Archive for April, 2014
Comments Off on Duplex Sellers Finally Make An Appearance
Apparently, many Minneapolis and St Paul duplex owners have decided it’s time to sell.
There were 37 new duplex, triplex, and fourplex listings that came on the market during the week ending April 19, 2014. The vast majority, at 86.5 percent, belonged to traditional sellers.
The total number of new listings for the week far outpaces last year’s 26 during the same stretch. Of these, 76.9 percent were offered for sale by owners with equity in their properties.
What’s interesting about this surge in new listings is there wasn’t a comparable surge in the number of sellers who accepted purchase agreements during the week. Just 16 sellers accepted offers for the week; 75 percent of those folks will walk away from the closing with a check.
These sellers averaged an off market final list price of $249,932. While this is substantially higher than the average sold price of $212,008 last year, it’s important to note one property in the average was listed at $699,900. This boosted the average by about $10,000.
These 16 sellers represent a 38.5 percent decline in the number of pended small multifamily transactions over last year. There were 26 sellers who sold during that week, 69.2 percent of which took money home from closing.
Meanwhile, the single family home market saw a 2.8 percent decline in the number of New Listings. However, Pending Sales were also down 5.3 percent.
Granted, this year weather may be playing a role in the apparent decline in transactions. When we see more traditional spring weather, we may get a better read.
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By now, everybody knows it’s a great time to buy or sell a duplex.
That’s because interest rates are low and rents are high.
But what happens if interest rates rise even 1 percent, as they have over the last year?
Rates would still be very good. However, it’s important to remember one percent is the equivalent of several thousand dollars a year.
For example, on a $300,000 mortgage, payments would be $3000 higher for every year of the loan.
And for many duplex buyers, that amount is the difference between either an acceptable return on their investment, or affordability.
For duplex sellers, that means there may be less demand for their properties; for no other reason than people can no longer afford it.
Comments Off on It’s Spring For Minneapolis Duplex Sellers
Like the first spring day after a long winter, the Minneapolis duplex market inspired hope the week ending April 12, 2014.
For the first time in years, 100 percent of the sellers who accepted offers had equity in their properties. On average, these 15 properties went off the market at an average final list price of $250,860. This number is likely to be somewhat smaller when the prices the properties sold for are ultimately tallied.
Last year during the same week, 17 duplex, triplex and fourplex owners accepted offers. Just 41.2 percent of these sellers were not in a distressed situation. More bank involvement in sales, of course, resulted in a lower average sold price, at $202,753.
Spring was in the air for new listings as well, with 30 new properties coming on the market. A whopping 93 percent of these investment property owners are traditional sellers.
This number of new listings for the week was actually up 25 percent from the same week last year, when just 24 sellers put properties on the market. Just half of these sellers had equity in their properties.
The single family home market saw a jump in new listings, up 19.9 percent over last year. Pending sales also rose slightly, up 1.8 percent. Thanks to a year-long lack of inventory, however, the total number of homes available was actually down 2.4 percent from one year ago.
In March, the Median Sales Price for a Twin Cities home was up 7.6 percent to $190,000. Sellers continue to get 95 percent of their Original List Price, as there is still just a 3.1 month supply of inventory available.
In other words, spring looks to continue to be a Seller’s Market, which is good news if you’ve been considering making the move.
Comments Off on How Hiring Just Any Realtor To Sell Your Duplex Could Cost You A Lot
This morning, a duplex seller shared with me the “comps” another Realtor had given him for his duplex.
“Comps” are the comparable properties that have sold in the area in the last few months, which help establish the market value of the property.
In his cover letter, the Realtor suggested the seller compare the amount of finished square feet in each property to his own.
And in that note, he revealed how very little he knows about duplexes.
Duplexes are priced a couple of different ways. There are different methods because there are different kinds of duplexes.
Many duplexes always have been and always will be completely occupied by tenants. As such, their worth is dictated almost entirely by the amount of rent they generate every year, their expenses, and the remaining cash flow.
Other duplexes are one hundred percent owner occupied. Since the owner doesn’t usually pay rent, and often makes improvements to the property beyond the scope of what most landlords provide tenants, pricing is a bit more difficult and requires more art than science.
To determine the value of these properties, a Realtor will use a combined approach that includes both the amount of rent a tenant pays, and the ballpark value of single family homes that are comparable to the space in the property the owner occupies.
Neither of these valuation methods use the amount of square feet in a unit; except for how it contributes to the amount of rent the property generates.
In the case of my seller, calculating his duplex’s value according to the amount of square feet actually decreased his value by tens of thousands of dollars!
This again underscores the importance of hiring a Realtor who specializes in duplexes when it’s time to sell. Not doing so may cost you a fortune.
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Late last month the real estate information company RealtyTrac published a report detailing the best and worst markets in the nation for rental returns.
Their measure of gross rental yields was determined using the median sales price for over 1500 counties in the nation, and the average fair market rent for a three bedroom home for 2014 as determined by the Department of Housing and Urban Development (HUD).
That fair market rent was multiplied by 12 months, then that total was divided by the media sales price in each county.
Wayne County, Michigan– home to Detroit, topped the nation for highest rental returns with an estimated yield of 30 percent.
Of course, the higher the risk, the higher the reward. And Detroit’s lingering economic doldrums may make it difficult to fill rental vacancies.
New York County, New York (home to New York city) had the worst rate of return in the nation at just three percent.
In the Twin Cities, the seven county metro area seemed to hover at yields of 7-8 percent.
That’s still a pretty good return compared to a savings account.
Comments Off on Minneapolis Duplex Market Reverses Itself
OK, I’m officially going to call it a blip.
For months now Twin Cities duplex sellers with equity in their properties have dominated every category of duplex sales.
For the week ending April 5, 2014, however, they slipped ever so slightly.
Last year, traditional duplex sellers had 59.1 of the sales that pended the first week in April. This year, they finished with 57.9 percent. Granted, it’s a small decline, but it is nonetheless a reversal of the trend of the last 12-18 months.
As always, a higher percentage of bank owned or mediated sales leads to lower sales prices. This held true in early April as well, when the average off-market list price was $163,658; down slightly from the week last year’s average sales price of $164,508.
Before we all worry that the sky is falling, it’s important to note there is absolutely no statistical evidence of an increase of foreclosure activity. It is more likely a simple anomaly we won’t see again.
Evidence of this may be found in the 82.14 percent of the new listings for the week that are being offered for sale by traditional sellers. They, coupled with newly listed distressed properties, brought 28 new duplexes to the market. This was down one from last year’s 29; 58.6 percent of which were listed by equity sellers.
The single family home market finally saw a slight increase in new listings; up 6.1 percent from the same week in 2013. However, it’s important to note that pending sales decreased as well, dropping 7.1 percent.
In March, the Median Sales Price for Twin Cities homes was $190,000. This was a 7.6 percent increase over last year. On average, listings spend just 95 days on the market, and sell for 95 percent of what the price they were put on the market for.
In other words, in spite of our statistical blip, it remains a seller’s market.
Comments Off on Some Realtors Are Liars
If you want me to tell you what your duplex is worth, I will tell you the truth.
If you want a Realtor to tell you what you wish your duplex was worth, it isn’t me.
But there are plenty of agents who will.
The market determines the value of your duplex. Not you. Not me.
It isn’t worth the total of what you have in to it. Or what your friends tell you that you should be able to get based on what they’ve seen for sale in the neighborhood.
Single family home sales have little to nothing to do with duplex values.
And any Realtor who goes along with your hopes or friends opinions of value without market data to back it up is lying to you.
In the real estate industry, what they’re doing is called “buying a listing”. They’re telling you what you want to hear, knowing full well that at some point, you will finally realize through either a lack of showings or a sale that the property is simply overpriced.
And they hope at that point, you’ll see the light and agree to lower your price.
There wouldn’t be anything wrong with this if it weren’t for statistics from the National Association of Realtors that sellers who price their properties correctly from the start ultimately net more money thanks to immediate influx of buyers waiting for inventory to come on the market.
When a property is for sale for an abnormally long period of time, it leads buyers to believe there’s something wrong with it.
And, just like new technology at an electronics store, they will wait until it goes on sale to either look at it or buy it.
Ironically, had that new gadget come on the market near their price range to begin with, they would have looked at it and perhaps, even found a way to pay a little more. This is especially true if it was the only one on the market, with multiple buyers vying for it.
So, in the end, the Realtor who agreed to your price not only lacked integrity, but ultimately cost you money.
And wasn’t money the reason you listed with him in the first place?
Comments Off on Duplex Chick Improves Property Search
You may not have notice, because it’s a behind the scenes technology change. But, Duplex Chick recently got a new engine behind its Property Search link.
In addition to being able to customize and save a search for exactly the kind of property you’re looking for, you can sign up to automatically be notified when new properties that meet your criteria come on the market.
If you’re not sure where you’d like to live, you can also customize your search to find neighborhoods by school ratings, commute times, and crime rates.
Of course, just like always, if you find a property you’d like to see, give me a call or send an email to firstname.lastname@example.org. I’d be happy to arrange a showing for you.
Comments Off on Twin Cities Duplex Sellers Prefer High Rent To High Prices
In Minneapolis, it’s a duplex sellers market. The irony is, nobody seems to want to sell. They’re too busy raking in the cash from rent.
For example, consider the week ending March 29, 2014. There were just 17 new listings that week; 88.2 percent of which are being sold by people with equity in their properties.
During the same week in 2013, there were a whopping 32 new listings. Traditional sellers contributed 59.3 percent of those new listings to last spring’s market.
Pending sales for the week took a slight dip from last year, with 17 sellers accepting offers; down two from last year. Of this year’s pending sales, 82.3 percent belong to traditional sellers. On average, these properties were listed at a price of $202,623. This is up from last year’s sold price of $178,615.
The single family home market saw New Listings jump 18.4 percent over the last week in March of 2013. Meanwhile, Pending Sales declined 5.6 percent. However, thanks to a year of listing scarcity, overall inventory remained 5.5 percent below last year.
Twin Cities duplex sellers tell me they’re happy with low vacancy rates and high rent. However, high rent also inevitably leads tenants to discover sometimes buying a house is more affordable than renting.
Comments Off on Sellers Trade Duplexes For Malls
One of the many reasons there aren’t many duplexes, triplexes or apartment buildings for buyers to purchase is a lack of places for would-be sellers to move their money.
Thanks to so many investment property owners being upside down for so many years on their properties, it’s been a long time since we’ve talked about what’s known as a “like kind”, 1031 or Starker Exchange.
Simply put, a 1031 Exchange is a way for property owners to defer capital gains tax by adhering to a set of relatively easy IRS rules and reinvesting in another property.
Many duplex sellers have misconceptions about this process. Some believe they must buy a building with an equal number of units to the one they’re selling. Other think if they’re selling a multifamily property, they must replace it with a multifamily property.
Seeing what they believe are few opportunities to purchase property, these people simply choose not to sell.
The facts are, however, there are plenty of great properties to invest in; if they just know the rules.
First, “like kind” does not mean multifamily housing must be exchanged for multifamily housing. A duplex seller, for example, can reinvest her profits in a retail center, a mixed-use building, an office building, industrial warehouse or, even land.
And since this exchange is possible, the number of units one exchanges for is also irrelevant.
While the economy is still in recovery mode, it’s important to remember it isn’t just the housing rental market that’s improving. Other sectors are starting to get on their feet as well, and the return on your investment may be greater, thanks to less competition for the “good deals”.
If you need a referral to a Realtor to help you explore other investment opportunities, I’d be glad to guide you to a competent professional.