purchase agreements signed for the week.

As the tax credit expired April 30, 2010, we should start to get a more accurate measure of the Twin Cities single family and duplex markets in the coming months.

Happy Minneapolis Duplex Investors Find Loans

said on April 25th, 2011 categorized under: Financing

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excitedA while back, you might have heard investors could obtain financing for as many as 10 duplexes, triplexes or small-multi family properties;  a number that included the investor’s personal home and vacation property.

And, if you’re anything like me or my clients, you quickly called your loan officer or bank to find out how.

That’s when you were told that even though Fannie Mae and Freddie Mac were willing to back up to ten of your loans, that bank or group of lenders were not due to something called “bank overlays”.

What are those?

Essentially, even though government sponsored entities (GSEs) like Fannie and Freddie can say one thing, each individual lender is allowed to participate or not — according to their own tolerance for risk.

So, for example, Wells Fargo might only allow a duplex investor to have four mortgages because of Wells’ own internal rules or “overlays”.

Needless to say, this has been frustrating to both myself and my duplex investors.

Until last week, when William Halfrich, a loan officer I know saw his well-known local company bought out by Wintrust Financial, which is a large bank based in Chicago.

According to Bill, Wintrust is willing and able to lend on as many as 10 duplexes and investment properties; ANYWHERE in the United States. Most of the loans require a 25 percent down payment.

So if you’ve been looking to buy more duplexes or investment properties but haven’t been able to find financing, you now have a solution.

Since the transition is so recent, I can’t give you a link to Mr. Halfrich’s web site; and if I type his number here, he’ll get spammed mericlessly. So feel free to give me a call or drop me a line if you’re looking to buy a duplex and I’ll put you in touch with him.

Comments Off on Stop By And See A Rare Minneapolis Mid-Century Modern Duplex!

Minneapolis mid century modern duplexWhen’s the last time you saw a mid-century modern duplex…in Minneapolis?

Until yesterday, my answer was “never”.

Why? Mid-century modern architecture of any kind in the Twin Cities is exceptionally rare, and a duplex even more so.  In fact, it’s more commonly associated with places like Los Angeles, Palm Springs, and even Las Vegas.

But guess what?

There’s one on the market. Here. One block, maybe two from the Minneapolis city line.

It needs work but it is one of the better mid-century modern homes I’ve seen in the Twin Cities; duplex or single family.

small side mcmBoth units have fireplaces (one double-sided), much of the original cabinetry, and many original fixtures. While both units have basements, the side with four bedrooms also has a second full bath and kitchenette. The two bedroom unit features a private patio and the original kitchen.

The duplex is located at  6129 France Ave S, in Edina.

It’s listed at $309,900 and should not only cash flow, but have a long term upside as well.

Even though it’s a holiday weekend for many, I’ll be there on Saturday from 1-3 and Sunday from 2-5. So if you’re sick of your relatives, or would just like to see some wonderful architecture and say “Hello”, please stop by.

Mom will forgive you.

After all, I’d be willing to bet you might never get another chance to see a mid-century modern duplex in Minneapolis again.

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Short Sale Duplexes Are Best BuysA client wrote an offer last week on a Fannie Mae owned duplex in south Minneapolis.

His offer was one of eight.

Needless to say, his offer was well above the list price. Hugely above. And he was going to live in it and put 20 percent down.

He lost out…

to a cash offer.

If you want to invest in a Minneapolis duplex, have good credit and a down payment, but don’t have six figures in cash, what should you do?

I’m going to encourage my duplex buyers to look at short sales.

Yes, they require a great deal of patience due to the amount of time it takes lenders to approve the transaction. However, here are five good reasons a short sale duplex is worth the wait:

  1. The bank looks at one offer at a time- If the seller decides to work with you, you don’t face a bidding war.
  2. Short sale duplexes are often in better condition than foreclosures- There’s an odd phenomenon that happens to unoccupied property. Somehow, the presence of people in a duplex keeps the plaster on the walls, the plumbing from freezing and windows from breaking. As a result, many short sales do not require an immediate cash infusion for repairs.
  3. Short sale duplexes come with tenants- Not only does the rental income help you qualify for a mortgage, it also allows you to your ownership of the Minneapolis duplex with an infusion of cash from the damage deposits and pro-rated rents that should have been assigned to you at closing.
  4. Less competition- By now, we all know of someone who wrote an offer on a short sale, only to wait 9 months for a bank response. Most of the banks have gotten better at processing these files. However, they still do require time. That fact alone helps deter people from making an offer, meaning you’re less likely to experience multiple offers and have a broader selection of inventory to choose from.
  5. The seller is human- Banks don’t care about anything but their bottom line. There is no reasoning, no arguing a case and, in the case of a foreclosure duplex, no one who can answer questions about the property’s history. With a short sale, most sellers are happy to tell you what year the roof was replaced, where the nearest hardware store is, and warn you about the little quirks most properties seem to have.

I know I’m frustrated with losing out on great duplex investments. And I’m sure my clients are too. That’s why we’re going to be looking at more short sale multi-family properties.

Did Your Minneapolis Duplex Start As A Kit?

said on April 20th, 2011 categorized under: Architecture

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rosemary thornton's wardway homes, duplexesHave you ever noticed that a lot of Minneapolis and St Paul duplexes look a lot alike?

Drive down Grand Avenue; either in Minneapolis or St Paul and you’ll see them;  up/down duplexes with a living room, archway to dining room with a built-in buffet, two bedrooms, with a bathroom in the middle, average to mid-sized kitchen and sometimes, a third bedroom in the back.

In fact, many single family homes or bungalows often have the same floorplan, sans the second story, of course. The Longfellow neighborhood is packed with them. So too are the Town and Country and Como neighborhoods in St Paul.

So was there one builder with a single good idea?

Nope.

But a number of Minnesotans had the exact same idea at about the same time…

Why not leaf through a catalogue and simply order a duplex? Or a house?

In the early 20th century, companies like Sears and Montgomery Ward’s published catalogs of not only house plans, but all the materials that went with them as well.

Light fixtures could be ordered from the catalog. Boilers. And the latest rage; indoor plumbing.

For somewhere around $2500-$3500, Minnesotans could order the house or duplex of their dreams by mail. And some time later, they simply went down to the train station and picked it up. All they had to do was put all the pieces the company sent together.

While I’ve been aware of the history of kit houses for some time, I only recently learned that duplexes, or, as they were called in the early 1900s, double bungalows, could be purchased this way as well.

My curiousity piqued, I tried to track down everything I could about the history of kit double bungalows.

All roads lead to Rosemary Thornton.

Widely regarded as the nation’s leading expert on kit houses,  Thornton has lectured at the Smithsonian, had her work featured in the Wall Street Journal, New York Times, Washington Post and Los Angeles Times, appeared on PBS’ History Detectives, A&E’s Biography, and the CBS Sunday Morning News.

Her books include: The Houses That Sears Built, Finding The Houses That Sears Built, Montgomery Wards Mail-Order Homes and The Ugly Woman’s Guide To Internet Dating.

Clearly, this is a topic that is much bigger than I’m capable of understanding and blogging about.

So, next week, for the first time ever, there will be a guest blogger on Duplex Chick, when Rosemary Thornton stops by to talk about the history of kit duplexes.

I can hardly wait!

.

Minneapolis Duplex Sellers Have Hoarding Problem

said on April 19th, 2011 categorized under: Twin Cities Real Est

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Minneapolis Duplex Sellers Hoarde ListingsApparently, Minneapolis and St Paul duplex owners have some deep emotional ties to their investment properties, because they’re not putting them on the market to sell.

New duplex listings for the week ending April 9, 2011, were down 36 percent from the same week one year ago.

Both equity sellers and lender owned and negotiated properties must be filling up a warehouse somewhere, because neither made a significant change in the percentage of Minneapolis and St Paul duplexes they were willing to part with.

Of these new listings, 35 percent were offered by traditional sellers. The rest will involve banks at some level of purchase negotiations.

Last year, traditional sellers contributed 43 percent of the week’s new inventory.

The number of pending duplex sales for the week was relatively flat, with 20 sellers accepting purchase agreements this year, compared to the 22 who did one year ago.

A whopping 45 percent of the duplexes that pended for the week were owned by people with equity. That’s a 13 percent jump over last year.

This was likely a significant factor in the average off-market listing price of $158,620. While this is likely to result in a somewhat lower sales price, it nonetheless represents a significant jump over last year’s average sold price of $112,182.73.

Apparently single family home sellers have a hoarding problem too. New listings for the week were down 30 percent over last year’s mark.

Of course, they’re not alone, as buyers seem to be hoarding their cash too, in spite of historically low interest rates and fire sale prices; so much so that pending sales were down 22.7 percent from last year’s tax-incentive inspired spree.

It’s probably the single family home buyers we need to do an intervention on. There are presently 27 active listings on the market for every buyer.

Minneapolis and St Paul duplex and single family home buyers and sellers probably need to see a therapist. But I just don’t know where we’ll find enough trash bags to clear out the clutter.

Foreclosure Decline Deceptive

said on April 18th, 2011 categorized under: Short Sales/Foreclosure

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When to Buy and Sell Real EstateLast week it was reported Minnesota experienced an 18.1 percent decline in single family, duplex and multi-family in foreclosures and related activity in the first quarter of 2011, when compared to the same three months in 2010.

The decline, according to Realty Trac, the nation’s leading foreclosure data company, put Minnesota 24th out of the 50 states, with 7,539 foreclosure filings.

Filings included notices of default, scheduled sheriff’s sales, and repossessions.

Of these filings, 6,918  were in the Minneapolis, St Paul and surrounding communities.  Of the 200 metro areas surveyed, that put the Twin Cities 70th in the nation; not near the bottom, but clearly in the top half of the cities in the country.

While the drop in the number of filings initially appears like cause for celebration, it’s important to note that Realty Trac attributes most of this decline to the bank’s winter moratorium on foreclosure activity while they sorted out the paperwork they have been accused of mishandling.

In fact, while the 3,330 foreclosure filings in Minnesota in March represent a decline of 11 percent compared to the same month last year, it also represents a 57 percent increase from February.

In fact, the month of March alone contributed 44 percent of the quarter’s foreclosure activity.

While market activity does seem to be picking up in the duplex market, data seems to indicate we still have a long way to go before we see stability in the Minneapolis and St Paul market.

What Exactly Is A Duplex Anyway?

said on April 15th, 2011 categorized under: Architecture

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double bungalow for saleI recently saw this sign in the basement of a St Paul duplex my clients are buying.

It is the original “For Sale” sign for the duplex, dating to the property’s construction in 1959.

I had never seen one for a duplex. And it reminded me of all the different names there are for duplexes.

The term “double bungalow”, was, for a long time, the description the county tax assessors used to describe duplexes, and is probably the most common description used in Minneapolis and all of Hennepin County.

I imagine this term stems from the Craftsman era of housing, when single family home designs were for “bungalows“. And, as the upper Midwest is a treasure trove of homes from the era, with many of the Twin Cities most highly sought-after duplexes built in that era of architecture, it would make sense.

In some parts of the country, duplexes are called twin homes. This is a little confusing for many of us, as a twin home in Minnesota consists of two separate homes, with separate property identification numbers, that share a common wall. These properties may be owned and sold separately.

A duplex, on the other hand, typically has one county property identification number and as a result, one owner.

Our friends in Chicago and Detroit often refer to a duplex as a “two flat”. A two flat is two separate residences, with two separate residences on a common lot that share a wall or floor/ceiling. In Chicago, most two flats are two story properties.

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