Archive for March, 2014

Duplex Financing Even If You’ve Had A Foreclosure

said on March 18th, 2014 categorized under: Financing

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Drawing rainbow by a chalkIf you sold a house or duplex via a short sale, or even lost a property to foreclosure, you may already be able to buy again.

Even after the worst of credit circumstances, like bankruptcy and foreclosure, lenders do offer forgiveness and a chance to start again.

For example, if you’ve filed for bankruptcy, you may be eligible for an FHA insured loan in as little as two years following its discharge. If you sold a property via a short sale or foreclosure, you may qualify to buy another in as little as three years.

Of course, FHA mortgages are limited to owner occupants, and come with mortgage insurance premiums. So what about conventional loans?

If you’re had a Chapter 7 or 11 bankruptcy,  you may be able to finance a duplex purchase four years from the date of discharge. Those who filed Chapter 13, on the other hand, may be able to qualify for a loan just two years after the bankruptcy discharge.

The availability of conventional loans for short sale survivors varies. If you had a short sale two years ago, you may qualify with a 20 percent down payment. If you only have 10 percent saved to put down, your short sale had to be at least four years ago. And if your short sale was one of the early ones, taking place seven or more years ago, you may be able to put as little as 5 percent down for a conventional mortgage.

And finally, if you lost a home to foreclosure seven years ago you may now be able to qualify for a conventional mortgage.

Of course, there are other mitigating factors in your ability to qualify for a loan. Be sure to speak with a qualified loan officer so you can address your specific situation.

Minneapolis Duplex Market Gets Skinny

said on March 11th, 2014 categorized under: Twin Cities Real Est

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duplex sales get skinnyThe Minneapolis and St Paul duplex market went on a diet the week ending March 8, 2014.

The market was fat one year ago, when 22 duplex owners accepted offers on their properties during the week. Slightly less than half, at 45.5 percent, were not in a distressed situation. On average, they received a sales price of $154,070.

Compare that to the market during the same week this year, when just 12 duplex sellers came to terms on the sale of their duplexes. Of these, 41.7 percent have equity in their properties.  Perhaps it was because there was so little for buyers to sample, but on average, these properties final listing price was $219,233.

New listings for the first full week of March finally showed weighed in, with 25 new listings coming to the market. The vast majority of these duplex sellers, at 80 percent, have equity in their properties.

Last year, there were 19 new listings during the same week. Just 42.1 percent of those sellers did not have to consult with anyone at a bank to receive permission to sell.

As we continue to thaw out from a brutal winter, let’s hope the number of new duplex listings is less than anorexic.

Comments Off on Is Your Duplex Equity Earning All It Can?

Return on Investment DuplexIf you purchased a duplex any time since 2007, chances are it’s worth a lot more now than it was.

What this means is you now have equity in your property. In addition to your initial down payment and the amount of your loan you’ve paid off, you have the equity you’ve earned through appreciation.

This is great news. That’s how real estate investment is supposed to work. But it also means you should now be asking yourself whether you’re getting the maximum return on that equity.

If your ultimate goal is to increase your cash flow to the point where you can quit your day job, it might be time to look at moving your money into a larger property that generates more passive income for you.

For example, you may find you have enough equity for a down payment on a four, six or eight unit building. You will find the cost of each unit in the building (purchase price divided by number of units) to be much lower than that of a duplex. More importantly, however, you will also have more than just two sets of tenants paying you rent.

More tenants may equal bigger cash flow.

If you’d like to explore whether you’re maximizing your equity, give me a call or email me. Interest rates are low, and there are still plenty of terrific real estate investment opportunities to be found.

Does Your Realtor Look Like Pinnochio?

said on March 6th, 2014 categorized under: Selling A Duplex

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realtor lies about price of duplexIf you’ve ever asked your Realtor to list your duplex for more than the market says it’s worth, you’ve asked her to lie.

We all have a price we’d like to get for our properties. And, as it’s human nature, most of the time that’s a number that’s much higher than other people would like to pay for it.

And what someone is willing to pay for it is what it’s actually worth; not how much we’d like to have for it, how much the neighbors say it’s worth, or how much you have in to the property.

Even if you happened to find a buyer who agrees the value of your duplex is much higher than data suggests, unless that person can pay cash, the property must appraise for the agreed upon value. An appraiser is hired by the bank to give them an independent, objective opinion of value, which is formulated by comparing your duplex to others in the area sold for.

Sometimes, Realtors will agree to list a property at a higher price just to get the listing. Their hope is somewhere down the line the seller will agree to lower the price so it can sell. In the real estate industry, this is called “buying a listing”.

And while it might make you feel good as a seller, it will not cause your property to sell. In fact, data from the National Association of Realtors indicates properties listed for too much money ultimately sell for less than they would have had they been priced correctly from the start.

Don’t worry. Properties rarely sell for less than what they’re worth. The market recognizes a great deal, and buyers will rush to a duplex they perceive as undervalued. As a result, the price rises to where it should have been all along.

Duplex Sellers Look For Early Thaw

said on March 4th, 2014 categorized under: Twin Cities Real Est

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A row with colorful silk tulipsI might be hallucinating after a long, relentless winter, but it’s beginning to feel like spring in the Minneapolis and St Paul duplex market.

During the week ending March 1, 2014, 18 Twin Cities duplex sellers accepted offers on their properties.  While equity sellers were in the majority at 61 percent, their market share wasn’t nearly as sizable as its been in recent weeks. On average, the price these sellers last had their properties listed on the MLS for was $158,939.

One year ago during the same week, there were 15 people who sold their duplexes, triplexes and fourplexes. Just four, or 26.6 percent of those sellers actually left the closing with a check in their hands. On average, their properties sold for $143,658.

There were 22 new listings that came on the market during the week. At 82 percent, the vast majority of these properties are being sold by sellers who are current on their mortgage payments. This is up substantially from the 50 percent of last years 24 sellers who were not in distressed circumstances.

The weather forecast is promising more optimistic temperatures in the coming week. Let’s hope it’s right.

Comments Off on Should Your Duplex Be Fully Leased Before You Put It On The Market?

one hundred dollarsOne of the challenges many prospective duplex owners face when making the decision to sell is timing the end of tenants lease periods to coincide with the property being on the market.

Some sellers believe it’s best to have a property fully leased before putting it on the market. While this is absolutely the best way to sell most income-generating properties, it isn’t always the case for duplexes.

Why? The answer is simple.  Duplexes have a pool of buyers most large apartment buildings and retail shopping centers don’t: owner occupants.

These buyers are the very reason many duplexes sell for more than what might be worth strictly as an investment property. By en large, these folks hope to live in a desirable neighborhood, in a unit with amenities similar to what they might find in a home, but do so less expensively than if they purchased a single family residence.

And, even if these buyers don’t expect to move in right away, their lender may require them to. All FHA insured financing for duplexes mandate that an owner occupant must take up residency in the property within 60 days of closing.

So what happens if an owner occupant wants to purchase your duplex, but both units are leased beyond 60 days?

I have found that many times when a tenant realizes change is imminent, he or she is receptive to the idea of accepting a  financial incentive to move.

When faced with this situation, most sellers have preliminary conversations with their tenants. If one is receptive, terms are negotiated, with the understanding that payment and notice will be given the day the property closes escrow. In most cases, the tenant receives half  of the compensation at that time, with the balance placed in escrow and released upon successfully vacating the property on time.

Of course, if neither tenant is interested, the terms of the lease survives and the buyer who hopes to owner occupy must honor its terms and conditions until the lease ends.