Archive for June, 2012
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I wish duplex loans were like socks.
Then there would be a “one size fits all” answer to the question, “How much money do I need to put down to buy a duplex?”
The trouble is, there isn’t a universal answer. There’s actually a different answer for almost every buyer- but before I delve too far into metaphorically custom sizes, let’s start with the basics.
Broadly speaking, if you have great credit, a good job, and some money saved, the minimum down payment for a duplex is:
- 3.5 percent – If you are an owner occupant using FHA financing. You may only have one FHA loan at a time.
- 20 percent – If you are an owner occupant or investor with good credit and very little debt.
- 25 percent – If you are an investor. You must also have in reserves an amount equal to six months of payments, interest, taxes and insurance for the property. This does not have to be liquid, but can be in a retirement account.
Of course, these standards may change if you have higher debt burdens or a lower credit score. The way the bank sees it, the less perfect your credit, the higher risk you are. It isn’t that they won’t lend you money; they just want you to have a higher down payment.
Fair warning. There are many loan officers will tell you there are loans available if you are an owner occupant for as little as five percent down. If someone says this to you, be sure to make it clear to them that you are buying a multifamily property, not a single family home.
The only way to find out for certain what kind of down payment is right for you is to talk to a loan officer who has experience with duplexes, triplexes and four unit properties.
If you need a recommendation, please call. I have several qualified, reliable loan officers who would give you the answer that’s right for you.
Comments Off on Minneapolis Duplex Owners Recycle Parts For Charity
When the Re-Use Center closed last year, Minneapolis duplex owners lost a valuable resource for replacing hard-to-match items, as well as dispose of gently used but still useful pieces of housing and excess building materials.
I’m happy to report that while the Re-Use Center hasn’t been reborn, Habitat for Humanity has stepped in to fill the void.
The ReStore store accepts donations of things like used kitchen cabinets, unwanted doors, leftover paint and floor tile.
It then resells these items at discounts of up to 75 percent of their retail price, with proceeds benefiting Habitat for Humanity.
This is a great idea. Not only does reusing material keep it out of landfills, it also provides duplex owners an opportunity to save money and match hard-to-find architectural pieces, but it also provides revenue for a great charity.
The ReStore also offers free electronics recycling for things like computer hard drives, cell phones, dvd players and ipods. The items are then either refurbished or the raw materials recycled.
The ReStore is located in New Brighton at 510 County Road D W. They are open from 9-6 Tuesday-Friday, and 9-3 on Saturdays.
Comments Off on Minneapolis Duplex Sales The Same. But Different.
If you were to look at two pictures side by side; one of Minneapolis duplex sales for the week ending June 18, 2012, and the other for the same week one year ago, they would look almost identical.
For example, there were 17 duplex owners who accepted offers on their properties for the week this year, 18 last year.
On closer examination, however, you will start to see some differences.
Of these Minneapolis duplexes that sold, 47 percent of the owners had equity in their properties. Last year, just 27.8 percent did.
There were 30 new duplex listings for sale on the MLS for the week; similar to the 32 one year ago. Last year’s crop consisted of 40.6 percent equity sellers, this year, 53.3 percent of the duplex owners will walk away from closing with a check.
However, this year’s average off market list price is where the most obvious distinction appears.
The average price a duplex left the market at this year was $154,626.
Last year’s sold price for the week was just $99,055.
When those pended sales for the week finally close, odds are the average price will be about 5 percent lower than the last list price. That would bring the average down to $146,895; almost $50,000 above last year’s.
If you took a snapshot of the single family home market, you’ll see a similar image.
New listings for the week were down 3.7 percent, while pending sales increased 19.8 percent. Overall, market inventory is down 31 percent from one year ago.
Things are changing, but only if you look closely.
Comments Off on Why It’s Better To Buy A Minneapolis Duplex Than Rent One
Over the weekend, Forbes magazine made it official. According to them, it makes more sense to buy a Minneapolis duplex than it does to rent one.
In an article published on June 24, the magazine maintains almost 4 million families have become renters since the foreclosure crisis began.
Forbes’ Best And Worst Cities For Renters
As a result, there is more demand for rental housing, and a stagnant supply thanks to a lack of new construction.
The National Association of Realtors believes this will cause rents to rise an average of 4 percent this year, and another 4 percent in 2013.
To arrive at their rankings for the places best to rent or buy, Forbes used the average rent in the first quarter of 2012 and how much that changed since 2011, vacancy rates, and compared the area’s average monthly rent to the average monthly mortgage payments.
While Minneapolis didn’t “win”, it did finish second to only New York City on Forbes’ list for worst cities for renters. With vacancy rates at 2.5 percent (lower still in the downtowns), the average monthly rent is up 2.3 percent since the same time last year.
Meanwhile, the average monthly mortgage payment has dropped 30 percent since 2006, meaning a mortage payment will, on average, be $122 a month less than rent.
Of course, in a duplex, since you have a tenant paying most of the mortgage to begin with, your costs should be lower still. In some instances, you may even get paid to live in your unit.
Get in touch with me and let me show you how!
Comments Off on How To Get Paid $3000 To Short Sale Your Duplex
I had a duplex owner call yesterday who is staring down the barrel of foreclosure.
And the government is willing to pay him up to $3000 to do a short sale.
The Home Affordable Foreclosure Alternative (HAFA) program, gives struggling duplex owners two options for transitioning out of their mortgage: either a short sale, or what’s known as a Deed-in-Lieu of foreclosure — which is, essentially, simply handing the keys back to the bank.
In order to receive a HAFA payment, a duplex owner must have:
- Lived in the duplex within the last 12 months
- Have a documented financial hardship
- Not have purchased a house or another income property within the last 12 months
- Have a balance left on their first mortgage that’s less than $729,750
- Gotten their mortgage prior to January 1, 2009
- Not have been convicted in the last ten years of larceny, theft, fraud, money laundering, forgery or tax evasion in connection with a mortgage or real estate transaction.
- Fallen behind on mortgage payments
- Have a duplex payment larger than 31 percent of their gross income
- Applied for the Home Affordable Modification Program (HAMP) and been denied
Like all government programs, there are a lot of hoops to jump through. But without trying, what’s the alternative?
said on June 20th, 2012 categorized under: Financing
Comments Off on Why Using Rental Income To Buy A Duplex Takes Experience
Many first time duplex investors believe that one of the best things about buying a duplex is their ability to use 75 percent of the income from the rental units as their own in order to qualify for the loan used to buy the property.
While this was certainly true during the real estate boom years, it hasn’t been the case for the last couple of years.
Fannie Mae and Freddie Mac, are two government sponsored entities that essentially buy loans from banks so they can then have money on hand to continue to lend.
And, when the market crashed, they decided they didn’t want to buy any loans where the borrower had used the rental income to qualify, unless that person already had two years of experience as a property manager.
Well, less experienced duplex buyers got a little good news this week, as Fannie Mae announced it was easing this restriction. Rather than requiring two years of experience, they will now only be asking for one.
While this doesn’t help first time duplex investors, it should free up some money for others.
Of course, local lenders may always decide whether or not they want to abide by Fannie and Freddie’s policies. By en large, many have favored more conservative approaches.
You’ll have to speak with your local loan officer to find out.
Comments Off on Minneapolis Duplex Sales Dip While Prices Rise
What a difference a year makes.
For the week ending June 9, 2012, Minneapolis and St Paul duplex sales were actually lower than they were for the same week one year ago.
There were 17 duplex, triplex and four unit sellers who received and accepted offers during the week. Just more than half of these folks (52.9 percent) have equity in their investment properties and will walk away from closing with a check.
Last year, there were 21 sellers who accepted offers during the week. Just 23.8 percent of them left the closing table with money in their pockets.
Of course, Minneapolis duplexes owned by traditional sellers typically sell for more than their distressed, bank-negotiated counterparts. As a result, the average duplex left the market at a list price of $142,500 the first week of June in 2012, compared with an average sold price of $99,921 for the same week in 2011.
There continued to be a lack of new inventory, with 37 new listings hitting the market compared with last year’s 46. Of those new listings, 67.6 percent belonged to traditional sellers with equity, while just 34.8 percent of last year’s sellers left the closing with money.
Single family homes began to see a small shift toward more inventory, with the number of new listings hitting the market up .4 percent. This was not enough to make up for the overall inventory decrease for the year of 31 percent. Pending sales, of course, continued their rise, up 29.4 percent over last year.
One year from now, it will be interesting to see if these trends continue.
Comments Off on Why The Duplex Market Won’t Get Better Until You Sell
Are you a Minneapolis duplex owner with equity who would like to sell, but have decided to wait out the market?
If so, you’re like countless other Minneapolis and St Paul duplex sellers.
And it scares me to think that one day, you’ll all decide at the same time to sell your duplex, flooding the market and driving down prices.
Of course, odds are that won’t happen.
Still, things won’t truly get better until some of you do decide to sell.
Duplexes owned and sold by traditional sellers typically sell for 30 to 40 percent more than those that involve a bank in the negotiations.
Until those kinds of Minneapolis and St Paul duplexes start hitting the market, values won’t go up as aggressively as most people sitting on the sidelines would like.
There continues to be a shortage of Minneapolis duplexes for sale, and if you’ve been thinking of selling yours, it’s a great opportunity to showcase yours.
Comments Off on Minneapolis Duplex Sellers Spin Sales On Their Fingertips
If the weekly Minneapolis duplex sales statistics were a basketball game, traditional sellers would be the Harlem Globetrotters, while lender-mediated duplexes played the Washington Generals.
There were 18 Minneapolis and St Paul duplex, triplex and fourplex owners who accepted purchase agreements on their properties. Of these, 66.7 percent were traditional. sellers, with names and you could find and friend, not fan, on Facebook.
This resulted in an average off-market list price of $156.850.
One year ago during the same week, just 23.5 percent of the 17 duplex sales involved equity sellers in the transaction. On average, these duplexes sold for $129,496.
The majority the 23 new listings for the last week of May, also belonged to traditional sellers, with a 65% market share.
While these 23 listings represented a significant drop in new inventory compared to last year’s 36, traditional sellers offered 10 percent fewer of the listed duplexes.
Meanwhile, the single family home market continued to see declines in new listings (-17.4 percent), overall inventory (-29.9 percent), while realizing a 27.2 percent increase in sales over the same period of time in 2011.
This is good news for anybody considering selling a Minneapolis duplex.
Comments Off on Investing In Minneapolis Duplexes Is Like Fishing
Buying a Minneapolis or St Paul duplex right now is a lot like fishing.
When the fish aren’t biting.
I had a client contact me over the weekend. He is growing impatient, and is certain there are duplexes either currently on the market, or have gone off without selling that are great deals, and I’m just not finding them for him.
There are only 257 active duplex listings in the entire metro area right now that don’t already have offers on them.
Normal is somewhere around 1200.
So getting a great deal, simply because you want one, is kind of like yelling at the fish in the lake to get on your line.
It is easy to rush into a duplex that is a bad investment, simply because you want one now and nothing else is available. However, it will take you infinitely longer to divest yourself of that mistake than it would have to just wait for the fish to start biting again.
I reminded my client there are, in fact, plenty of duplex seller fish known to be in the lake. And they will start biting again.
I reminded him too that his agent knows where there’s a school of them. It’s just a matter of time before they decide to list their properties.
My client has one job…
To set his hook as soon as I notice the bobber moving.