Archive for July, 2012

Minneapolis Duplex Sales Need Rain

said on July 31st, 2012 categorized under: Buying A Duplex

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Duplex Inventory DroughtThe Minneapolis and St Paul duplex market continued to suffer a drought of new inventory the week ending July 21, 2012.

While there were 31 new listings for the week, which sounds as if it should be a positive number, it actually represents 24.3 percent fewer duplex, triplex and four unit investment opportunities for buyers.

Of the listings to hit the market, 54.8 percent are being sold by traditional sellers. This represents a slight increase of the 46.3 percent of equity sellers for the week in 2011.

Perhaps the best news of all, however, is that 41.2 percent of the property owners who accepted purchase agreements that week did not need permission from anyone at a bank in order to do so. This is up dramatically from the 14.3 percent of last year’s sellers who could say the same.

Of course, fewer bank owned or negotiated transactions usually result in higher prices. This was certainly true for the week, with the average off-market list price at $209,553. This is double the average sold price of $104,231  for the same week one year ago.

Single family home buyers also found themselves doing a rain dance for houses to look at, with overall inventory down 30.7 percent. Meanwhile, pending sales were up 22.7 percent, putting even more pressure on an already withering crop of inventory.

Comments Off on What If Everyone But The Bank Thinks The Duplex Price Is Right?

Loft View IIThis morning I had a client contact me about buying a duplex I’d shown him years ago, that never sold.

I immediately knew which property he was referencing. After all, it was one of those rare duplexes that broke the barriers of what a rental property could and should be, and entered the realm of something you’d see in Dwell magazine.

With historically low interest rates helping make the property more affordable, my client was suddenly willing to pay the amount the duplex owner had wanted to sell it at three years ago. Low interest rates mean lower payments, which suddenly means the property will now cash flow.

In the process of tracking down the seller, I realized there was one problem. There hasn’t been a single duplex in that area that sold for anywhere near what this property can and will sell for.

And without comparable sold properties, we’re going to have trouble getting an appraisal to value the property as highly as we do.

Without an appraisal substantiating the value of the duplex, the bank won’t give the buyer a loan.

So what can we do about that?

While an appraiser is hired by the lender to render an independent opinion of value, most are open to receiving information from the listing agent that substantiates the value of a property.

For example, I was able recently to tell an appraiser how a comp for a duplex I was selling had been decorated in early old lady, had a broken deck and no air conditioning. Meanwhile, the property he was providing a valuation of not only had central air, but was fully updated and even had granite counter tops.

The listing agent may also be able to justify price to an appraiser by comparing the gross annual rent of one income property to another. For example, if the duplex in question has much larger rent than most of the income properties in the neighborhood, it may warrant a higher price.

In the case of the exceptional duplex, the Realtor may also be able to talk with the appraiser about how truly unique it is; showing him or her interior pictures of comparable properties, and pointing out the differences in each.

Unfortunately, if the appraiser is unwilling to bend, there are only three options left: the seller can lower his price to match the appraisal, the buyer can come up with the cash to bridge the gap between appraised value and purchase price, or the seller may choose to sell the property on a contract for deed.

Unfortunately, until prices improve, those are our options.

Minneapolis Duplex Market Changes

said on July 24th, 2012 categorized under: Twin Cities Real Est

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Change ahead signThere were some big shifts in the Minneapolis duplex market the week ending July 14, 2012.

For example, for the first time in months and months there were fewer pending duplex sales (19) than there were the same week the year before (28).

Of this group of sellers who accepted offers, 52.6 percent were traditional sellers this year. One year ago, just 28.6 percent of the sellers did not need to include a bank in the sale negotiations.

The average off market list price for duplexes that received purchase agreements for the week was $168,205. This shatters the average sold price for the same week in 2011, which was a paltry $115,123.

There were 35 new listings for the second week of July in 2011, with 57 percent of those requiring a lender’s permission to sell. This year, just 28.6 percent of the 21 new sellers either are banks or will require negotiating with one in order to sell.

In the single family market, word of a tightening market brought sellers out, with the number of new listings up 6.2 percent for the week. While this increase was good news for anxious home buyers, the total amount of inventory available on the market remains down 30.7 percent for the year.

The combination of shrinking inventory and rising sales helped the median home price in the Twin Cities for the month of June increase 10.4 percentto $179,000.

Clearly, change can be a good thing.

Comments Off on Is A Duplex Property Manager Right For You?

duplex keyIf you’re thinking about buying your first duplex, you might think the best way to make it a low maintenance investment is to hire a management company.

After all, they do this for a living, right? They can handle all of those late night phone calls and evictions, while you sit back and collect rent.

However, it’s important to remember that property managers impact your cash flow. And not always in a good way.

In Minneapolis, most duplex managers charge anywhere from $80-100 per unit per month. That’s $1920-2400 a year, on a property that may generate $20-24,000 a year.

After vacancies, taxes, insurance, utilities, repairs and mortgage payments, management fees can often soak up as much as one third of your profit.

What’s more, if you’ve never managed investment property on your own before, it can be difficult to know whether your manager’s accounting of expenses is accurate.

And frankly, most of the time, managing one or two properties isn’t really that time intensive.

Having said that, there are certainly great reasons to hire a property manager as well.

For example, if you live a considerable distance from your duplex, property management makes sense. The same can be said if you have multiple properties, or simply don’t have the time for more hands-on management.

If you’re considering hiring a property manager, you may decide the benefits don’t outweigh the costs.

Brad Pitt Builds A Duplex

said on July 19th, 2012 categorized under: Architecture

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GehryDuplex3Even Brad Pitt loves duplexes.

Two years after the destruction of Hurricaine Katrina in New Orleans’ Lower 9th Ward,  Pitt toured the area and noticed absolutely nothing had been done to rebuild it.

To help change that, he founded the Make It Right foundation, with the goal of building affordable, well-designed homes in the Lower 9th Ward.

Pitt raised money, and solicited help from well-known architects like Frank Gehry.

This week, the foundation announced the completion of Gehry’s contribution to the project; a four bedroom, three bath duplex.

The property features a three bedroom, two bath home in the front, where the owner will reside. In the back, there is a one bedroom, one bath rental unit.

The duplex helped Make It Right reach the halfway point in its goal to build 150 homes.

Comments Off on Welcome The New Minneapolis Duplex Seller’s Market

Invitation. 3D little human character standing on a doormatApparently all of the Minneapolis and St Paul duplex sellers went up north for the summer.

After all, there were only 21 new duplex, triplex and four unit listings for buyers to choose from; down 36 percent from one year ago.

Then again, 66 percent of last year’s new inventory was either brought to the market by banks, or involved a bank in the negotiations. This year they contributed just 48 percent of the new inventory.

It is interesting to note in a market filled with multiple offers and enormous buyer demand that just 14 Minneapolis and St Paul duplex owners accepted purchase agreements on their properties. Most (64.2 percent) of these were traditional equity sellers.

One year ago, there were 17 duplex sellers who accepted offers. Sixty-five percent of those properties were either bank owned inventory, or required a lender’s approval in order to proceed with the sale.

Traditional sellers, of course, always bring higher average prices and the holiday week was no exception. Their market domination resulted in an average off market list price of $203,278. After applying an MLS average Percent of Original List Price Received of 95.1 percent, resulting in what will probably be an average sale price for the week of $193,317, we are on track to shatter the average for the same week in 2011, which was $119,297.

Single family homes also saw a decline in new listings, dropping 21.9 percent, and an increase in pending sales for 24.6 percent. Overall in June, we saw median sales prices increase 10.4 percent to $179,000, and the months supply of Inventory drop 44 percent to 4.5 percent.

A real estate market is considered balanced, favoring neither buyers or sellers, when there is a 5 – 6 month supply of inventory. Less than that creates a seller’s market, and more inventory favors buyers.

Not so subtle hint: it’s a great time to sell.

Minneapolis Duplex Sales Help Plumbers

said on July 11th, 2012 categorized under: Twin Cities Real Est

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Plumber.Plumbers will probably be happy with Minneapolis duplex sales the last week of June.

Because twenty-three Minneapolis and St Paul duplex sellers received and accepted purchase agreements on their properties.

Of these, the vast majority (65 percent) were traditional sellers.

You remember them. They’re the people who actually have owned the duplex for some time and can tell you about who their favorite plumber is.

For the same week one year ago, just 38 percent of the 13 sellers who accepted offers could tell you about the pipes.

Of course, traditional sellers generally keep their properties in better shape than the banks do, and as such, their duplexes command better prices. This is evidenced by the average off-market list price of $191,168.47 for the week this year, compared with the average sold price for the week in 2011 of $134,084.61.

The flow of new inventory continued to be corroded, with just 24 newly listed duplexes, triplexes and fourplexes for sale. Of these, 54 percent were brought to the market by equity sellers.

One year ago, there were 31 new duplexes for sale, with 54.9 percent listed by traditional sellers.

Things weren’t much better in the single family home sector, where overall inventory is down 31 percent from one year ago. Meanwhile, pending sales are up 20.4 percent.

It’s a great time to be a seller.

And a plumber.

Comments Off on Why You Can’t Get A Great Deal On A Minneapolis Duplex By Calling On A Sign

Great Deal on a duplexI had a phone call today from an aspiring duplex investor.

Nothing unusual in that. In fact, I get a number of these every week.

All of them wanted to know the same thing; was that duplex my sign was in front of still available to purchase and if so, when could I show it to them?

They were confused when I told them there had been an offer on it for months, and we were just waiting to hear back from the bank.

Whether it’s a bargain at a garage sale, or the real estate deal of the century, we all dream of making a pile of money as a result of our efforts.

The trouble is, the only people getting these great duplex deals are the ones working with a Realtor. And even then, duplex buyers are having to compete in multiple offers to get property, or, through the help of their agent, find something not yet available to the public for sale.

Much of the time in a market like this, by the time the sign is in front of the duplex, the property is already sold!

Minneapolis Duplex Sales Too Hot

said on July 5th, 2012 categorized under: Twin Cities Real Est

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duplex sales too hotLooking for a Minneapolis or St Paul duplex to buy is a little like being stuck in your house during this recent heat wave with a broken air conditioner.

No matter what you do or say, no matter who you plead with or offer abundant amounts of cash to, nobody’s coming to fix your AC until they decide they can.

And, no matter how much money you offer, or how earnest you are in your search, you can’t seem to make more duplexes, triplexes and fourplexes come on the market.

For example, during the week that ended June 23, 2012, there were 26 new multi-family properties available for sale in the metro area. This figure is a decline of 23.5 percent from the same week last year.

Of the new listings this year, just 30.8 percent belong to traditional sellers.  Last year, half of the new listings belonged to people with names not associated with banks.

Meanwhile, there was a 69 percent increase in the number of duplex owners who accepted purchase agreements compared to last year. Of these, half are traditional sellers who will take money home with them after the closing.  This is a 3 percent increase in the number of equity sellers over last year.

On average, pended duplex listings left the market at a list price of $172,480. This sounds like reason to rejoice, until compared to one year ago, when the average sold price for the week was $214,096.

The single family home market also continued to see declines in inventory, with new listings down 1.6 percent, and pending sales up 15.8 percent.

If the heatwave continues, without the relief of new inventory, it’s going to be a frustrating summer for many Minneapolis duplex buyers, but one with central air for duplex sellers.

Comments Off on Why A 5 Unit Apartment Building Is Worth Less Than One With 4

numbersOne of the most common misunderstandings about multi-family property investing is that more units is always better.

After all, the more tenants there are paying rent, the more a property should be worth, right?

Theoretically.

The trouble with that thinking when it comes to smaller apartment buildings, however, is that any property that has more than four units requires the buyer to obtain a commercial loan.

And commercial loans usually require a larger down payment (25 percent or more), come at a slightly higher interest rate, and have shorter amortization schedules.

Meanwhile, duplexes, triplexes, and four unit properties may be purchased with as little as 3.5 percent down (for owner occupants using FHA financing), and their loans are paid off over thirty years.

Spreading payments over a longer amount of time usually results in them being less. This helps the investment properties with fewer units cash flow.

More importantly, however, since the smaller the down payment, the greater the pool of possible buyers. The greater the number of buyers, the higher the demand. And the higher the demand, the greater the value.

So, that 5 unit building you see on the MLS that’s priced $50,000 less than a comparable four unit down the street may not be such a good deal after all!