Comments Off on Minneapolis Duplexes Continue To Be Scarce
As of today, there are 209 active duplex, triplex and fourplex properties actively listed on the Minneapolis and St Paul MLS within the seven county metro area.
To put things in perspective, in the peak years of the market, there was at or above 1000 properties available for sale.
In other words, there is a severe shortage of investment properties available for buyers.
This shortage may be the result of several factors; high rents, low vacancy rates and the sudden, dramatic absence of distressed properties on the market.
In fact, for the week ending February 14, 2015, 100 percent of the 13 listed duplexes that either sold or whose sellers accepted offers did not involve negotiations with a bank whatsoever. This resulted in an average off-market list price of $210,823.
Last year, 16 properties went off the market during the same week. Just 62.5 percent of these belonged to traditional equity sellers. Oddly, the average sold price for these properties was $216,050; higher than this year’s pended price. It’s probably simply a result of the collection of properties that were available each week as opposed to an actual market reflection.
While the difference between the number of new listings coming on the mark was just one; 17 last year and 16 this, it’s interesting to note that 87.5 of this year’s are being sold by traditional sellers. Last year, 76.5 percent were, meaning banks were bigger contributors to inventory.
Over in the single family market, the number of New Listings was up 12.1 percent over last year. Pending sales were also up 15.6 percent. This meant the total amount of available inventory was down 3.7 percent.
If you’re thinking of selling, give me a call. You may not have a great deal of competition.
Comments Off on How To Lose Money Selling A Minneapolis Duplex
As the Minneapolis and St Paul duplex market heats up, some sellers may chose to be penny wise and pound foolish and sell their duplex themselves.
In a seller’s market, this appears as if it’s a smart idea. After all, if duplexes are in such high demand, some sellers think, why not save the commission?
On the surface, it seems like a prudent move. Six or seven percent of a sales price is a lot of money. And even if the seller pays a Realtor who brings a successful buyer, the seller still saves about 3 percent.
Here’s the irony. According to data from the National Association of Realtors, in 2014 the average For Sale By Owner property had an average sale price 13 percent lower than agent assisted home sales.
In 2014, the median sales price for a Realtor-assisted duplex sale on the local Multiple Listing Service (which includes the seven county metro area, as well as listings as far north as Duluth and south as Rochester and Mankato) was $168,000. In other words, half of the sold small investment properties sold for more, half for less.
Applying the same national statistic to our local market means, on average, duplex, triplex and four unit building sellers who chose not to employ the expertise of a Realtor realized a median sales price of $146,160. That figure is a whopping $21,840 less than the agent average.
Sure, that 13 percent includes a commission for both the listing agent and selling agent which probably totaled somewhere between 5 and 7 percent. However, as most For Sale By Owners are willing to pay a Realtor whose client buys the property somewhere around 3 percent of the sales price, the difference between selling on your own and with an agent is still 10 percent.
In other words, in an effort to save the 3 percent listing commission ($168,000 x .03) of $5040, the duplex owner who sold without an agent lost $16,800.
Sometimes trying to save a little really can end up costing a lot.
Comments Off on Minneapolis Duplex Sale May Cause Taxes
For the first time in years, many Minneapolis and St Paul duplex owners are asking themselves, “What are my tax consequences if I decide to sell?”
After all, an investment property’s increase in value may trigger capital gains tax, not to mention the challenge of depreciation recapture.
While everyone’s situation is different, and a consultation with your accountant is a critical step before selling, there are some basic options duplex sellers can take to help reduce potential tax obligations.
- Selling On A Contract For Deed (Land Contract) – In this case, the duplex seller basically acts as the bank for the buyer. Typically, the buyer gives the seller a down payment, who then carries the loan for a pre-determined amount of time (usually 2-5 years) at a higher interest rate than banks are charging. At the end of that time, the buyer agrees to refinance, paying the seller off in full. This helps duplex sellers spread their tax liability over several years and strategize on how best to reduce their tax obligations.
- 1031 or Starker Exchange – This allows for a property owner to sell one property and exchange it for another, provided the owner adheres to very specific and strict guidelines. The qualifying property may be another single family home or duplex, something larger, an oil well or the property owner may even exchange into something called an UPREIT, in which the owner joins forces with other investors, jointly owning other properties.
It’s important to note the duplex seller is only taxed on the cash they touch. Therefore, it’s crucial to know all of your options before you decide to sell.