Archive for March, 2012

Why Selling Duplexes Is Like Selling Shirts

said on March 30th, 2012 categorized under: Selling A Duplex

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minneapolis duplex salesThe other day the New York Times ran an article about retail shopping that also talked about pricing duplexes to sell.

I’m sure the journalist at the Times didn’t intend to write about real estate, but she may as well have.

The article quoted the CEO of JC Penney, Ron Johnson, who said, “The customer knows the right price. We can raise the price all we want; she’s only going to pay the right price. And why is that? Because she’s an expert.”

This consumer expertise comes from hours spent on the Internet studying and comparing prices. Thanks to their research, consumers know they can get a better deal at either another store, or by ordering the item online.

The article detailed how several retailers, including American Eagle and Urban Outfitters, are reworking their pricing strategies to adjust to web-savvy consumers.

Duplex buyers are every bit as savvy as someone looking for a new bedspread. In fact, they may be even more so, as real estate is a much bigger purchase.

I often have duplex sellers they want to go against my counsel by pricing their duplexes 10 percent or more above my recommended number.

Their thinking is they can “always come down”, or, buyers can “just make an offer”.

The trouble with this logic, however, is that a duplex buyer is educated and if a property is over-priced from the outset, they won’t even go through the front door. Because they’ve been shopping online, they know they can get a comparable property down the street for less.

And once the property’s been sitting, to consumers, it becomes like last fall’s sweaters– too expensive for what it is. At that point, the only way to sell it is at a discount.

In other words, when the duplex goes “on sale” at a price usually below what it might have brought had it been priced right from the start.

Do You Have A Duplex To Sell These Minneapolis Buyers?

said on March 28th, 2012 categorized under: Selling A Duplex

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minneapolis duplex sellers wantedWith an extreme lack of inventory of Minneapolis and St Paul duplexes for sale, I thought I’d ask whether any of you might have a duplex you’d consider selling to one of my pre-qualified buyers.

If you have something that matches one of the duplexes one of these buyers is looking for, please let me know!

Jordan – A first time home buyer/investor who would like to find a duplex, triplex or four unit building in the Uptown/Wedge area. While he’s ambitious and not opposed to work, the property needs to be in reasonable condition, make financial sense and have some charm. His preference is the Craftsman era of architecture.

Tim – Another first time home buyer/investor who would also like to find a Craftsman or mid-century duplex. He is open to doing some cosmetic work, but as he comes from a family of engineers, structural issues are out of the question. He is open to buying a duplex in a number of areas, including Northeast, Uptown, Kingfield, Prospect Park, near the University of Minnesota, St Thomas or Macalaster.

David and Linda – This couple are established home owners interested in down sizing. They intend to live in one half of the duplex, with their son and his young family living in the other. They prefer one level living or a minimum number of stairs, two or more bedrooms, an attached garage, and a duplex that’s in great shape. They would like to find a duplex in Southwest Minneapolis, Edina, St. Louis Park, Hopkins or West Bloomington.

Sally, Aaron and Mirian – Another family looking to split two sides of a duplex. They prefer something with big kitchens, two or more bedrooms, an attached garage, and in one unit, room for a home office/business. They are not opposed to updating paint or redecorating, but major repair projects make them uncomfortable. They are looking in Bloomington, Richfield, Hopkins, St Louis Park or Robbinsdale.

Joe – This buyer recently had a job transfer from Detroit, and has fallen in love with the Twin Cities. He is looking to owner occupy a duplex, triplex or fourplex in either Minneapolis or suburbs west. (His employer is located in Minnetonka.) As his career in the financial sector demands a great deal of his time, he is looking for a property in good repair that also makes financial sense.

Simon – A first time duplex/investment proeprty buyer whose ideal location is the Bryn Mawr neighborhood. He is looking for a duplex with two or more bedrooms in each unit. He prefers something with charm and, if possible, a view of downtown.

Jeff – An experienced investor who also owner occupies, Jeff is not opposed to projects. He is looking for a 1950s-1960s vintage side by side duplex in the Seward, Longfellow or Powderhorn Park neighborhoods. Because he’s not afraid of work, he’s interested in buying a duplex at a discount and earning sweat equity.

Derek – A first time home buyer who’s looking to owner occupy a property in Northeast Minneapolis. He’s an architect, so he’s looking for something basic that he can put his own flourishes to. He’d prefer two or more bedrooms and a big back yard for his black lab who’s been living in an apartment too long.

George – An investor who’s not afraid of more extensive cosmetic work. A property must make financial sense. He is primarily interested in properties in the south metro.

Caroline – As a veteran and native of the Lake Nokomis neighborhood, Caroline is interested in finding a duplex, triplex or fourplex in that area, preferably with easy access to the VA. She intends to reserve one unit for extended stays; giving veterans or their families a comfortable place to stay while receiving medical care.

Adam and Kari – An ambitious young couple who moved home from California to start a family as well as their investing careers. They are concentrating on single family homes, duplexes, triplexes and four unit buildings near either campus of the University of Minnesota. They are extremely handy and not afraid of projects and bigger repair work.

Mark – An experienced investor who is open to investment properties almost anywhere in the Twin Cities, provided their rate of return meets his criteria. Some amount of work is OK, but major rehab projects are not. He is capable of closing quickly if someone just wants out.

If you have a Minneapolis or St Paul duplex that matches any of the descriptions above that you’re thinking about selling, or would be open to selling if the right buyer came along, please call or email me. After all, selling a duplex doesn’t always have to involve completely putting it on the market.

Comments Off on Why Now Is A Great Time To Sell A Minneapolis Duplex

open window selling a duplexWhen is a good time to sell your Minneapolis duplex?

Now.

No, prices aren’t what they were in 2005-2006.

And they aren’t going to be anywhere near there for quite some time.

So why is NOW a good time to sell?

Because during the week ending March 17, there were just 28 duplex, triplex and fourplex listings newly  for son the market. Last year during that same week, there were 22 percent more new properties for buyers to choose from.

Of the new listings, most (53.6 percent) were being sold by traditional sellers who did not need a bank’s permission to sell. This represents a market share increase of 3.6 percent from last year.

Meanwhile, there were 17 Minneapolis and St Paul duplexes sold the third week of March. Of these, 52.9 percent did not involve a bank in the sale negotiations. While this number represents a 29 percent drop in new inventory compared to the week one year ago, it’s important to note just 16.67 of those sold properties were owned by sellers with equity.

In other words, the banks don’t seem to be offering as many of their Minneapolis and St Paul duplexes for sale.

And yet, here’s the real news…according to my crude estimates, there are over 200 bank-owned duplexes currently on the books, but not on the market.

I wish I could tell you why they aren’t selling them, but I honestly have no idea.

Worse yet, I couldn’t even begin to guess when they will offer these duplexes for sale; or foreclose on all the owners who are behind on their mortgage payments.

They simply aren’t doing it right now.

Which gives traditional Minneapolis and St Paul duplex sellers a window to sell…

One that won’t stay open forever.

Is A Minneapolis Duplex Rent Bubble Next?

said on March 26th, 2012 categorized under: Tenants

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duplex bubbleAccording to a recent report from Zillow, median rents for duplexes and other rental properties increased 3 percent between January of 2011 and 2012, while during the same period, home values declined 4.6 percent.

In many large cities, rents rose almost exactly as much as home values fell. Take Chicago, for example; rents jumped 9.1 percent for the year, while home values fell 10.4 percent.

Here in Minneapolis, rents rose 11 percent, while housing values dropped 8.1 percent.

Perhaps that jump is why Minneapolis duplexes and other investment properties seem to be selling faster than new inventory is coming on the market.

As rents rise, duplex ownership will become more attractive and affordable for many duplex tenants than renting.

The challenge is figuring out when that will happen.

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minneapolis duplex sales go upWith the headlines increasingly filled with good news about an improving economy, it would be easy to prematurely celebrate the impending return of higher duplex values.

However, before we all start thinking happy days are here again, we need to keep two things in mind…

Interest rates impact value.

When the economy improves, interest rates tend to rise; just as they did this week.

And for every 1 percent increase in rates, a prospective duplex buyer can generally qualify for $10,000 less of a loan.

Yes, rents will increase as more people start living on their own once again.  And when rents get too high, people with good credit start looking for homes.

But the real estate boom of 2003-2006 happened when people with bad credit were able to qualify for loans.

I’m no economist, but I can’t imagine the banks are going to be willing to lend to those folks any time soon. And demand and supply for anything is what determines its value.

When it comes to supply,  there’s the small matter of all that shadow inventory

Why A Duplex Short Sale Could Save You Taxes

said on March 21st, 2012 categorized under: Short Sales/Foreclosure

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Duplex debt forgiveness tax consequencesIf you’re considering selling your duplex as a short sale, if you don’t act soon, further delay may result in your owing taxes.

Historically, if a lender forgives some or all of your debt, with certain exceptions, the borrower must pay tax on the forgiven amount.

Thanks to the Mortgage Debt Relief Act, however, a borrower can be excused from paying taxes on forgiven mortgage debt on a principal residence. (In other words, the debt and tax forgiveness applies only to owner occupants.)

And this applies in the event you’re able to stay in the duplex thanks to a principal reduction , taxes on the amount of the reduction will be forgiven.

Here’s the problem. The current law for this tax forgiveness expires on December 31, 2012.

While there’s always the possibility Congress will extend this deadline, encouraging economic news may spell the end of some of the government’s recent incentives.

Stay tuned.

Dear Minneapolis and St Paul Duplex Sellers…

said on March 20th, 2012 categorized under: Twin Cities Real Est

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letters to duplex sellersDear Duplex Sellers,

We miss you.

ALL of you; whether you’re a bank, upside down on your duplex, or a traditional seller with equity in your property.

We know you’re out there, somewhere. You’re just not in the process of actively selling, even though the market right now is terrific.

Think I’m making it up?

Right now, metro-wide, there are just 318 duplexes, triplexes and four unit properties for sale.

Of these, 113 already have offers and are in the process of either getting a short sale approval or in an inspection period.

On the Mineapolis side of 35W, there are 95 properties available. On the St Paul side there are 183.

Meanwhile, there are rumoured to be as many as 6 million single family, duplex, triplex and fourplex owners nationwide who are at least 30 days late on their mortgage payment.

What this means to traditional sellers is this moment, right now, is yours. At some point in time, the banks will have to actively foreclose on delinquent property owners. And when they do, seller competition will go up and values may go down.

For the week ending March 10, there were 32 Minneapolis and St Paul duplex sellers who accepted purchase agreements for their properties. Of these, 37.5 percent were sellers with equity in their properties. This market share was equal to last year’s, when six of the sixteen properties that sold were offered by traditional sellers.

However, it’s interesting to note the average sold price for the week in 2011 was $99,105. The average off-market list price for the same week this year was $159,430. As always, we’ll have to wait until those sales close to know how we truly fared.

There were 31 new listings for the week. Savvy traditional duplex sellers recognized their opportunity and contributed 51.6 percent of the new inventory. Last year during the same week, equity sellers contributed 40.7 percent of the 27 new duplex listings.

The single family home market continued to see decreases in the number of new listings, dropping .3 percent for the week. Meanwhile, pending sales were up 20.9 percent. This decreased the total amount of inventory on the market by 24.3 percent.

We miss you, Minneapolis duplex sellers.

Please write back.

Let A Duplex Save Your Energy

said on March 19th, 2012 categorized under: Multi-Family Property Investing

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duplex cash flow in handOne of the most important pieces of information any Minnepolis duplex buyer or seller should have is a good, basic idea of how much utilities either do or should run.

Sellers, of course, may be asked to produce this information when a prospective buyer has requested it. More importantly,  having a basic knowledge of the average cost helps duplex owners notice when a monthly charge is unusually high, allowing them to immediately investigate.

Buyers, or the Realtors representing them, on the other hand, should at least have a basic understanding of howmuch it costs to provide tenants with water and trash service, heat, and electricity (if the landlord is responsible for these services).

Not only will this help duplex buyer determine whether or not a property is a good investment, but also, possibly recognize when there’s a hidden opportunity with a property that’s for sale.

For example, last week I found a duplex on the MLS that’s been listed for a long time. It’s appears to be a nice property, in a sought-after location, at a very good price.

So why hasn’t it sold?

As I looked closely at the expenses for the building, it suddenly became apparent that either it has a massive plumbing leak, or, the MLS information was horribly wrong.

A quick call to the city of Minneapolis established the water bill reported on the listing was, in fact, high by $1700. When I plugged the accurate amount into my investment property analysis worksheet, the building immediately went from generating an OK cash flow to a great one.

If you’re new to investing or your Realtor isn’t familiar with duplex expenses, the utility companies like Xcel and CenterPoint Energy are happy to provide that information.

While they can’t disclose the exact amount of a heat bill, for example, they can provide you with a high amount, a low, and a monthly average. In the end, a simple phone call may make or even save you a fortune.

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hamp-logoUntil now, it’s been difficult for upside down duplex investors to get the government-backed loan modifications available to owned-occupied duplexes and single family homes.

In late January, however, the Obama administration announced an expansion of the HAMP program to allow investors to qualify.

According to a report in Bloomberg News, Timothy Massad, the Treasury’s assistant secretary for financial security said starting in May, landlords can use the Home Affordable Modification Program (HAMP)  for up to four loan workouts, as long as they rent out each property or have plans to fill them.

The federally-subsidized program pays banks to cut interest rates, lengthen the terms or forgive some of the mortgage principal.

The theory behind the change in policy is keeping current owners in place prevents tenants from being evicted. Massad said, “Vacant properties are a problem no matter how they became vacant.”

Almost one in every four home purchases in January were investment or vacation properties.

It is estimated that about 700,000 landlords will be eligible to modify their mortgages.

Minneapolis Duplex Investors Learn How To Be Landlords

said on March 14th, 2012 categorized under: Education

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mhalogo_stbSMALLWhether you’re a new or experienced Minneapolis duplex owner, or are simply thinking about becoming a real estate investor, you may find the Minnesota Multi Housing Association’s (MHA) upcoming class, “The Fundamentals of Rental Property Management in Minnesota” helpful.

The two hour class will cover key components of being a duplex owner, including:

  • Accepting applications
  • Screening Basics
  • Leases
  • Security Deposits
  • Fair Housing
  • Protecting Your Investment
  • Licensing and Regulations
  • Ending the Tenancy
  • Evictions

MHA will be holding the class on Thursday, April 5 from 8:30-10:30 AM and again on June 14th from 6:00-8:00 PM.

Registration costs $29 for MHA members and $49 for non-members.

To register, call MHA at (952)548-2215.

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