Archive for July, 2013

Minneapolis Duplex Sales A Tough Puzzle

said on July 30th, 2013 categorized under: Twin Cities Real Est

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minneapolis duplex sales puzzleI’ve been puzzled by the Minneapolis and St Paul duplex weekly market statistics the past few weeks.

Why?

Well, the pieces don’t seem to make a complete picture.

For instance, 64.7 percent of the pended listing sales for the week ending July 20 belong to traditional sellers, compared with just 50 percent for the same week in 2012.

So the gradual diminishing supply of bank-owned or negotiated duplexes for sale should bode well for traditional sellers, right? After all, buyers purchase distressed properties at a discount. So it stands to reason that the more properties being sold by traditional sellers, the higher the prices.

Not over the past few weeks.

Last year’s average sold price for the third week in July was $217,871.  This year’s average off market list price, however, was $207,141. And the average list price is usually a little higher than the sold price. This makes the fourth consecutive week this has happened.

The only plausible explanation I can come up with is the increase in interest rates has caused buyers to either qualify for a reduced mortgage amount, or be unwilling to take lower returns on their investment thanks to the reduction in cash flow caused by the higher cost of borrowed money.

There were 31 new duplex, triplex and fourplex listings during the week.  At 67.7 percent, most of these belong to traditional sellers. One year ago there were 34 new listings; just 47 percent of which were brought to the market by equity sellers.

The single family home market saw pending sales up 6.2 percent for the week, and does not appear to be experiencing the same anomalies as the small multifamily market.  New listings were up 25.1 percent, while inventory continued to be down 14.3 percent.

The Median Sales Price for single family homes for June was $210,000; up 17.5 percent from June 2012.

As the summer marches on, let’s hope we can at least find the border pieces of whatever this puzzle is about.

Comments Off on Why You Don’t Need A Real Estate License To Be A Successful Duplex Investor

Laminated Card - Real Estate License for Agent ProfessionalSometimes new investors see obtaining their real estate license as the key to achieving success as a duplex and rental property investor.

Many think simply having a real estate license will not only allow them to pocket the commission an agent would have earned, but also, give them an inside track on all of the “good deals”.

The trouble is, most of those mysterious, best deals only agents allegedly have access to? They come from hours, days, weeks, months and years of networking, talking with prospective sellers, and in general, making real estate a full time career.

Realtors can’t buy every property we find. And for many of us in today’s difficult lending environment for self-employed people of all professions, financing isn’t even possible.

So what do we do when we stumble across a good deal we’d buy ourselves if we had the money? Pass it along to our best clients.

And for many of us, that’s our investors. In other words, it’s my loyal clients who get the first calls when I stumble upon a great deal; not investors who are part time agents looking to “save the commission” on my hard work.

If you’re thinking of getting started investing in real estate, it pays far more in opportunity to align yourself with a full time Realtor than you’ll ever save in commission.

Comments Off on Duplex Sales Slip As Prices And Delinquencies Rise

Slippery floor hazard symbolAccording to the National Association of Realtors (NAR), existing home sales slipped one percent in June from May’s three-year high.

While a dip of  1.2 percent to an annual rate of 5.08 million from what had been a pace of 5.27 million does not seem like much, the suspected reason behind it may have longer term implications.

NAR’s Chief Economist Lawrence Yun believes rising mortgage interest rates may be the cause of the slowdown.

However, thanks to pent-up demand, and a low supply of inventory, home and duplex prices continue to rise at an above-normal pace. In fact, the national median home price was up 13.5 percent from June 2012, to $214,200.

Fewer foreclosures and short-sales, which typically sell at a discounted price, were part of the price increase is well. In fact, they were responsible for just 15 percent of all existing home sales, down three percent from May.

This trend may not hold, as the data company Lender Processing Services (LPS), reported this morning that the national mortgage delinquency rate rose 9.9 percent from May to June. At 6.7 percent of all mortgages, it is the highest level since February. However, compared to June of 2012, it nonetheless represents a year-over-year decrease of 6.5 percent.

Minneapolis Duplex Sellers Make News

said on July 24th, 2013 categorized under: Twin Cities Real Est

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minneapolis duplexes for sale riseThere was big news in the Minneapolis and St Paul duplex markets the week ending July 13, 2013: there were twice as many new listings as there were one year ago.

Of the 42 new listings, 80.95 percent of them are being offered by traditional sellers. Last year, there were just 21 new listings, with 71 percent of these sellers having equity in their duplexes.

There were 22 duplexes, triplexes and fourplexes that sold during the week. Half of these involved a bank in the purchase negotiations. Last year there were 16 property sellers who accepted offers over the same period of time, and half of these were traditional sellers as well.

What’s curious is the average final list price for the week this year was $197,618; down slightly from last year’s average sold price of $199,038. Whether this is a result of higher interest rates dampening buyer’s enthusiasm, or increased inventory is yet to be seen.

The number of single family homes new to the market increased 25.1 percent for the week, while pending sales also rose 26.5 percent. Inventory, however, remains down 15.6 percent from last year’s numbers.

Stay tuned.

Minneapolis Duplex Sellers Make News

said on July 24th, 2013 categorized under: Twin Cities Real Est

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duplex newsThere was big news in the Minneapolis and St Paul duplex markets the week ending July 13, 2013: there were twice as many new listings as there were one year ago.

Of the 42 new listings, 80.95 percent of them are being offered by traditional sellers. Last year, there were just 21 new listings, with 71 percent of these sellers having equity in their duplexes.

There were 22 duplexes, triplexes and fourplexes that sold during the week. Half of these involved a bank in the purchase negotiations. Last year there were 16 property sellers who accepted offers over the same period of time, and half of these were traditional sellers as well.

What’s curious is the average final list price for the week this year was $197,618; down slightly from last year’s average sold price of $199,038. Whether this is a result of higher interest rates dampening buyer’s enthusiasm, or increased inventory is yet to be seen.

The number of single family homes new to the market increased 25.1 percent for the week, while pending sales also rose 26.5 percent. Inventory, however, remains down 15.6 percent from last year’s numbers.

Stay tuned.

Duplex Tenant Quality Looking Up

said on July 22nd, 2013 categorized under: Tenants

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tenant improvement

I’m sure it bothered you. (Sarcasm intended.)

Well, now you can say you have. CoreLogic’s recently released Renter Application Risk Report indicates the quality of potential renters has improved in the last year.

Apparently the folks at CoreLogic study these things. In the first quarter of the year, the index rose nationally to 104, up two from last year. They believe a value above 100 indicates improved credit quality among tenant applicants, which suggests there may be less risk of them defaulting on their rent.

Of course, not all parts of the country are equal. Their study found the tenants with the highest index scores, at 111, are in the Northeastern part of the country. And the worst? In the Midwest and South, where scores were 100 and 101.

The report also found that renter traffic has decreased in all property types, in spite of income gains of up to 1 percent made by tenants.

Here’s an interesting statistic. In properties that rent for more than $750, the rent-to-income ratios were as much as 22.9 percent. In other words, tenants are using just less than one-fourth of their monthly income for their rent payment.

This ratio may indicate tenants are stretching their budgets for nicer places to live.

Comments Off on How To Keep Tenants While You Think About Selling Your Duplex

Decision to sell a duplexSometimes duplex owners who are thinking about selling their properties are not only on the fence about selling, but also what to do with tenants who are either under month-to-month leases, or are about to expire.

After all, if both units are leased, doesn’t that eliminate the possibility of an owner occupant moving in?

Yes and no.

First, even if a prospective duplex seller hasn’t made her mind up as to whether or not to move forward, I suggest modifying the lease she uses to include language that in the event she chooses to sell, and a buyer wishes to occupy that tenant’s unit, the tenant will agree to do so given appropriate notice.

Of course, if you’re in a rent control neighborhood or city where such clauses are prohibited, or tenants must be compensated for relocation, you must abide by those standards.

A second option many duplex owners who are considering selling choose is to simply let the tenants continue renting on a month-to-month basis. Some owners feel this puts them in a precarious position; giving the tenant an opportunity to leave he might not otherwise seize. However, if the current happens to be at or below market rate, the fact is most tenants don’t seem too excited about the prospect of moving.

Both options are worth consideration, if you simply need more time when deciding to sell your duplex.

Duplex Sales Cause Fireworks

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

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duplex sales spark fireworksMinneapolis and St Paul duplex sellers set off fireworks during the week of the fourth of July, when a whopping 48 of them put their properties on the market.

Of these, 81.3 percent are being sold by people with equity in their investment properties.

To put in perspective how magnificent this truly is, compare it with the measly 13 new listings made available during the same week one year ago, when just 35 percent of the 20 new sellers would not have to include a conversation with a bank or asset manager in order to make the decision to sell.

There were 30 property sellers who accepted offers on their existing listings over the holiday. Strangely, while a majority were traditional sellers (56.7 percent), this number is lower than the market share we have recently become accustomed to seeing. Nonetheless, it’s well above the 35 percent of last year’s 20 sellers who left closing with cash.

Bizarrely, last year’s average sold price for the week was $202,107, which was higher than this year’s average final list price of $192,347.

The single family home sector saw increased listing activity, with the number of new listings for the week 14.3 percent higher than the same week last year. However, pending sales were still up, albeit by just 5.7 percent. Inventory is still 16.4 percent lower than one year ago.

Sellers, however, should still be encouraged by the explosive Median Sales Price for June, which was up 17.5 percent to $210,000 for the month.

Let’s hope there are enough fireworks left for the rest of the month.

Is This Duplex Owner In A Zone?

said on July 15th, 2013 categorized under: What Does That Mean?

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duplex zoningIf you’re thinking of converting your duplex to a triplex, or adding bedrooms to your existing investment property, what city department do you call?

Zoning? Building permits? Or, if you’re in a city that requires one, rental licensing?

This morning I had a duplex investor call with exactly that question. He was considering adding two bedrooms to his 1950’s built side by side duplex, and after speaking with many departments in the city, was more confused than ever.

And the fact is, the answer is pretty simple insofar as who he needs to talk to. The question is– is he changing the use, condition, or residents of the property?

First, the zoning of a property is restricted according to the kind of properties a city has decided should be in a given area. In other words, the use.

A fast food restaurant, for example, may not be appropriate in the middle of a residential block. And the way a local government creates those unifying standards is by creating mapped zones for different land uses. Zoning may also regulate things like the size of building you can put on a lot on and how tall it can be.

Zoning may also limit the number of units allowed on a given piece of land. This issue is quite common in Minneapolis, where a duplex owner may be required to bring the entire property up to current building code and standards when changing it from a duplex to, say,  a triplex, and regardless of the fact it was first constructed over 100 years ago.

Building permits and codes involve new or changes in construction to a property. The local government has created a set of rules in terms of public safety, health and general welfare. Those standards, however rigid or lax, are what must be adhered to during construction.

Rental permits or licenses involve the health, safety and welfare of tenants. Those may be similar to what’s required of a regular, single family home, like the presence of smoke and carbon monoxide detectors within 10 feet of any bedroom. Or, they may be quite different, like restricting the number of unrelated people who can legally live in the same unit.

Yes, there are times when some of the departments overlap, and others when their standards are quite different. Just remember to ask yourself: use, condition or residents?

Duplex Sales Pose A Riddle

said on July 9th, 2013 categorized under: Twin Cities Real Est

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duplex sales inspire questionsHey, I don’t make up the data on Minneapolis and St Paul duplex sales, I only interpret it. And today? Well, I’m befuddled.

During the week ending June 30, 2013, there were 28 duplex, triplex and fourplex owners who received and accepted purchase agreements. Of these, 71.4 percent were equity sellers, who’s final average list price was $156,401.

Here’s where it gets weird. Last year during the same week, there were 21 duplex sellers who accepted offers. And, exactly 71.4 percent of them had equity in their properties.

One would think, with such relative similarity in the data, last year’s average sales price, and this year’s would be comparable. And yet, last year’s average sales price of $186,096, far eclipses the average for the week this year.

Weirder still is just 50 percent of the 26 new listings were brought to the market last year were being offered by traditional sellers. A whopping 82.9 percent of this year’s 41 new listings are not underwater.

Then again, that may be the answer to the drop in average sales price. There were 26 new listings during the week last year. There were 41 this year. That’s a 57.6 percent increase. But certainly, 15 more new listings do not make a market.

The single family home market didn’t seem to share in the market peculiarities. New listings were up 22.8 percent, pending sales up 22.4 percent and inventory remained down 16.8 percent from last year.

For the month of June, the Twin Cities Median Sales Price increased 17.5 percent to $210,000. Days on Market dropped to just 75, and sellers received 97.5 percent of their Original List Price during the month.

I guess we’ll see what the next few weeks bring to determine whether there’s a pattern we should either be alarmed or excited about.

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