Archive for April, 2013

Duplex Investors Chip In A Quarter

said on April 29th, 2013 categorized under: Multi-Family Property Investing

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minneapolis duplex investors dominate marketAccording to the 2013 National Association of Realtors (NAR) annual Investment and Home Buyers Survey, last year the share of investment property buyers actively purchasing real estate remained at its second highest level since 2005, nearly one quarter of the market at 24 percent.

High demand for rental property caused the average national sales price for investment properties to rise for the second straight year to $115,000.

A whopping 49 percent of these investors paid cash for their property. Of these investments, 24 percent were in foreclosure, with 23 percent more being short sales.

Almost half of these investors, (47 percent) said they will probably purchase another investment property in the next two years.

That’s because investors know low interest and vacancy rates coupled with affordable inventory have made it a great to time to invest in real estate.

FHA Makes Conventional Duplex Loans Sexier

said on April 25th, 2013 categorized under: Financing

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duplex loans get easierOK, so there’s not a lot about obtaining a mortgage to buy a duplex that’s truly sexy.

But FHA’s recent decision to not only increase the mortgage insurance premiums it charges, but also to do so for the life of the loan has created an opportunity for conventional mortgages to update their look in order to attract more borrowers.

Two of the most appealing aspects of an FHA loan for owner occupant duplex buyers is the requirement for a low 3.5 percent down payment and lower credit score requirements (minimum 640).

While these sound great, the loan also comes with a 1.35 percent mortgage insurance premium, which would add $1350 a year to mortgage payments, or $112.50 a month over the life of the loan.

Recognizing how unappealing this premium may be to many buyers, conventional lenders have put on lipstick and begun offering a conventional loan for owner occupant duplex buyers that requires a 15 percent down payment with no mortgage insurance premium, and an equally low minimum credit score.

Of course, it’s a lot more difficult to come with a 15 percent down payment than 3.5 percent. However, it’s also important to note that until now, the minimum down payment for an owner occupant duplex was 15 percent.

Clearly, conventional lenders have a strong preference for single family home buyers received even better news from conventional lenders, who now offer a loan that requires a low 3 percent down payment with no mortgage insurance preimum.

With interest rates at historic lows, it remains a great time to buy a duplex, regardless of the kind of loan you use.

Minneapolis Duplex Sales Rewrite Themselves

said on April 23rd, 2013 categorized under: Twin Cities Real Est

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minneapolis duplex sales break the rulesSometimes Minneapolis and St Paul duplex sales seem to have unwritten rules.

Take, for example, the week ending April 13, 2013.

There were 18 duplex, triplex and fourplex owners who received and accepted offers. For the first time in ages, the minority of these, 38.9 percent, were traditional sellers with equity in their properties. Last year there was a similar trend, when just 36.8 percent of the 19 properties that sold were offered by equity sellers.

With banks contributing the majority of the sold properties, you would think prices would drop. And yet, the average final off-market list price for duplexes this year was $195,733, compared with $134,608 one year ago.

Meanwhile, traditional sellers continued to bring the majority of the new listings to the market. For the week in 2013, 52.2 percent of the 23 new investment property opportunities were being offered by traditional sellers.  Of the 28 new listings last year, 57.1 percent did not need a bank’s permission to sell.

The single family home market continued to experience a squeeze in inventory, with new listings down 2 percent and pending sales up 6.1 percent for the week.  In all, inventory was down 28.7 percent.

With so few properties to choose from, it continues to be a great time to be a seller.

Buy A Duplex – You Won’t Regret It

said on April 22nd, 2013 categorized under: Buying A Duplex

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RegretOne of the greatest fears many first time duplex buyers have is they’ll regret selecting the property they ultimately purchase.

According to a recent survey by Trulia, they’re right. They’re just not right for the reasons they think.

While many owner occupant duplex buyers think they’ll end up hating the kitchen, or the sound of footsteps overhead, the fact is that won’t be the case at all.

The top regret of most buyers is not choosing a larger home or duplex. Thirty-four percent of those surveyed listed this their top “do-over”.

And the second most common regret? Not remodeling more when they bought the duplex they’re in.

Homeowners aren’t alone in their regrets. Tenants have them too.

Trulia’s survey found 42 percent of tenants wished they had bought their current home rather than renting.

In fact, 56 percent of the tenants surveyed had regrets, compared to just 50 percent of homeowners.

The moral of the story?

Buy a duplex. It will make you happy.

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One of the most confusing things for many first time duplex buyers to understand is that an FHA appraisal is not the same thing as an inspection.

An inspection is a service provided by an independent contractor usually hired by the buyer to thoroughly go through a duplex and determine the condition and functionality of the property’s structure and mechanical components.

An appraisal, on the other hand, is an independent opinion on value. The appraiser is hired by the bank (using money from your closing costs) to make sure the duplex they’re lending you money for is worth what you’re paying for it.

In a way, I can understand why some people are confused. After all, FHA appraisers are required to do some things a bit differently than he or she is asked to do for a conventional loan.

FHA is an insurance company. When a borrower gets an FHA loan, he or she is paying an extra mortgage insurance premium every month to cover any costs the bank might incur if the buyer defaults on the loan.

fha duplex appraisal checklistBefore FHA will agree to offer this insurance, they want to be sure the duplex is in relatively decent condition. And so, they have a set of guidelines or set minimum standards they want the appraiser to compare the property to.

A few of the items FHA does not want to see include:

  • Missing handrails
  • Cracked or broken windows
  • Broken doors
  • Chipped or peeling paint
  • Evidence of wood destroying insects
  • Worn out floors
  • Damaged plaster or sheetrock in duplexes built after 1978
  • Improper attic or crawlspace access
  • Leaking roofs and/or missing shingles or tiles
  • Trip hazards
  • Minor plumbing leaks
  • Lack of a functional heat source in every room
  • A missing toilet, sink or shower

If a duplex meets these items as well as several other measures, FHA will agree to insure the duplex buyer’s loan. If it fails to, the seller may agree to make the repairs prior to closing, or the buyer may choose to pursue an FHA rehabilitation loan.

Minneapolis Duplex Sellers Drive Like Danica

said on April 16th, 2013 categorized under: Twin Cities Real Est

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Formula 1 CarIf last year’s Minneapolis duplex market and this year’s were race cars, 2013 would have just lapped 2012.

For the week ending April 6, there were 24 Minneapolis and St Paul duplex, triplex and fourplex owners who received and accepted offers on their properties. Of these, sixty-seven percent were traditional sellers who will pocket a check from the sale at closing, who last listed their properties for an average price of $171,726.

Last year, just 13 Twin Cities small multifamily property owners received and accepted offers. Less than half, at 46.2 percent, had equity in their investment properties. These sellers cashed out at an average sales price of $151,077.

As has been true all spring, there were fewer new listings, with just 27 new opportunities listed for sale.  Of these, 55.6 percent are being offered by traditional sellers. Last year, just 33 percent of the 30 new sellers did not have to receive a bank’s permission to sell.

Single family home sellers actually got a bit of a relief from tight market inventory when new listings increased 22.6 percent. Of course, pending sales kept close pace, up 17.1 percent.

For the month of March, the single family home market’s median sales price increased 18 percent to $176,840, while the average number of days on the market dropped to 109.

As long as inventory remains tight, sellers are in the driver’s seat.

Does Size Matter In Duplex Value?

said on April 15th, 2013 categorized under: Selling A Duplex

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duplex sizeWhen pricing a duplex to sell, the biggest mistake many Realtors who don’t specialize make is calculating value based on the number of finished square feet in the property.

That makes sense with a single family home. After all, if two properties have exactly the same number of bedrooms, bathrooms and garage stalls and are in similar condition, isn’t a bigger house worth more than a smaller one?

What about a duplex?

Well, if you have a big duplex with two one bedroom units in it that rent for $800 a month each, and a total of $19,200 a year, is it worth more than a slightly smaller duplex where each unit rents for $900 a month and a total of $21,600?

No.

Finished square feet only impact duplex value in two circumstances. First, if the size of the  either results in the owner being able to charge more rent, then the property generates more revenue and is therefore, worth more.

In the second case, if the duplex would appeal to an owner occupant and therefore, a larger sized unit might be perceived as more desirable.

In neither case, however, should the duplex’s value be determined the number of finished square feet by the average cost per square foot comparable properties in the area have sold for.

Minneapolis Duplex Sellers Catch On

said on April 10th, 2013 categorized under: Twin Cities Real Est

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minneapolis duplex sellers get a clueAfter countless elbow nudges and hints, is it possible Minneapolis and St Paul duplex owners have finally caught on and decided to sell?

For the week ending March 30, 2013, there’s a sliver of hope.

There were 32 new duplex, triplex, and fourplex listings that came on the market. More than half– 59 percent — were offered for sale by sellers with equity in their properties.

During the same week in 2012, there were five fewer new lisitngs. However, 62.3 percent of these were being sold by people who who did not need to receive permission from a bank in order to sell.

There were 19 Minneapolis duplex and small multifamily property owners who received and accepted offers during the last week of March in 2013. Of these, 52.6 percent were traditional sellers, resulting in a final average final list price of $176,789.

In 2012, there were 21 duplex sellers who accepted offers. Fifty-seven percent of these had equity in their property, resulting in an average sold price of $149,582.

There were 12.1 percent fewer new single family home lisitngs for the week ending March 30 than one year ago. Meanwhile, pending sales were up 12 percent. In all, inventory is down 29.6 percent from last year.

Let’s hope more sellers get a clue.

Comments Off on How Minneapolis Duplex Owners Could Help Pay For Vikings Stadium

minneapolis duplex owners support vikingsI know how the city of Minneapolis could pay for the Vikings new stadium.

They could simply fine all of the duplex owners in the city who currently don’t have rental licenses. After all, there are a lot of them.

The fine for operating a rental without a license in the city of Minneapolis is $500. This is in addition to any costs the owner might incur in the process of obtaining one.

The fee for the initial inspection required on a duplex that either hasn’t had a valid rental license in the last 12 months, or on a property being converted to a rental property is $1000. However, this fee can be reduced by $250 if the owner can present proof of attendance at a fundamentals of rental property management class.

This class is conducted by the Minneapolis Police Department and costs $30 to attend.

After the initial inspection fee, duplex owners are required to keep their licenses current. The annual license fee is $69 for the first rental dwelling unit, and $19 for each unit after that.

All rental licenses in the city of Minneapolis must be renewed prior to August 31.

And if not?

More skyboxes for the Vikings.

Equity Duplex Sellers Take Charge

said on April 2nd, 2013 categorized under: Twin Cities Real Est

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happy duplex sellerMinneapolis equity duplex sellers rule!

Or at least they did for the week ending March 23, 2013.

Of the 21 Minneapolis and St Paul duplex sellers who received and accepted purchase agreements, a staggering 90.5 percent were traditional sellers who did not need to consult with a bank in order to sell. As always, the more traditional sellers dominate the market, the higher the average price. This was certainly true here, as the average list price a duplex left the market at was $179,230.

Compare this to the same week in 2012, when just 35.3 percent of the 17 sellers walked away from closing with a check. More bank owned or negotiated sales resulted in a much lower average sales price of $116.947.

Traditional sellers didn’t fare quite as well in new listing contributions, however, bringing just 50 percent of the 30 new duplexes, triplexes and fourplexes to the market.

This number slightly trails the 51.6 percent market share of  the 31 properties that were new inventory for the same week in 2012.

The single family home market saw new listings increases in both new listings — at 2.8 percent for the week, and the number of pending sales, which rose 11.9 percent during the week. Overall inventory saw a decrease of 29.8 percent.

In February, the Median Sales Price for single family homes increased 15.5 percent to $160,000, while the average number of Days on Market dropped 22.2 percent to 112.

There is currently just a three month supply of inventory on the market; meaning if nobody decided to list their house or duplex, we would have absolutely nothing left to sell in just 90 days.

A balanced market is when there is a 5 to 6 month supply of property for sale.

Can you say “Sellers Market”?

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