Archive for November, 2011

10 Reasons The Holidays Are A Great Time To Sell A Duplex

said on November 30th, 2011 categorized under: Selling A Duplex

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selling a duplex during holidaysOn the surface, it doesn’t seem like the holidays would be a great time to sell your Minneapolis duplex. And yet, nothing could be further from the truth.

Especially this year.

Here are 10 reasons to sell your duplex during the holidays:

  1. Duplex inventory is down. While this is generally true during the holiday season, as has been noted here, the Minneapolis duplex market is currently in dire need of inventory. In short, you have less competition.
  2. People looking to buy in the winter are serious. Come on, would you put on your parkas, boots or snowshoes to go look at property if you weren’t determined to buy?
  3. Many duplex investors and owner occupants buy at year’s end for tax reasons.
  4. If you close on the sale of your duplex early in the year (2012) and are facing tax consequences as a result, you have the rest of the year to come up with strategic ways to reduce your obligations.
  5. January is typically the biggest transfer month. Many corporations move employees to new locations at the start of the calendar year. These buyers are motivated to buy and get settled before starting their new jobs.
  6. Fewer buyers mean fewer showings. While this may sound like a bad thing, your duplex tenants will be disrupted less for showings and when they are, you will know it is so a motivated buyer can look at the duplex.
  7. Buyers have more time to shop during the holidays. Motivated buyers spend days off with a Realtor, looking for duplexes. While most of the year this consists of weekends, during the holidays, it’s the down time between Christmas and New Year’s.
  8. Your duplex looks better during the holidays. Whether you owner occupy your duplex, or have it as an investment property, tenants decorate for the holidays, which helps your units show better.
  9. You may net more for your duplex, as you have less competition in the marketplace.
  10. You can sell in the winter, and buy in the spring. While holiday duplex buyers don’t have much to choose from, sellers who want to reinvest can feel confident they will find more opportunities to do so as the spring market heats up.

Call me if you’re thinking about selling your duplex.  Doing so might be the best holiday gift you get this year!

Comments Off on Minneapolis Duplex Sales Do The Same Thing Over And Over Again

duplexes for sale bring sanityTo some people, doing the same thing over and over and getting the same results is the definition of sanity.

That must mean the Minneapolis duplex market must be pretty sane. Because that’s exactly what Minneapolis duplex sales and newlistings did the week ending November 19, 2011.

There were 25 Minneapolis duplex, triplex, or four unit apartment building owners who received and accepted purchase agreements for the week. Of these, 44 percent were traditional sellers who will leave the sale of the duplex with a check in their hand.

This ratio was true of the newly listed duplexes for sale as well, with 25 coming on the market, of which, 52 percent belonged to sellers who won’t need to consult with a bank in order to sell.

These ratios of traditional sellers might sound paltry when compared with 2005 figures, but when held up to the same measures for the week last year, things look promising.

Back then, there were 24 Minneapolis duplex sellers who received and accepted purchase agreements. Of these, just 29% walked away from the closing table without having to consult with a bank.

There were 27 new Minneapolis duplexes for buyers to choose from during that same stretch. Of these, just 26 percent were brought to the market by a traditional seller.

Single family homes also kept doing the same thing over and over, with the number of new listings down 18.6 percent for the week, and pending sales up 30.5 percent.

Overall, the total amount of housing inventory on the market decreased another 21.8 percent.

FHA Says Minneapolis Duplex Buyers Can Spend More

said on November 28th, 2011 categorized under: Financing

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fha duplex limits increaseYou may recall that back in October, the limits for the amount of money you could finance using an FHA loan to buy a Minneapolis duplex were reduced.

The temporary increases were meant as an incentive for prospective duplex buyers to jump into the market, using FHA’s low down payment requirement of 3.5 percent as an opportunity they wouldn’t otherwise have.

In October, that loan limit dropped for a Minneapolis duplex from $467,250 to $407,800.

What this meant was if you purchased a duplex for more than $422,073 in Hennepin, Ramsey, Dakota, Washington, Anoka, Carver or Scott counties, and planned on using FHA to finance that purchase, you would have to come up with a down payment big enough to cover the difference between a loan amount of $407,800 and the purchase price.

Last week, however, Congress changed their mind, reinstating the higher temporary loan limits. Now, if you purchase a duplex, say, in southwest Minneapolis for more than $483,604, using FHA financing, then you would have to come up with the difference for a down payment.

Otherwise, you can just put 3.5 percent down.

For a triplex, that limit is $564,800, and a four unit loan is limited to $701,900.

It’s important to note that these limits vary by county and state. For example, Goodhue County’s FHA duplex loan limit is $347,000, while many counties in southern California, for example, have a duplex loan limit of $934,200.

These changes happened so recently that HUD has yet to update its web site. However, once they do, you can find FHA loan limits for your area by clicking here.

Minneapolis Duplex Sales Continue To Be Trendy

said on November 22nd, 2011 categorized under: Twin Cities Real Est

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duplex trendsAt least the Minneapolis duplex market is consistent.

Somewhat.

The trend of dramatically fewer new duplex listings continued for the week ending November 12, 2011, with just 17 new duplex opportunities appearing on the Minneapolis  market compared to last year’s 40.

For the math whizzes in the audience, that’s a decline of 57.5 percent.

Of these new listings, 8, or 47.05 percent were offered by sellers who won’t have to consult with a bank before signing a purchase agreement. Last year, 50 percent of the duplex sellers had equity in their properties.

There were 15 duplex owners who accepted and signed purchase agreements during the week. Of these, just two will take a check home from closing.

Last year, there were 26 Minneapolis and St Paul duplex, triplex and four unit property owners who accepted offers. Of these,  26.9 percent were sellers with equity in their properties.

What may be perceived as an encouraging sign is last year’s average sold price for the week was $113,631. This year, the average list price Minneapolis duplexes left the market at was $127,253.33.

On average, listings on the MLS are closing at 91.2 percent of the price they were last listed at, so we should see average sold prices finish at or slightly above last year’s figure.

The single family homes market continued to see increased sales and decreased listings as well.

There were 2.5 percent fewer new listings for the week, while pending sales increased 37.1 percent over last year’s tally.

Whether you own a Minneapolis duplex or St Paul home, you may want to consider listing it over the holidays. There is far less competition on the market right now, while buyer activity remains high.

The Most Important Word In Duplex Investment

said on November 21st, 2011 categorized under: Tenants

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add no to your landlord vocabularyIf you plan on buying a duplex in Minneapolis — or any other location, there is one word you must have in your vocabulary.

And that is the word, “No”.

Most duplex investors I work with seem to be comfortable with that word when it comes to buying a property that doesn’t work for them due to return on investment, location, or any other reason it might not fit with their present portfolio or lifestyle.

However, I am always surprised by the number of duplex sellers I meet who seem to have forgotten that word when it comes to tenants.

Let me give you some examples:

– One duplex owner installed an expensive water softener for the entire property because one of her tenants allegedly had a skin issue. Mind you, this wasn’t mentioned when the tenant moved in.

– Another duplex owner got behind on his mortgage payments to the point he had received a foreclosure notice, because his tenant had lost her job and wanted to know if she could have another month, and then another and another and another to get him the money.

– One tenant asked her landlord if she could have her boyfriend move in. Two weeks later, it was discovered he was wanted in another state on felony charges.

– A triplex owner changed out an entire sink because a tenant complained about a microscopic chip in the porcelain.

In every single instance, the duplex investor could have saved either money or heartache by simply saying, “No” when the tenant request was made.

Many duplex investors are afraid if they say “no”, the tenant will leave and they will be faced with having a vacant unit to clean, repair and re-rent.

The irony is, in all of my years of being a landlord and a Realtor who specializes in duplexes, I have never had, nor heard of this happening.

Granted, savvy duplex owners make every effort to attract and keep good tenants. This can be easily achieved by keeping your property well maintained and clean with a fair market rent.

And if it’s in your annual budget to make repairs and honor requests made by tenants that don’t have to do with health and safety, by all means, go ahead.

Just remember, a real estate investment property is a business.

And the word “no” is part of every successful business person’s vocabulary.

 

Minneapolis And St Paul’s Favorite Duplex Era

said on November 17th, 2011 categorized under: Architecture

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craftsman  duplex built-inWhen I sit down with a prospective Minneapolis duplex buyer, one of the first questions I ask is whether or not they have a preference for an architectural style.

Most don’t have an answer.  They can tell me, however, that they like built-in buffets, fireplaces, hardwood floors and would like to be close to the lakes or river.

In both Minneapolis and St Paul, that description usually fits what’s known as an Arts and Crafts or Mission style duplex.

Inspired by a European movement, the Arts and Crafts style was a knee-jerk reaction to the Industrial Revolution of the late 19th century as well as the ornate architectural workings of Victorian architecture.

Arts and Crafts designs are simple in form, without the extravagant flourishes of the Victorian era.

Running from between 1910 and 1929, the philosophy of Craftsman-era architects and designers was that it was not only time to simplify life, but also that even the “common man” deserved good design.

The central theme of this movement in the United States was that by moving back to simpler aesthetics and utilitarian design,   people would become more rational and help contribute to a more harmonious lifestyle.

In other words, it was a hope that architecture would help return an increasingly mechanized and hurried society to the important things in both design and life, like the quality of not only the materials employed, but also the life they helped a duplex’s inhabitants to enjoy.

While I don’t have concrete statistics, I believe it would be fair to say the bulk of the duplexes around the lakes in Minneapolis and St Paul, on Summit and Grand Avenues, as well as those along the Mississippi River are from the Craftsman era.

And they seem to be the ones everyone’s looking for.

Comments Off on Why Selling A Duplex Before It Hits The MLS Doesn’t Determine Value

duplex on a stack of cashWe all remember the basic principle of economics that the amount of demand for a product like a duplex, determines value.

Following that thought, it would then stand to reason that  when you decide to sell a duplex, you should put it on the MLS to expose it to the maximum number of potential buyers (demand).

But what if you’re getting ready to sell your duplex and a Realtor brings you a qualified buyer before it’s even actively listed for sale? Does that mean since the property had less exposure, it’s not selling for as much as it might have?

No.

If you’re working with an agent who’s experienced in the duplex market, she will help you determine appropriate value for your property. Not only does she have a fiduciary duty to look out for your best interests at all times, but keep in mind, she also works on commission. The more your duplex sells for, the more she gets paid.

I recently took a fellow agent and his extremely qualified buyer to see three Minneapolis duplexes not yet on the market. Two were priced comparably to one another, and the third a full $100,000 higher.

When the buyers wrote an offer on the most expensive duplex of the three, what did my sellers say?

“Well, maybe we could get more if we put it on the MLS.”

Maybe.

However, both the buyers agent and myself have given them our professional opinions on value; his through his clients offer, and me through the market analysis I provided my seller.

And we both agreed, within a reasonable range, that their property would be the fifth most expensive duplex to sell in Minneapolis or St. Paul this year.

A huge offer. In a down market. No tenant interruption. No dragged out selling process.

Sounds like a pretty good deal to me.

Foreclosure Freeze Causes Minneapolis Duplex Squeeze

said on November 15th, 2011 categorized under: Twin Cities Real Est

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Mann mit Fön bedroht SchneemannAnyone thinking the banks foreclosure freeze hasn’t had an impact on the availability of Minneapolis duplexes for sale, should consider the market data for the week ending November 5, 2011.

There were 12 new duplex listings that came on the market, and 18 duplex sellers already on the MLS who accepted purchase agreements.

During the same week last year, there were 16 duplex owners who received and signed purchase agreements for their properties.

However, there were also 45 new listings for duplex buyers to choose from.

Last year,  roughly one third of the new listings came from sellers who did not need to receive permission from a bank to sell.

This year, one half of the duplex sellers will be able to make selling solely their decision.

The presence of traditional sellers in the duplex market also meant a higher average off-market price increase to $144,364 over last year’s sold price of $116,602.

In my opinion, this is not necessarily cause for celebration. According to the Default Servicing News, estimates of the number of about to be repossessed and foreclosed properties yet to hit the market nationally run from 1.6-8.2 million.

Most industry analysts believe the most accurate figure of shadow inventory to be around 4 – 4.5 million homes.

The number of distressed properties currently on the market is somewhere in excess of 1 million.

It is important to bear these figures in mind when considering the single family home market in Minneapolis and St Paul as well. New listings for the week were down 18.7 percent, pending sales increased 20.5 percent, and overall, there are 22.1 percent fewer homes to choose from on the MLS than there were one year ago.

As winter approaches, it will be important to watch for signs of a Minneapolis bank owned duplex inventory thaw.

Comments Off on Duplex Sellers Don’t Have To Be Behind To Qualify For A Short Sale

confused duplex investorOne of the most common misunderstandings among prospective duplex sellers in today’s market is in order to qualify for a short sale, you must be behind on your payments and facing foreclosure.

Nothing is further from the truth.

Being “short” simply means you owe more on your property than it’s worth.

And, while I’ve gone over this before, it’s probably a good idea to look at it again.

In order to qualify for a “short sale”, a duplex seller needs to have one of the following hardships:

  1. Payment Increase or Mortgage Adjustment- If your adjustable rate mortgage suddenly increases dramatically, it can result in a loss of cash flow, and make mortgage payments difficult to come up with.
  2. Loss of Job – If a duplex owner is laid off and suddenly finds she must tap into the duplex’s cash flow simply to survive, a short sale is justified.
  3. Business Failure – In a down economy, many duplex investors find themselves on the hook for expenses associated with that endeavor, and become spread too thin financially to continue owning the property.
  4. Damage to Property – Contrary to belief, insurance doesn’t cover every disaster or even all of the damage inflicted by the accidents and forces of nature it does. For example, a duplex owner may find the cost to replace his roof that was blown off in a storm is covered, but not the flooding in the basement that resulted from the storm. The out-of-pocket cost to repair this damage can be prohibitive, and until the repair is made, the property may be uninhabitable, causing an additional loss in revenue. Read the rest of this entry »

Comments Off on 3 Reasons Not to Hire A Duplex Property Manager

Handling Multiple DuplexesMany new duplex investors think the first thing they should do when buying a duplex is hire a property manager.

While I believe in property management for experienced and out-of-state duplex owners, there are a number of reasons I think this is a bad idea for your first duplex investment. Here are the top three:

  1. Managing the Duplex You Know Your Property – Granted, investment property management can be time-consuming. All of the maintenance and repairs necessary in home ownership are part of owning a duplex as well. Learning that furnace filters need to be changed periodically, or that a downspout has a bad habit of getting knocked off during lawn mowing (resulting in water in the basement), will ultimately help you better keep the duplex in better shape, as well as supervise and gauge the competency of the property manager you do hire.
  2. Tenant Selection And Management – If you plan to become a lifelong investor, learning how to advertise a property, screen tenants, and keep tenants happy will help keep your duplex occupied and profitable.
  3. Save The Money – On smaller investment properties, like duplexes, it’s often difficult to generate enough income to cover the costs of a property manager and have cash flow left over. In some communities, property managers typically retain somewhere between 5 and 10 percent of the rental income. In other markets, like Minneapolis and St Paul, duplex property managers charge as much as $100 per rental unit.

Once you’ve become confident in your knowledge of the duplex, and it’s generating enough income to cover the expense, it’s perfectly fine to hire a competent property manager.

That will leave you more time for things like buying other duplexes!

 

Why?

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