Archive for October, 2013
Comments Off on Duplex Foreclosures Make Halloween Comeback
The duplex market is like a horror movie.
After all, judging by all of the good news the media has featured about a recovering real estate market, you’d think the bad guy is dead, and we can all go on and celebrate.
Just like the villain who appears dead but really isn’t, the foreclosure crisis isn’t entirely over.
Last week, for example, Lender Processing Services, which is the database for approximately 70 percent of the mortgage market, announced there are still 4,594,000 mortgages in the U.S. going unpaid in the U.S.
Of these, 3,266,000 are 30 days or more past due but not yet in foreclosure.
While this sounds horrific, it’s down 32.18 percent from last September’s 5,640,000 unpaid mortgages. In all, the foreclosure rate was 12.63 percent lower than last September’s rate.
Florida, Mississippi, New Jersey, New York and Maine lead the way with the most non-current loans. North Dakota, South Dakota, Alaska, Montana and Wyoming had the lowest percentage of non-performing loans.
Foreclosures certainly aren’t the duplex market monster they once were, but we’re a long way from them truly being dead.
Comments Off on Duplex Sales Inch Forward
Things were better than the same time last year in the Minneapolis and St Paul duplex market; if only by inches.
For example, there were 26 duplex sellers who accepted offers, 84.6 percent of whom have equity in their properties. On average, their final list price was $226,106, a number which will likely be slightly smaller at closing.
Last year, there were 25 duplex owners who received offers, and 76 percent of them walked away from closing with a check in their pocket. The average price these properties sold for was $206,440.
Sellers continue to catch on that it’s a good time to sell, and 25 of them decided to do just that during the week. Of these, 76 percent were owners with equity. Last year, there were 26 new listings, 65.4 percent of them were not in distressed situations.
The single family home market also saw gains, but like the duplex, triplex and fourplex market, those gains were marginal.
While New Listings were up 21.7 percent, Pending Sales actually decreased by 2.7 percent. Ironically, overall inventory nonetheless was down 5.6 percent over last year.
Remember, while gains may not be by the mile or yard, inches forward are always better than reverse.
said on October 21st, 2013 categorized under: Financing
Comments Off on The First Thing You Should Do Before Buying A Duplex
When it comes to buying a duplex, it isn’t like the old days. And by old days I mean just 8 to 10 short years ago.
Looking back, people who remember the booming real estate market of the mid 2000’s often joke that anyone who had a pulse could qualify for a loan.
Today, things are quite different; a fact many duplex buyers are unaware of until it’s too late.
Back then, you needed a pre-approval letter from a lender or mortgage broker stating you could qualify for a loan. Getting one took a matter of a couple of hours, required a nominally low credit score, and some proof of income somewhere.
These days, you still need a pre-approval letter with any offer. However, getting one can take weeks, and require copious amounts of documentation like pay stubs and tax returns.
Because this now takes so long, many new investors make the mistake of waiting until they find a property they like before speaking with a lender. The trouble is, really good deals sell quickly. And by the time you get an approval letter, the property you wanted is already gone…leaving you to wonder if your life would have been different, if only you’d had a loan ready to go.
So the very best thing you can do before looking for a duplex to buy is talk to a loan officer.
If you need a referral for one, give me a call.
said on October 17th, 2013 categorized under: Home Repair
Comments Off on Save Money: Learn From My Mistakes
Many of the tips and suggestions I share here are the result of my own personal experience as a property owner. In doing so, my hope is you’ll either learn something new, or be reminded of something you had forgotten.
Unfortunately for me, learning never ends.
Over the summer, I decided to embark on some long-overdue remodeling of my own residence. And as part of that project, I wanted to use some flooring that’s something of a specialty item.
It turned out there was a manufacturer of this product in my area, so I spoke with the company directly. In the course of those conversations, it was suggested that since this type of flooring had some unique quirks in installing it correctly, I find a contractor who had experience to install it.
I didn’t know of anyone locally, so I asked the manufacturer for a recommendation.
The gentleman they sent initially seemed like a godsend. He said he was a licensed general contractor, and as I also needed to replace some windows, I thought I’d found my savior.
The first sign of trouble was when he demanded more than my down payment for the job to show up and work.
The second was him not showing up when he said he would.
The third was him screaming at me on the phone when I asked why he hadn’t shown up.
The fourth was shoddy workmanship.
The fifth was missing materials I’d already paid for.
And the sixth was his complete lack of responsiveness to all forms of communication.
I am largely a patient person. But six months into a project that should have taken at most, a month, I finally got angry.
So I contacted the Minnesota Department of Labor and Industry to see if this contractor did, in fact, have a license, and whether I had any recourse against this individual.
Turns out he never had a license.
In Minnesota, anyone who engages in more than one category of construction: Excavation, Masonry/Concrete, Carpentry, Interior Finishing, Exterior Finishing, Drywall and Plaster, Roofing and/or General Installation Specialties is required to have a contractor’s license. The only exception is Roofers, who are required to have a license, even if it’s the only thing they do.
The good news is the Department of Labor and Industry has an Enforcement Services division. Consumers can send all of their receipts, contracts, and communications to them. If they feel there is merit to the case, they will pursue the company or individual and levy fines of up to $10,000.
And while they’re in pursuit, I can either hire a lawyer or take this person to small claims court.
In all, it was an excellent reminder to always ask contractors for their license number, or to look them up on the state web site before you pay them a dime.
And if not? Well, maybe we can carpool to court.
1 Comment »
If you’re a Minneapolis or St Paul duplex seller, things are looking up. Way, way up.
For the week ending October 5, 2013, the 25 duplex sellers who accepted offers on their properties did so at an average final list price of $233,584.
This shattered the average sold price for duplex sellers the same week in 2012, who, on average. received $174,750 for the sale of their duplexes. Now, just 44 percent of these 25 sellers had equity in their properties compared with the 68 percent of this year’s sellers who could say the same.
Inventory continued its slow growth during the week, which is greatly needed. There were 34 new listings, the bulk of which (73.5 percent) were brought to the market by equity duplex sellers. Last year, just 51.7 percent of the 29 new duplex, triplex and fourplex listings did not involve bank negotiations.
The single family home market saw the number of new listings increase 17.9 percent , pending sales rose 2.4 percent, and total inventory was down 6.2 percent.
In September, the Twin Cities Median Sales Price was up 11.7 percent over last year to $195,000.
Let’s hope the good news continues.
1 Comment »
If recent good news about real estate values have made you think you’ve missed out. You haven’t. Here are 11 reasons it’s real estate is still a great investment.
- Leverage – Real estate is one of the few investments where you can use someone else’s money — namely, the bank’s, to pay for most of it.
- Pride of Ownership- It’s difficult to drive your family past your stock portfolio and point to it with pride. A nice duplex, however, with great curb appeal is an investment you can touch and be proud of.
- Tax-Free Growth – While you should never buy an investment property and count on appreciation, history suggests that it is reasonable to assume given enough time, it will be worth more than you paid for it. As this happens, you are not taxed on that appreciation until you sell the asset. And when you do, you may want to consider a 1031 exchange or contract for deed to lessen your tax liability.
- Tax-Free Cash Flow – Thanks to depreciation and mortgage interest deductions, your cash flow may not be taxed.
- Tax Write Offs Against Your Day Job – Check with your accountant, but there’s a reasonably good chance that your investment property will give you so many tax deductions that you can use it against your other income.
- More Tax Deductions – Owning an investment property is like owning a business. As such, paying your son to mow the lawn is tax deductible, as is driving past to check on the property. Not only does this help reduce your annual taxes, but it may help offset future capital gains taxes as well.
- Forced Retirement Savings – For most of us, it’s tough to have the discipline to consistently put extra money in an IRA or 401k. However, the money tenants contribute toward the mortgage of an appreciating asset is comparatively easy to save. After all, the bank requires payment, and the amount you pay off on your loan every month will help fund your retirement later.
- Diversification – Having investments in both real estate and the stock market helps you hedge against crashes in either market.
- Infation is Rent Friendly – One of the few investments you can make that will keep pace with inflation is real estate. After all, it keeps pace with market prices.
- Reliable Returns – If a property has a positive cash flow when you buy it, there’s no reason to think provided that you properly manage and maintain it, that it won’t for years and decades to come.
- Prices Are Still Depressed – While real estate values have begun to make a comeback, they are still well below the highs of 2005 and 2006. What this means for investors is smaller multifamily properties that previously were too expensive to produce much of a positive cash flow are now providing double digit returns.
Comments Off on Minneapolis Duplex Sales Warm For Fall
As we drift into fall and temperatures start dropping, the Minneapolis and St Paul duplex market continues to generate heat.
For the week ending September 29, 2013, there were 25 duplexes that went from active to pending listings on the Twin Cities’ MLS. Of these, 72 percent are being sold by sellers with equity. While the average final list price was $202,364, it’s important to note one was listed at $539,000, and five more had list prices greater than $300,000.
Last year, just 17 duplex sellers accepted offers during the week. Just 52.5 percent of these folks left closing with a check in their hand. On average, they sold for $227,931, with the high seller going for $435,000.
There were 34 new listings for the last week of September, 2013. While the majority (64.7 percent) belong to traditional sellers, this is not too far ahead of the 63.9 percent market share of last year’s 34 new sellers.
The single family home market continued along at a brisk pace for the week, with pending sales up 12.2 percent. While inventory grew 10.3 percent for the week, overall it remains 5.9 percent lower than last year.
As we creep toward winter, let’s hope all of the good news continues.
Comments Off on Why I Won’t Call If I Find A Good Deal
If I had a dollar for every time a prospective duplex buyer or investor told me to call them if I found a property that’s “a good deal”, I’d be retired.
But I won’t call.
Well, there’s a couple of reasons.
This conversation usually happens when I first meet a prospective client. And that investor may not be at a point where she’s ready to buy something immediately or commit to a Realtor. As a result, if I bring them a duplex I perceive to be a terrific value, she might not be ready to buy just yet.
Part of the reason she may not be ready to take that step may be financing. Perhaps she hasn’t sat down with a lender just yet, and fully intends to once she identifies a property. But there is a problem in this thinking. Most sellers won’t even look at an offer without seeing proof a buyer can afford it. And that proof requires either a pre-approval letter from a lender (which can take several days to get) or proof that she has the cash.
I have a number of buyers at any given time looking for a good deal. And the ones who have demonstrated to me their ability to get financing on a moments notice or pay cash for a property are the ones I call first. After all, their financing in place, and I know they can move to acquire the property.
Finally, I will not call someone who wants to hear from me only when I find a good deal because I don’t know how many other Realtors they’ve said the same thing to. When I call, I may discover that buyer has just purchased an investment property with another agent or, worse yet, that Realtor has called them about the same duplex and they are in the process of writing an offer.
Realtors work entirely on commission. We are not paid by the company we have our real estate license with (like Keller Williams). Instead, we are compensated only when we locate a property our clients then purchase. As a result, it only makes sense that we spend our time and energy on buyers who can truly afford a property.
It isn’t that I won’t call someone with a good deal. I absolutely will; if I know that investor is not only truly ready, but willing and able to perform.
Comments Off on Government Shutdown Could Delay Duplex Loans
Sometimes, it seems like a federal government shutdown doesn’t impact our lives. After all, we’re still getting the mail, and most of us are still going to work every day.
However, if you’re in the process of buying or refinancing a duplex or single family home, the government shutdown may actually stop your plans.
When you apply for a duplex loan, the lender asks for a copy of the last two years of your tax returns. To make sure you’re telling the truth, they use something called a 4506T, which allows them to verify with the IRS that the tax returns you provided match the ones you gave the government.
Thanks to the government shutdown, the IRS is closed. And following all of the mortgage fraud committed during the real estate boom, the lenders aren’t likely to just take you at your word.
So, until the IRS opens back up, you may not be able to get a loan.
Call your Congressman. No matter what side of the debate you’re on, sooner or later, this will affect us all.
Comments Off on Duplex Sales Explode
The final average, off-market list price for a Minneapolis or St Paul duplex the week ending September 21, 2013, was $212,871.
Compare this to the average sold price from the same week last year of $128,318.
Granted, listing prices are rarely the same as selling prices. Most of the time, the actual amount a duplex sells for is less than the seller was asking.
Nonetheless, considering sellers in the Twin Cities real estate market are currently averaging sold prices of 97 percent of what they were asking, so it’s unlikely the sold prices will change much.
Of the duplex sellers who accepted offers during the week, 73.7 percent have equity in their properties. Four of these properties had list prices above $300,000, which is something we haven’t seen too much of the past few years. For the week last year, there were no listings above $300,000, and just 41.2 percent of those who sold were traditional sellers.
Duplex owners who’ve been considering selling have clearly begun to test the waters, as there were 27 new listings for the week. A whopping 81.5 percent of these new listings belonged to traditional sellers. Last year, the week saw just 16 new duplex investment opportunities come on the market; 62.5 percent of which belonged to owners with equity.
Numbers from the single family home market for the week suggest there are changes in the wind. While new listings were up 13.3 percent over last year, pending sales were actually down 5.5 percent. Whether this is an isolated incident or a trend is yet to be seen.
In all, it’s good news for duplex sellers; who’ve been waiting a long time to hear it.