Archive for September, 2011
Comments Off on Where Do You Want Duplex Investing to Take You?
When I was a kid, every now and then my parents would say, “let’s go for a drive”.
They never seemed to have a specific destination in mind. They’d just load us all in the station wagon and take off.
Gas was cheap, so I think it was their idea of inexpensive family fun.
Of course, nobody can afford to do that today.
Every now and then, some of the real estate “investors” who call me on the phone remind me of my parents in those early days.
They don’t seem to have a particular plan or destination.
For instance, when I ask them what kind of cash on cash return they want on their money, I am greeted with silence.
This is usually because they have no idea what I’m talking about.
Cash on cash return is simply the amount of money you take out of a duplex investment every year compared to the amount you put in.
For example, if a duplex has a positive cash flow of $5000 a year, and your down payment on it was $50,000, then your money is earning a 10 percent cash on cash return. (5000/50,000 = .10 or ten percent).
Now, if that same $50,000 was earning $10,000 a year in some other type of investment, like stocks, a money market account, or business investment, it would be earning a 20 percent cash on cash return.
So why would you ever move it into something that makes you less?
Conversely, if that money’s generating a lowly 2 percent return for you in a savings account, why on earth would you leave it there?
What’s your ideal return on your money– provided there’s not too much risk?
If you know that before you begin, you’ll never end up financially lost.
Comments Off on Minneapolis Duplex and Home Sales: Is The Sky Really Falling?
With yesterday’s headlines that Minneapolis housing values have dropped 9.1 percent it would be easy to make like Chicken Little and worry that the sky is falling.
But before you reinforce your ceiling, wait a minute.
Yes, according to the monthly S & P/Case-Shiller Home Price Indice, housing values have dropped in the Twin Cities since last July.
However, their report also contained data that between May and July, only Detroit saw a higher monthly rate of appreciation than we did.
In fact, between May and June, Minneapolis home values were up 3.5 percent. And between June and July they jumped another 2.6 percent.
Other cities that saw jumps included Chicago, Boston and Washington D.C. (For a full list click here.)
Remember. monthly housing statistics are not duplex and small multi-family specific. Rather, they include single family homes, townhouses and condos.
Duplex values are driven, in part, by rent. Very few vacancies and an increased demand for rental units cause rents to go up.
And when rent goes up, sooner or later, duplex values do too.
Comments Off on Minneapolis Threatens Duplex Rationing
These days, there are so few new Minneapolis duplex listings coming on the market that I’m convinced some one’s going to have to start giving out ration coupons.
Really. There’s a shortage!
For example, for the week ending September 17, 2011, there were 36 new duplex listings available for purchase.
During the same week last year, there were 49. So, from last year to this, we experienced a 27 percent decline in new inventory.
Last year, 51 percent of these listings were brought to the market by duplex owners with equity.
This year, 53 percent belonged to traditional, or equity sellers.
There were 23 duplexes, triplexes or small multi family building owners who accepted purchase agreements in the second week of September. Of these, just 26 percent will not need to consult with the bank before they sell their property.
During the same stretch last year, 19 Minneapolis and St Paul duplex owners accepted offers. Of these, 32 percent did not need permission from their lender before agreeing to sell.
On average, these sellers from one year ago received $107,100 for the sale of their property.
This year, the average property a duplex was listed at before it became a pending sale was $104,560. As sold prices, as of late, have averaged less than list prices, odds are we will see a more significant drop when sold prices are recorded.
While not nearly as dramatic as the Minneapolis duplex market, new single family home listings were down 22.5 percent for the week, marking the 15th straight week of new inventory decline.
Meanwhile, pending sales were up 40.6 percent.
Overall, there are 22.5 percent fewer single family homes available to purchase on the Twin Cities market than there were one year ago.
While I doubt they’re at the place where they’re going to ration home sales, duplex coupons might not be far away.
Comments Off on 3 Facts About Minneapolis Duplex Sales
I went out of town for a few days last weekend.
While I was gone, I managed to help two clients write offers on Minneapolis duplexes.
Neither was an active listing on the Multiple Listing Service (MLS).
In fact, one was a property where an accepted offer on it was about to be cancelled. The other duplex was not coming on the market until next year.
This proves three things I’ve been saying for months.
1. It’s a great time to sell a duplex.
2. If you want to buy a duplex, working with the right Realtor will help you get access to properties you either won’t find on your own, or would be missed by an agent who doesn’t specialize in duplexes and small multi family properties.
3. If you’re thinking of selling, but aren’t quite ready to stage your property or leave the duplex for showings, letting a Realtor who’s a duplex specialist know, and/or agreeing to do a “pocket listing” with her, may help you avoid the inconveniences altogether.
Let me know if you’re either in the market to buy a Minneapolis duplex or sell one. While values are nowhere near where they were in 2005-2006, the market is better than you think.
Comments Off on Why You Won’t Find A Great Duplex By Looking For A Sign
If you’ve come to the realization it’s a great time to invest in real estate, and want to buy your first duplex, how on earth do you go about finding one to buy?
Should you drive around the neighborhood looking for real estate signs?
Pick up one of those free Real Estate guides or look on Realtor.com?
Since I’m a Realtor, you could argue I’m biased. And yet, I truly believe if you’re serious about duplex investment, it is the best way to find the right property to buy.
With the limited inventory in today’s Minneapolis duplex market, many buyers working on their own call because they’ve recognized a duplex with my “for sale” sign in the yard, or they saw in an ad, is a great deal.
The trouble is, by the time they’ve “found” the duplex, it’s already sold.
Read the rest of this entry »
Comments Off on How Walkable Is Your Duplex?
As going green has become increasingly important, I’ve suddenly had some of my duplex buyers me they didn’t like the “walkability score” of a prospective property.
Well, it’s a score that’s calculated by the web site Walkscore.com.
They’ve designed a system where they rate properties according to their proximity to things like neighborhood restaurants, grocery stores, public transportation and recreational activities.
Needless to say, duplexes located in more heavily urban neighborhoods tend to generate higher scores than, say, a duplex planted in the middle of a corn field.
Not only does the site rate specific properties, it also ranks neighborhoods and major metropolitan cities around the county.
It’s no surprise that New York is the nation’s most walkable city. However, Minneapolis is ranked 9th; ahead of Los Angeles, which didn’t even finish in the top ten.
In Minneapolis, duplexes in the Calhoun, University, Seward, and many of the southwestern neighborhoods ranked among the most walkable.
If you’re considering buying a duplex, a walkability score be something you factor in your decision.
Odds are your prospective tenants are doing just that.
Comments Off on Can You Spot The Changes In The Minneapolis Duplex Market?
The Minneapolis duplex market for the week ending September 10, 2011, was a like one of those puzzles where you see two seemingly identical pictures and are supposed to spot the differences between them.
Sometimes you have to look closely.
For example, 15 duplex, triplex or four plex owners accepted purchase agreements over the Labor Day week.
Of these, six, or 40 percent, actually will put money in their pockets when they hand keys over to the buyer.
Last year, 15 small Minneapolis and St Paul multi famiy investment property owners also accepted offers on their properties. But just three, or 20 percent of those folks were going to walk away from the closing with cash.
On average, those 2010 duplex sellers sold for a price of $96,293. The 2011 sellers, on the other hand, saw their duplexes pend at an average list price of $155,131. (Remember, in this market, sold prices tend to be a little less than list prices.)
The week saw inventory continue to shrink, as there were just 22 duplexes new to the market, compared with last year’s 33.
Of those new opportunities, 45.5 percent of the 2011 week’s inventory is being offered by equity sellers. This is down slightly from last year’s 48.5 percent.
The single family market saw a soaring increase in buyer activity for the week, up 53 percent from 2010. In fact, over the last three months, buyer activity in that market segment is up an average of 41.7 percent.
Shrinking inventory also continued to be the trend, with 21.2 percent fewer new listings hitting the market than did last year.
Both the Minneapolis duplex and single family home markets seem to be changing, but you have to look carefully.
Comments Off on The Ups And Downs Of Duplex Styles
One of the many questions most first time duplex buyers ask is, “Which is better? An up/down duplex or a side x side?”
This is usually followed by, “And which duplex is worth more?”
Well, unfortunately, the term “better” is subjective. What’s better to me might not be to you, and vice versa.
Some people think the disadvantage of an up/down duplex is the first floor tenant is subjected to the noise (mostly footsteps) overhead.
Trouble is, side by side duplexes aren’t free of noise either. I once lived in a 1920’s built side x side, and I could always hear my neighbor walking down his hall.
Sure, carpet would eliminate noise in either case. But most tenants today seem to prefer hardwood floors.
How about value? Is an up/down duplex worth more?
Read the rest of this entry »
Comments Off on Who Buys Duplexes Anyway?
According to the National Association of Realtors (NAR), sales of investment properties, including duplexes, constituted 17 percent of all home sales in the United States in 2010.
As there were 5.28 million homes sold last year, that means 897,600 were duplexes and investment properties. Divide that by 50 states, and it’s an average of 17,952 per state.
That’s a lot of real estate investing!
According to recent data, there’s uptick in that figure this year.
In fact, in July alone, NAR found 29 percent of all purchases were all-cash deals; likely involving real estate investors.
In a down economy featuring high unemployment, just who are these real estate investors anyway?
Half of them are people under the age of 45, while those under 54 comprise another 26 percent.
Are they millionaires?
Hardly; 58 percent of them earn less than $100,000 a year.
While 39 percent of last year’s investment property buyers used a mortgage, 59 percent of them did not. And of those who used a loan, 50 percent contributed more than 30 percent toward the down payment.
Of these buyers, 45 percent saw real estate as a good opportunity to diversify their investment portfolio.
A whopping 77 percent of all real estate investors in 2010 think now is a good time to purchase real estate. So good, in fact, that 52 percent of them plan to buy another duplex in the next two years.
What’s holding you back?
Comments Off on Duplex Foreclosure Report A Sign Of Things to Come?
Our friends over at RealtyTrac just released their Foreclosure Market Report for August, and the news was mixed.
While the number of Default Notices issued nationwide was down 33 percent from August of last year, the 78,880 single family home and duplex owners who received those notices this August represented a 7 percent jump from the number who did in July.
Foreclosure auctions, or sheriff’s sales, were down 1 percent from July, and 43 percent from August of 2010.
Nationally, the 64,813 properties repossessed by the banks in August was actually a 4 percent drop from July, and a 32 percent decline from August 2010.
In Minnesota, there were 2403 new notices of default issued to delinquent home and duplex owners. The vast majority of these came from the Twin Cities metro area.
Hennepin County lead the way with 843 foreclosure filings. Ramsey County contributed another 330, followed by Anoka County with 255, Dakota County with 241, Washington County with 118 and Scott County with 69.
Minnesota averaged one homeowner out of every 971 experiencing some sort of foreclosure average. This puts us in the middle of the pack when it comes to the foreclosure averages for all 50 states.
However, when breaking the data down on a county basis, Hennepin County averaged 1 out of every 600 homeowners officially in trouble.
These figures may be about to change, with rumors swirling the banks have begun stepping up foreclosures, now that they have the robo-signing and documentation issues behind them.