Archive for September, 2012
Comments Off on Why You Need A Map To Buy A Minneapolis Duplex
If you’re thinking about where you want to buy an investment duplex in Minneapolis, one of the first questions you should ask yourself is where you drive.
Why is driving important to investment real estate?
Because many new investors make the mistake of buying properties too far from where they already travel, which makes managing the property difficult.
In the book FLIP: How to Find, Fix and Sell Houses for Profit, authors Rick Villani and Clay Davis shared an excellent strategy for locating neighborhoods to invest in.
They suggest you get a map of your city that’s divided into neighborhoods or zip codes. Then, take a pen and put a mark on where you live, and where you work.
Next, decide how far you’re willing to drive to take care of your investment property. A better measure might be how much time you’re willing to spend in the car.
If that’s ten miles, draw a ten mile circumference around your office, and another around your home.
Looking at the map, draw a line from the top of one circle to the top of the other. Then connect the two bottoms of the circles in the same way.
The area that falls between those two lines, or where the two circles overlap, should be neighborhoods you either travel through every day, or ones that wouldn’t be tremendously out of the way for you.
And it’s those duplexes you should target, as they’ll be the easiest for you to manage.
Believe it or not, there will be days you really, really don’t want to have to go to your Minneapolis duplex to make a repair or show a vacant unit. The less out of your way it is, the easier that trip will be to do.
Comments Off on Why Minneapolis Duplex Sellers Love 2012
What a difference a year makes in the Minneapolis duplex market!
For the week ending September 15, 2012, the average list price the duplexes, triplexes and four unit buildings listed for sale in Minneapolis and St Paul left the market at was $173,311.
Compare this to the average sold price for the same week one year ago of $96,853. Theoretically anyway, prices have doubled.
And this in spite of traditional sellers losing market share for the week.
Last year, Minneapolis duplex sellers with equity were responsible for 36.8 percent of the pended sales. This year, just 23.1 percent of the pended sales will not involve a bank in the negotiations.
This is especially curious given that 55 percent of the 20 multi-family properties newly listed for sale during the week are being sold by traditional sellers. This is slightly ahead of the 51.4 percent of the 37 newly listed properties during the same week in 2011 that were offered for sale by traditional sellers.
The single family home market saw the number of new listings increase 4 percent for the week, pending sales rise 18.4 percent, and the total amount of inventory decrease 29.5 percent.
Makes me wonder what next year will look like.
Comments Off on What’s The One Percent Rule To Buy A Minneapolis Duplex?
When looking to invest in a duplex, many Minneapolis duplex buyers have a quick rule of thumb they use to eyeball financial information on a property to decide whether it’s a good deal.
For some, that measure is the Cap Rate, which is a ratio of an income property’s net operating income to its fair market value.
Other duplex investors may use the Gross Rent Multiplier, which is a number determined by dividing the fair market value (usually purchase price) by the gross amount of revenue a property generates in a year.
A close cousin of the gross rent multiplier is the Rent-To-Value Ratio. This ratio takes the Gross Monthly Rental Income and divides it by the Fair Market Value of a property. So, if a duplex generates $2000.00 a month in rent, and its purchase price is $200,000, the Rent-To-Value Ratio would be 1 percent.
Many investors believe as long as you have at least a one percent Rent-To-Value Ratio, the property will cash flow. However, it’s important to note a couple of things.
First, this number may be impossible to achieve in many of the more expensive markets across the nation.
Second, like the Gross Rent Multiplier, the Rent-To-Value Ratio fails to take into account one very big consideration: expenses!
Some properties have higher property taxes than others, some require the owner to pay heating bills, and some have so much deferred maintenance that repair bills will skew expenses.
Like the other measures, the Rent-To-Value Ratio is only an eyeball test.
You should never buy a Minneapolis duplex without doing a complete financial analysis, and asking the seller to provide the data necessary to back your math up!
said on September 18th, 2012 categorized under: Tenants
Comments Off on Can You Refuse To Rent Your Minneapolis Duplex To A Packers Fan?
The other day a client told me he didn’t have to rent his Minneapolis duplex to a tenant who was a Packer fan.
After all, he maintained, Packer fans are not a protected class according to either the federal or Minnesota fair housing laws.
And he was right.
My client had just purchased a duplex to owner occupy. Because he is going to live there, Packer or Bears fans aren’t the only classes of people he can discriminate against.
Turns out he can refuse to rent to people with children too. While duplex owners cannot refuse to sell, rent or lease a unit to prospective tenants on the basis of race, color, creed, religion, national origin, sex, marital status, sexual or affectional orientation, disability, public assistance or who have children.
The exception to this is when the duplex owner lives on the premises. He or she may then refuse to rent to tenants with children. A landlord may also refuse to rent to people with children if the property serves as housing for the elderly.
While the law states nothing about refusing to rent to Packers fans, it’s probably not a good idea. Discrimination, in any form, is a recipe for a lawsuit.
Comments Off on Minneapolis Duplex Owners Hoarde Inventory
First glance at the Minneapolis duplex market statistics for the week ending September 1, 2012, suggest we’re experiencing some sort of hoarding of duplexes for sale.
That is, until you look at the calendar for the same week last year and realize the Labor Day holiday occurred one week after it did this year. Isn’t it funny how people would rather go to the lake the last weekend of summer than be out shopping for Minneapolis duplexes?
For the week in 2012, there were 20 duplex, triplex and four unit property owners who accepted purchase agreements. Of these, half were sellers who did not have to consult with a bank before agreeing to sell.
One year ago, there were 25 duplex sellers who accepted offers. Forty-four percent of these sellers had equity in their properties.
We had just 13 new duplex listings the holiday weekend. Just 38.5 percent of these sellers stayed in town for the weekend, while the banks selling the rest of the new inventory stayed in town.
Last year, there were 27 new listings, with 44 percent of these belonging to sellers with duplex equity.
In the single family market, the number of new listings decreased 10.1 percent, while pending sales leapt 13.3 percent. In all, inventory is down a whopping 30 percent.
This increased demand, coupled with decreasing supply, conspired to make it a sellers market. As a result, for the month of August, the Twin Cities median sales price jumped 15.5 percent to $179,000.
Thanks to a late 2011 Labor Day holiday, expect to see much of the duplex data change directions next week.
said on September 10th, 2012 categorized under: Tenants
Comments Off on How To Winterize Your Minneapolis Duplex From Vacancies
I don’t know about the rest of the country, but in Minnesota, many duplex owners have realized tenants don’t like to move in the winter.
Why do I bring this up now? After all, it’s September. Football season has just begun. Winter is months away.
Because I don’t know whether it’s the result of too many Snickers bars, or the onset of the holidays, but in a tenants mind, winter starts the day after Halloween.
As in seven weeks from now.
This is particularly important to keep in mind if you’re thinking of buying a duplex. After all, if you have an offer on one, and were planning on closing the sale next month, it doesn’t leave you much time to paint or rehab your duplex before you need to get it rented.
Many of my duplex investors are scheduling closings keeping exactly those challenges in mind.
1 Comment »
Would you be shocked to hear it’s a Minneapolis duplex seller’s market?
Increasing prices are usually a sign of exactly that. And according to CoreLogic’s July Home Price Index, average home prices (the don’t break duplexes out into a separate category), including distressed properties, increased over July of 2011 by 3.8 percent. Better yet, they were up 1.3 percent since June.
The news was better yet when CoreLogic removed short sales and foreclosures from their calculations. Prices then were up 4.3 percent over last year, and 1.7 percent over the month before.
The company sees more monthly increases ahead. They estimate prices will rise at least .6 percent from July to August. This would result in a year-over-year price increase for the month of 4.6 percent. The projections are better still when excluding distressed sales. Anticipated gains based on those calculations put price gains at 1.3 percent month-over-month and 6 percent year-over-year.
While this is welcome news, please note that at this pace, it will take us more than five years to realize the prices we saw in 2005 and 2006.
Comments Off on Traditional Minneapolis Duplex Sellers Win The Last Week of Summer
What a difference a year makes in Minneapolis duplex sales.
For the week ending August 25, 2012, there were 13 duplex sellers who received and accepted purchase agreements in the Twin Cities. Of these, a staggering 76.9 percent are traditional sellers, who have equity in their properties.
One year ago, there were 18 sellers who accepted purchase agreements during the same week. Just 55.5 percent of these sellers were people who did not need a bank’s permission to sell their duplexes.
As properties sold by traditional sellers almost always go for more than distressed properties, the average final list price for the 13 now pending sale duplexes in 2012 was $194,084. Last year, the average sold price for the same week was $157,392.
There were just 16 new duplex, triplex and four unit listings for the last week of August in 2012. Just 37.5 percent of these were brought onto the market by sellers who either have equity or don’t need a bank’s permission to sell for less than they owe.
New listings for the same week in 2011 totaled 37. In other words, there were more than double the amount of new investment property opportunities for the week in 2011 than in 2012. Most of these duplexes were put up for sale by banks, with just 35.1 percent belonging to equity sellers.
Meanwhile, single family home sellers brought 1.3 percent more new inventory to the market for the week than they did in 2011. Pending sales, on the other hand, were up 19.4 percent, contributing to a nearly 30 percent overall decline in housing inventory for sale.
As we wind down summer and head toward fall, let’s hope things continue to change for the better.