Archive for July, 2011

How To Fill A Vacant Duplex

said on July 14th, 2011 categorized under: Tenants

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duplex chick signMy Duplex Chick duplex “for sale” signs occaisionally do interesting things.

Like attract buyers.

And tenants.

It seems the 2.7 percent vacancy rates in the cities of Minneapolis and St Paul have people looking for help finding a place to live. So they’re calling any residential income property related sign they see.

Well, mine anyway.

While vacant rental units are often listed on other Multiple Listing Services (MLS), around the country, it is a relatively new feature in the Twin Cities.

Property owners can work with a Realtor to get vacant units featured not only on the MLS, but web sites like Zillow as well.

Tenants who are relocating to Minnesota and who are familiar with this service because of having lived in markets like Chicago and Las Vegas, where it’s common, often contact agents for help finding a place to live as they transition.

And of course, there’s all the people who already live here looking for places too.

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How Congress Could Stop You From Buying A Duplex

said on July 13th, 2011 categorized under: Buying A Duplex

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Congress Impacts Duplex FinancingWhat does the end of the federal government’s fiscal year have to do with buying a Minneapolis duplex?

Your ability to get a loan.

If you’re thinking about owner occupying a duplex, and intend to use FHA insured financing (which requires just a 3.5 percent down payment), it’s important to know two things.

First, barring Congressional action, the maximum duplex loan amount FHA will in insure after October 1, 2011, in Anoka, Hennepin, Ramsey, Dakota, Carver, Chisago, Scott, Washington and Wright counties will be reduced to $311,632.

Meaning if you only have a 3.5 percent down payment, the maximum you can pay for a duplex will be $322,539.

Right now, that figure stands at $483,604, with a maximum FHA loan amount of $467,250.

Second, if you write an offer for a duplex before the September 30th deadline, but intend to close on it some time after that date, you won’t be able to lock an interest rate if the loan amount exceeds the $322,539.

Of course, with the majority of today’s loans being FHA insured, this throwback to 2008 might impact the amount sellers are able to get for their property as well.

Do I think Congress won’t take action on this? No.

Then again, I thought the government of the state of Minnesota wouldn’t shut down either.

Minneapolis Duplex Sales A Real Downer

said on July 12th, 2011 categorized under: Twin Cities Real Est

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debbie-downer, duplex sellerRemember the Saturday Night Live character Debbie Downer who, no matter what anyone said, parlayed the conversation into bad news or negative information?

Well, the Minneapolis duplex market was a little like that the week ending July 2, 2011.

The number of duplexes that left the market as a result of the owner accepting a purchase agreement was down 28.6 percent from the same week the year before.

Of those pending sales, 19 percent involved sellers with equity. This is down from 33 percent of the sales one year back.

The number of new listings buyers had to choose from was down 34 percent year over year. While 48.3 percent of those new opportunities involved traditional sellers, 83.3 percent of the week’s new inventory last year did not involve a bank in the decision to sell.

While the average off-market price for the week was $128,858; which was higher than last year’s sold price of $122,657, it’s important to remember not every property sells for the amount it was listed at.

We won’t know whether average sales prices have increased until the purchases are actually completed.

The single family home market continued to see year-over-year increases, however; experiencing a 58.2 percent increase compared to last year’s tax-credit-induced hangover.

With the exception of the number of new listings, I suspect this week’s duplex transaction drop is the result of some mild, temporary form of the blues.

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little kittenPeople who are thinking about buying a duplex often ask me what the advantages of occupying investment property are over living in a single family home.

I can think of dozens. But it’s Monday. We all should get some work done.

Here are 6 I can think of off the top of my head:

1. Neighborhood Affordability -Most buyers have their heart set on living in a certain neighborhood.  In Minneapolis, that might be someplace close to the lakes or river, or other walkable amenities. However, many quickly realize the popularity of that neighborhood has resulted in home prices that are out of reach for their budget.

A duplex brings in someone else, namely the tenant who lives in the second unit, to help the owner pay the mortgage by paying rent. For example, if a duplex costs $300,000 to purchase, the tenant is essentially paying for one-third or more of the expenses. For the owner, it’s almost like buying a comparable single family home in the neighborhood for a deep discount.

2. Long-Term Investment – A duplex generates income. When rents increase, so does your income. If you keep the duplex over the long-haul, even after moving out, it will continue to generate supplemental income for you. Best of all, odds are it will never be entirely vacant. Even if a tenant moves out, you should have the other continuing to pay you rent.

3. Tax Savings– Unlike a single family home, improvements you make to the rental unit of your property can be written off as business expenses for your investment. If you paint that unit, retile the floor, update the kitchen…all can help offset your rental income.

4. Greater Mortgage Interest Deduction – While Congress is revisiting our ability to take a tax deduction for the amount of interest we pay on our mortgage, for now, it is still in tact. By purchasing a duplex, which was probably slightly more expensive as a whole than a single family home, you are able to save more.

5. Pet Sitting – OK, I’m checking to see if you’re paying attention. And yes, there are far more important benefits of duplex ownership. Nonetheless, whether you spend your winters elsewhere, or simply go out of town for a long weekend, you may find having another set of eyes watching for maintenance issues (like plumbing) or making sure your cat has enough water to be benefits you might not have convenient access to in a single family home.

6. Flexibility – In a time of increased employment insecurity,real estate market uncertainty and geographic mobility, you may find the ability to rent your duplex in a sought-after neighborhood in the event of your relocation to provides you with a wider range of choices when it comes to having to sell or incur a financial loss by ridding yourself of the property.

Again, there are many more reasons to consider a duplex as an alternative to a single family home.

Comments Off on Why Your Realtor Won’t “Just Try” Selling Your Minneapolis Duplex

Try selling my Minneapolis duplexThe other day a prospective Minneapolis duplex seller suggested we just throw his property on the market at the price he “needs” to see if someone will just make him an offer.

The funny thing is, when you list your duplex for sale, most buyers think the price you list it at is what you truly want for it.

And if that number doesn’t make sense– as in it’s way out of line with what other properties are selling for– they won’t waste their time looking. Especially if it’s as much as $100,000-$150,000 above current market value.

Most duplexes and investment properties are presently selling for within 10 percent of the price they’re originally put on the market for. Therefore, a buyer has no reason to sincerely believe he or she will be able to purchase the property from you at present market value, which may be 30, 40 or 50 percent lower than the amount you “need”.

Here are the facts. If you purchased any kind of property after the year 2000, it’s probably worth considerably less than what you paid for it.

Or, if you’re a duplex owner who refinanced and took equity out of the property to pay off credit cards, buy another property, or go on vacation, odds are you owe more than the property’s worth.

And that stinks.

But today’s duplex buyer is unwilling to compensate you for that loss.

Here’s another fact. Putting a Minneapolis duplex on the market “just to try it”, costs your Realtor money. Marketing costs, like hiring a professional photographer, designing and printing brochures, paying a company to install “for sale” signs the agent bought, gas, insurance, licensing fees, and so forth, are all up front costs your Realtor pays.

Even if your duplex doesn’t sell.

And in today’s Minneapolis duplex sales environment, where Realtors are working harder and longer hours, often for less pay, there aren’t many of us willing to give you a “free loan” of “let’s just see” marketing money.

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Ricky_Rubio determines Minneapolis duplex taxesI’m looking forward to seeing Ricky Rubio play for the Minnesota Timberwolves.

Even though he’s partially responsible for the high duplex property taxes in Minneapolis.

OK, to be clear, he alone isn’t responsible for it.  The Target Center is.

In 1995, the city of Minneapolis bought the Target Center. As part of its agreement with the Timberwolves, the city is required to maintain the building as a first class facility.

In order to do so, the city created a special tax district that generates about $10 million a year to pay off, improve, and maintain the place. Some of the same fund is also earmarked for neighborhood revitalization projects.

But even that doesn’t explain how Minneapolis duplex taxable market values can decline, but the amount of taxes property owners are paying keeps going up.

According to a recent story in Downtown Journal, cuts in Local Government Aid at the state level, as well as a tax burden shift from commercial to residential properties during Gov. Jesse Ventura’s administration, resulted in homeowners paying 56 percent of all property taxes in 2011.

In 1997, homeowners paid just 33 percent of all property taxes.

Of course, it’s important to remember that 2011 property taxes are based on market values determined by non-distressed duplex sales in 2009.

Even after Minneapolis increased its levy by 4.7 percent in 2011, it will collect just $281 million in property taxes in 2011.

Th city has an annual budget of $1.36 billion.

So what do duplex property tax revenues pay for?

A big chunk of it goes into the city’s general fund. Of that pool of money, 21 percent goes toward paying for police, 17  percent for parks, 14 percent for pensions, 9 percent for fire, 7 percent for capital projects and 5 percent for public works.

I hate our high duplex property taxes but, I hate the thought of one less cop or fire station even more.

Let’s hope Rubio puts on a good show. It might help ease the pain.

Comments Off on Distressed Minneapolis Duplex Owners Find Help

Duplex Foreclosure HelpIf you’re a Minneapolis or St Paul duplex owner occupant and at least three months behind on your mortgage payments due to becoming unemployed, under-employed, or medical challenges, help may be available.

The Emergency Homeowners Loan Program (EHLP) is accepting applications between now and July 22, 2011, for zero interest, forgivable loans for duplex owners. The loan will pay some back payments and fees to your lender, as well as provide monthly assistance for payments on your first mortgage.

This payment help is available for up to 24 months, with a cap of $50,000. It is forgivable over 5 years if the duplex owner continues to meet program requirements.

Qualifying criteria is relatively strict, and not everyone who qualifies will be given a loan. Rather, applicants names will be put into a lottery. Those selected will receive duplex payment assistance.

To qualify, you must owner occupy the property. There can be no more than 4 units in your building. You must be a U.S. citizen.

Prior to the change in your employment circumstances, all of the people whose names are on the mortgage must have had a gross income below 120% of the median area income or $75,000. Your current household income must be at least 15% less than it was in 2009.

You must also have a history of making duplex mortgage payments on time prior to the change in your circumstances, have no more than two liens on the property and be current all of your federal debts (including income tax).

Finally, you must also have received written notification from your mortgage company that you are in danger of having the duplex foreclosed upon.

To find out if you qualify for Minneapolis duplex payment assistance, click here. If you live elsewhere in the United States, you may find help available by clicking here.

Minneapolis Duplex Market Ready For Ripley’s

said on July 5th, 2011 categorized under: Twin Cities Real Est

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duplexes challenge smallest manWhile the world’s smallest man didn’t buy or sell a Minneapolis or St Paul duplex the week ending June 25,2011, the market was, nonetheless, may have been enough of an oddity to qualify for Ripley’s Believe It Or Not .

Twenty duplex and small multi family property owners accepted purchase agreements. This seems like a paltry number; that is, until you consider that during the same week last year, only 11 owners received offers.

Of those who signed offers this year, 45 percent were sellers with equity.  Last year? Just 27 percent were.

So this should, in theory anyway, translate to a higher average off market price for the week, right? After all, aren’t bank owned and other distressed properties wholesale opportunities?

Call Ripley’s. Last year’s average sold price for the week was a whopping $200,936. And what was the average price duplexes achieved pending status on the MLS at this year? $142,527.

Last year during the comparable week, 43 new duplex and small investment property opportunities came on the market. Of these, 53.5 percent belonged to equity sellers.

This year,  there were just 28 new listings, with 57 percent of these belonging to traditional sellers.

Again, I keep saying it — inventory is down thanks to the banks slowing the foreclosure process. If you’ve been thinking about selling, this might be a window of opportunity.

After all, sooner or later the banks are going to be confident in their paperwork, and start foreclosing on duplex owners.

When that happens, market inventory is sure to rise; once again making traditional sellers a Ripley’s oddity.

Fannie Mae Gives Duplex Investors Independence

said on July 1st, 2011 categorized under: Financing

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minneapolis duplex investors celebrateFannie Mae gave Minneapolis duplex investors an early holiday gift yesterday when it announced a change in guidelines to now allow cash-out refinancing within six months of a cash duplex purchase.

Previously, investors who paid cash for duplexes were required to leave all of their equity in the property for a minimum of six months before they could apply for a loan and get their money back out.

For many, this slowed their ability to invest considerably.

Of course, there are still some restrictions. Duplex buyers can’t refinance the property for more than they paid for it, including the amount of their initial investment, financing of closing costs, prepaid fees and points.

The duplex owner must be able to document with a HUD-1 form that they did not use mortgage financing to buy the duplex. Needless to say, the property also needs to be free of liens.

Fannie Mae also stated that if a Borrowerwith multiple properties hadn’t yet reported rental income on tax returns due to length of ownership, leases would now be an acceptable form of documentation.

What this means for investors is they will no longer have to park ample amounts of cash in a single property for an extended period of time. Instead, they will be able to put a loan on the duplex, remove the excess equity, and acquire another property.

Theoretically, anyway, this flexibility, along with rent increases and low vacancy rates, could spur the Minneapolis duplex investment market toward recovery.

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