Archive for July, 2014

Duplex Sellers Revist The Past

said on July 28th, 2014 categorized under: Selling A Duplex

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HistoryI’ve recently had to blow the dust off a conversation I used to have with Minneapolis and St Paul duplex sellers long ago.

The topic? Capital gains tax and depreciation recapture.

It’s a conversation I haven’t had since the market crashed in 2007.

Duplex owners, even those who owner occupy, must treat the rental portions of their properties like a business. As such, that portion of the building may be subject to taxes when the property is sold.

Is there a way around this?

Yes. Sellers may choose to do what’s known as a 1031 or Starker Exchange.

This allows you to trade the proceeds of your sale into another property. This may be another multifamily property, or it could also be something like farmland, or a single family rental property anywhere in the country.

Many people understand the principle of the exchange, but make the mistake of putting the proceeds of the sale in their bank account with the intention of buying something else with that money.

Unfortunately, doing an exchange that way is a taxable event.

In order to conform with the IRS’s guidelines, the money from the sale of your rental property must be placed in the hands of a qualified intermediary. That entity holds the money, then releases it to the title company where you close on the sale of your replacement property.

As you go through the process of preparing to put your duplex on the market, it’s as important to have a conversation with your tax professional as it is to have your leases in order.

Not doing so could cost you a lot of money.

 

Minneapolis Duplex Sales Get Hot

said on July 24th, 2014 categorized under: Twin Cities Real Est

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photo of a burning match in a smoke on a black backgroundThe week ending July 12, 2014 saw both the temperature outside and the Minneapolis and St Paul duplex market heat up.

Eighty percent of the 15 sellers who accepted offers during the week have equity in their properties. This was reflected in a final average list price for the group of $238,193.

Last year, there were 20 sellers who received offers during the same week. Just 40 percent of these folks left their closings with a check.  As the majority of the sales involved bank owned or negotiated properties, the average sold price of $170,772, was understandably well below this year’s average.

There was good news for duplex buyers during the week, as traditional sellers listed 91.8 percent of the 49 new listings. This represents seven more new opportunities than the week last year, where just 78.6 percent of the properties were offered by equity sellers.

There were more single family home sellers during the week than one year ago as well, as the number of new listings increased 8.7 percent. In what may be an early indication of a return to a more balanced market, at the same time, the number of pending sales decreased 8.4 percent as well.

In all, the total amount of inventory on the market was up 7.8 percent over one year ago.

This should be good news to buyers who have been facing multiple offer situations all year long.

Duplex Sellers Get Energy Burst

said on July 15th, 2014 categorized under: Twin Cities Real Est

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exhausted duplex chickSometimes, the well runs dry. And after six years of consistently blogging about Minneapolis and St Paul duplexes, triplexes and fourplexes, in late May and June, mine did just that.

I apologize for that.

The good news is, the market  has changed. And after some time away to recharge, I am once again loaded with topics to write about.

But let’s start with the basics.

In the week ending July 5, 2014, 28 Twin Cities duplex, triplex and fourplex owners received and accepted offers on their properties. Of these, 88.9 percent are traditional sellers with equity in their properties. On average, these investment properties left the market at a list price of $236,455.

During the same week last year, 15 property sellers received and accepted offers. On the surface anyway, these folks appeared to fare better than this year’s sellers with an average sales price of $296,360.

While I haven’t yet tracked enough weeks to conclude this is a sign of a market shift, it is important to note that new listings for the week were up 18 percent over last year. An increase in inventory may be responsible for price stabilization, as more properties on the market reduce the amount buyer competition. Again, only time will tell if this is the case.

The single family home market also appears to be undergoing something of a shift. New Listings for the week were up 14.8 percent over the week in 2013. Pending Sales were up as well; rising 17.4 percent. Overall Inventory also increased– by 7.7 percent, which may suggest the start of a return to a more balanced market.

Next week’s report is sure to tell us more.