Duplex Chick

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The other day a prospective duplex investor told me he only wanted to work with the listing agent for any property he purchased.

His reason? Too many cooks in the kitchen.

There’s a flaw in his theory, however.

At the rate the great duplex deals are flying off the market in Minneapolis and St Paul right now, by the time he figures out who the listing agent even is through either a sign in the front yard or a listing on Realtor.com, it will probably already be gone.

In fact, I went through brand new listings just yesterday where there was a parade of Realtors and clients coming in and out of the duplexes?

Why?

Because the minute the property came on the Multiple Listing Service (MLS), their agents immediately recognized them as good deals and good fits for specific clients. In one case, the agents coming in and out had been waiting for the property to come on the market. Most had seen it when it was on a year ago as a short sale, and the bank refused to accept a short sale.

Realtors who actively prospect for listings are your best bet for finding a good duplex investment. Off the top of my head, I can name any number of distressed properties that will show up on the market in the next 12 to 18 months either as short sales or foreclosures if their owners are unable to obtain loan modifications.

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Today is Red Day.

What is Red Day?

It’s a day when every Keller Williams Realty International office in the United States and Canada goes out into their community and performs a day of service.

It’s up to each office what service they’d like to perform. In mine, we’re conducting a canned food drive for VEAP, which is a local food shelf.

Other offices are conducting blood drives, working with Habitat for Humanity, or doing any number of other things to give back.

While Keller Williams’ company color is red, in this instance, RED also stands for Renew, Energize, Donate.

The event was started as a way to honor and celebrate company Vice Chairman Mo Anderson’s  birthday, which is May 12. Mo’s big on giving, so this is a perfect way for us to wish her a “Happy Birthday”.

So if you see us out and about, stop and say “Hi”.

You’ll be able to recognize us. After all, we’ll all be wearing red.

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If you are a duplex owner in Minneapolis, St Paul, or anywhere else in Minnesota, and are struggling to make payments or facing foreclosure, there is a wonderful new resource available to you through the Minnesota Home Ownership Center (MNHOC).

MNHOC has teamed up with Fannie Mae and thirty-nine non-profit agencies throughout the state of Minnesota to not only sort out your options, but  also potentially perform a squeeze play on the bank servicing your loan (which is usually perceived as the lender), forcing it to work with you toward a solution that works for everyone involved; a solution which is often a loan modification.

The non-profit counseling agencies, which include entities like Lutheran Social Services and Habitat For Humanity, help duplex owners complete a comprehensive application that covers anything the lender would need to know in order to make a decision whether or not to agree to alter the terms of the loan.

While most of us perceive the bank we make payments to as the lender, they are often, in fact, simply taking care of all of the paperwork for an investor they sold your mortgage (along with hundreds of others) to. Often, these loan servicers simply do not have the authority to negotiate or agree to terms of a loan modification.

In Minnesota, Fannie Mae is the investor in at least one third of duplex mortgages. As such, they DO have the authority to renegotiate the terms of your loan.

The non-profits agencies, which are under the umbrella of MNHOC, then take the completed application and submit it directly to two Fannie Mae employees who are now working permanently out of MNHOC’s offices in St Paul.

Since Fannie Mae is the investor in the duplex mortgage, they have leverage with the servicer.

As a result of having Fannie Mae involved in the process, some duplex owners are receiving loan modifications in as little as ten days.

According to Ed Nelson, marketing director for MNHOC, Fannie Mae is taking similar steps in six or seven other states in the country, but only Minnesota has a coordinated, statewide effort in place.

So what if you don’t live in Minneapolis, but are delinquent on your duplex mortgage?

Nelson says it’s important to verify the authenticity of any company or service that promises to help you with a loan modification. If they are legitimate, they should be a part of HUD’s Counseling Agency Network.

Members of this network can be found at www.findaforeclosurecounselor.org and lookbeforeyouleap.org.

The Minnesota Home Ownership Center can be found at www.hocmn.org.

No matter where you live, it’s important to know that regardless of however bleak your circumstances seem to be, you do have options. Options help grow hope, and once you have that, everything else can change.

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There were fewer Minneapolis and St Paul duplex, triplex and four unit apartment building sales for the week ending April 30, 2011, than there were for the same week last year.

That’s no surprise, as last year’s figures include those who rushed to have a signed purchase agreement in hand prior to the end of the first time and repeat duplex buyer tax credits, which expired April 30, 2010.

For the week last year, there were 38 duplexes and small multi-family properties that left the market with purchase agreements for the week. Nearly 53 percent of the sellers involved did not have to receive permission from a bank, nor signed their names on behalf of the lender.

In other words, they were traditional sellers with equity in their properties.

This year, just 19 Minneapolis duplex owners came to terms with duplex buyers on their properties. Of these, only 21 percent had equity in their properties, and didn’t need to get any one’s permission to determine what they felt was an acceptable price.

Traditional, or equity sellers, as well as demand, help determine value. As such, last year’s average sold price of $149,047 is significantly higher than this year’s average off market Multiple Listing Service (MLS) price of $122,000.

In spite of  the expiration of the tax credit, the last week in April in 2010 saw 65 new listings come onto the market. Of these, 29, or 44.6 percent, were offered by traditional sellers.

The last week in April this year saw just 32 new listings hit the market, half of which belonged to equity duplex sellers.

The single family home market also saw a decline in new inventory, with 3.9 percent fewer homes coming onto the market than they had for the week one year ago.

Needless to say, the number of signed and accepted purchase agreements was down as well; 37.4 percent to be exact. In all, there are 10.8 percent fewer homes available for buyers to select from than there were last year.

Next week’s numbers should finally help us gain proper perspective of how the Minneapolis and St Paul duplex market is truly doing.

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It’s hard to believe, but there’s a shortage of duplexes in some areas of the Minneapolis and St Paul markets.

That’s exactly the opposite of what you’ve been told by other Realtors, as wells as the local and national media. 

In fact, if this were the Sesame Street game “One of These Things Is Not Like The Others”, I’d be the thing that doesn’t belong.

That’s OK. I’ve always enjoyed being the resident contrarian. And I’m often right.

So what makes me right this time?

For starters, I received my fourth phone call in a month from another Realtor asking if I had any duplex listings coming up in southwest Minneapolis, Uptown, or Kenwood Isles. He was the fourth separate Realtor.

The buyers each and every one of these agents represent are looking for exactly the same kind of duplex.  I have three clients of my own right now looking for the same kind of property.

What exactly does this highly sought-after but rarely found duplex look like?

First, it’s in a highly walkable neighborhood, close to amenities like walking paths, the lakes, neighborhood coffee shops and restaurants.

Most of the time, it’s was originally built as a duplex. If it was converted from a single family home, it must have been done with exceptional attention to flow and detail.

It must be move-in ready and not on a busy street. Charm and woodwork are always the unwrittens on the mental list of most buyers in these neighborhoods.

While we all know duplex values aren’t what they were in 2006, these buyers are nonetheless qualified to purchase southwest Minneapolis duplexes ranging from $225,000 to $500,000.

If you have a classic southwest Minneapolis, Kenwood or Uptown duplex you’ve been thinking of selling, but aren’t sure the time is right, please call or email me.

There’s a good chance the timing is perfect.

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While I don’t discuss it often, one of the best things about investing in a Minneapolis duplex vs a larger multi-family property is the fact that duplexes tend to have a more rapid rate of appreciation.

Before I continue, let me offer the following disclaimer. You should never, ever buy an investment property based on how much you or your Realtor thinks it’s going to go up in value.

Nobody can predict how much something will appreciate with any accuracy whatsoever, and if they tell you they can, they’re lying.

Having said that, sooner or later, all real estate does appreciate. And the properties that do so at the fastest clip are the ones there are the most buyers for.

The largest pool of prospective buyers is out looking for single family homes. As a result, they tend to go up in value the most quickly, because of the amount of competition driving price.

Because duplexes can qualify for low money down FHA insured financing, they also appeal to owner occupants. Most new duplex investors start out living in their first property, and moving out when their family expands or lifestyle changes.

While triplexes and four unit buildings also qualify for FHA financing, there seem to be fewer prospective owner occupants for them. Perhaps these properties seem more like they require someone to truly be a landlord, vs the perception of being a home owner who just happens to have a single tenant to tend to.

Larger apartment buildings, consisting of five or more units, cannot qualify for residential financing. Instead, investors must secure commercial financing, which typically requires a minimum down payment of 25 percent or more. Since few people tend to have large chunks of cash available for investment, there are fewer buyers for these apartment buildings.

Of course, in each and every one of the afore-mentioned property types, rents, location and condition play a key role in determining value.

However, if your goal is to accrue a large chunk of cash to put on larger properties down the line, a duplex might well be your best investment.

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Maybe it’s just Minnesota duplex buyers, sellers and owners who need help with this, but after hearing a Minneapolis attorney speak yesterday, I realized everybody might need a refresher.

The word is pronounced Real-tor. I am a Real-tor who specializes in duplexes and small multi-family investment properties.

Not a Real-i-tor.

The letter ”i” is not in the word.

At all.

Just like there’s no ”i” in the word “Doctor”.

I’ve never heard a duplex investor say they needed to call a “Doc-i-tor” for help with the flu.

So why do people think there’s an ”i” in “Realtor”?

It’s not like we’ve not been trying to clear things up. Just listen to any broadcast on NPR sponsored by the National Association of Realtors (NAR) and you can hear how hard we’re trying.

The announcer even over-emphasizes the last syllable of the word, calling us the National Association of “Real-TORS”.

Not every real estate agent is a Realtor. A Realtor has agreed to comply with a code of ethics and is a member of  NAR. But that’s beside the point.

The mispronunciation of the word ”Realtor” drives us a little crazy. So if you ever want to sell us something, practice saying it. Correctly. 

It goes a long way toward establishing credibility.

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Today’s post is courtesy of Rosemary Thornton, who is universally regarded as the nation’s expert on Sears Homes and kit houses. She is the author of several definitive books on the subject, including: “The Houses That Sears Built”, “The Sears Built Homes of Illinois” and “The Mail-Order Homes of Montgomery Ward”.

What’s better than a Sears kit home? How about a pair of kit homes, joined at the hip (roof)!

Cataloge Page For Sears Lakeland Double Bungalow

From 1908-1940, Sears sold about 70,000 kit homes and offered 370 designs. A few of those were “income bungalows” (also known as duplexes), designed to help homeowners meet that $55 a month mortgage payment.

The typical kit home arrived by boxcar with about 12,000 pieces of house. About 50 percent of the time, these homes were built by the homeowners themselves. A 75 page instruction book and detailed blueprints (purposefully designed for navices) assured swift and error-free construction.

Aspiring homeowners were attracted to kit homes because of their cost-saving benefits. Building a traditional stick-built home cost about 30 percent more than buying and building a kit home. These two-family bungalows didn’t cost much more than a single-family home, and you’d build equity a whole lot faster with a renter living in the upstairs unit.

Sears Lakeland Double Bungalow, Alton, Illinois

The Sears Lakeland was as a “cozy double house”, and each unit had more than 1,400 square feet. In fact, this Lakeland in Alton, Illinois (see photo) has been converted into a four-family house, with about 700 square feet per unit. (The home’s design made this conversion simple. A spacious kitchen pantry, situated directly below the second floor bathroom made a perfect space for a tiny first floor bathroom.)

Sears Manchester Double Bungalow

The Manchester was much more popular than the Lakeland. A man on a galloping horse would never notice it was a two-family home. It was designed to look like every other adorable bungalow on the street, and yet hidden upstairs was plenty of room for a renter or two. Sears estimated the mortgage payment for the Manchester was less than $55 a month. A rear staircase and entry added to this duplex bungalow’s ingenious disguise.

Montgomery Ward also offered duplex bungalows. Their kit home, The Ferndale”, was touted as “A doubly profitable investment.” Like the Manchester, this was a secret duplex, with a single front door opening up to a tiny vestibule with two doorways.

So, how do you identify these kit homes now? It’s not easy.

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For the week ending April 23, 2011, there was some good news in the Minneapolis duplex market, some not so good news, and some information that was, well, just plain news.

Thirty Twin Cities duplex sellers received and accepted purchase agreements during that week. Of these, 23.3 percent did not have to consult with a lender before agreeing to sell their properties.

This represents a significant improvement from the 18 duplexes, triplexes and four unit apartment buildings that received offers during the same week one year ago. Of those properties, however, it’s important to note that 44.44 percent did not require consulting a lender in the negotiations.

This makes sense, as traditional sellers tried to take advantage of the market before the $8000 first time home buyer tax credit expired on April 30,  2010.

Of course, greater participation by equity duplex sellers usually translates to higher prices. Evidence of this can be seen in an average sold price for the week of $161,333 one year ago, and an average off market price for the week this year of $110,893.

It would stand to reason, therefore, that traditional sellers are not participating in the market as enthusiastically as they did last year. And this is partially true.

There were just 32 new listings for the week; 18 were traditional sellers. This is down dramatically from the 39 equity duplex owners who contributed new listings during the week last year.

But get this. Banks put fewer duplexes on the market in almost the same ratios. Last year, there were 31 new multi-family bank owned listings for the week. This year? 14.

Meanwhile, the single family market was consistent in its patterns of the last several months. New listings were down 30.7 percent, pending sales down 25.2 percent over last year’s tax credit inflated figures, leaving the market with 13 percent fewer homes available for purchase than were last year.

In the coming weeks we should start to get a more accurate read on the true state of the duplex market, as we begin to see year-over-year comparisons, sans the impact of the tax credit.