Archive for July, 2016

Comments Off on Increase Your Duplex Cash Flow Through Short Term Rentals

airbnb logoOver the last few years, many of my investment property clients have told me they have dramatically increased the cash flow on their properties by furnishing a unit and using it as a short term rental through services such as Vacation Rental By Owner (VRBO) and Airbnb.

These services allow for short term rentals. In some cases it may be for a couple of days, and in others, several months. Because of the short term nature of the tenants stays, owners are able to charge a premium rent. In some cases, this is as much as double what a unit may rent for on a long term basis.

With the Superbowl and Final Four on the horizon, this may be especially appealing to Minneapolis duplex owners.

Of course, this is a relatively new way of running a rental property, which has cities across the nation scrambling to create regulations to make sure these properties are not exempt from the standards other types of investment properties are held to.

In San Francisco, for example, the city wants Airbnb landlords to display their city rental license number in all of their advertising as a way of insuring every owner is, in fact, running a legal unit.

In St Paul, the city council just created a committee to develop standards and rules and a way to collect taxes on the properties.

Minneapolis, however, doesn’t plan to add new rules because they haven’t experienced any problems with short term rental properties.

In Savage, there is a city ordinance which prohibits renting a property for less than 15 days which effectively bans short term rentals.

Even if your city has no restrictions on vacation rentals, you may encounter other hurdles. For example, if you purchase a condominium or townhouse where rentals are allowed, you may discover that applies only to long term tenancy.

The moral of the story is this. If you’re thinking of using your investment property for short term rentals, be sure to check with your city for the latest rules and restrictions.

 

 

 

 

 

Minneapolis Duplex Prices: We’re Almost There

said on July 20th, 2016 categorized under: Twin Cities Real Est

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In the past few days, you may have heard the median sales price for Twin Cities homes during June was all time high of $242,000; exceeding even the high water mark of 2006.

Lest we all panic in fear of 2006-like prices being followed by a value crash like 2007, media outlets were quick to report that these figures haven’t been adjusted for inflation. When they are, a $238,000 median sales price of 10 years ago is the equivalent of $285,000 in today’s market.

So what does this mean for duplex owners?

It depends on your point of view.

The median price for metro duplex sellers in June was $216,300. Ten years ago, not adjusted for inflation, the median price was $235,000.

This means there is still room for growth in terms of property values.

However, with just a 3.75 percent month inventory on the market, it is likely this will change. A balanced market is when there is a 5-6 month supply of properties available for sale. Less than that and it is a seller’s market. More than that and it’s a buyer’s market.

Of course, the current shortage of inventory may change when more and more duplex sellers believe it’s time to sell. Higher prices usually translate to more inventory.

If you’re thinking of selling, it would be a good idea to try and beat the crowd. Call or email me to see how you can benefit from this hot duplex market.

 

How to Get Others To Fund Your Retirement

said on July 14th, 2016 categorized under: Buying A Duplex

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Duplex or IRA?Let’s conduct an experiment.

Call your investment advisor and open an IRA or 401k. Then take $9000 out of your savings account and give it to him or her to invest.

When you get back to work, go to all of your co-workers and tell them you just opened this great IRA, and you’d like them to contribute to it.

What do you think the response will be?

My guess is either laughter or a rude remark.

Now, let’s change strategies.  Take that same $9000 and use it as a down payment on a $300,000 duplex. Move in, and ask your tenant to help fund your retirement by paying rent.

The tenant will agree to this.

Move out of the duplex a few years later and get another tenant for the other unit. Ask that tenant to contribute to your retirement by paying rent, and he or she will also agree.

After 30 years have passed, if your property never goes up in value, your duplex, which is the equivalent of your IRA, will have $300,000 in it. Your only contribution will have been the initial $9000 down payment.

Of course, this does not include any positive cash flow, tax savings, or potential appreciation you may have realized.

And what if you had put that $9000 in your IRA and never invested another dime? Using Warren Buffet’s 7 percent annual return guideline, after 30 years you would have $68,510.30.

Unless, of course, you convert your IRA to a self-directed IRA and use it to buy real estate, which is a whole other topic.

Seems to me real estate is still a pretty good investment.

Call me today to find out how you can start getting other people to fund your retirement.

How To Buy Two Minneapolis Duplexes With Just $19,500

said on July 11th, 2016 categorized under: Buying A Duplex

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Minneapolis Duplex for SaleLast week I heard something that seemed too good to be true.

A client told me he could buy a Minneapolis or St Paul duplex to live in using U.S. Bank’s awesome American Dream Loan with just 3 percent down. And then, after living there for more that a year, obtan an FHA loan to buy and move in to a second duplex, which would require just a 3.5 percent down payment.

Here’s what that means. Let’s say you put 3 percent down on a $300,000 duplex, or $9000. A little more than a year later, you buy a second duplex for $300,000, only this time due to FHA’s slightly down payment requirement of 3.5 percent, you pull $10,500 out of your pocket.

In all, you’ve aquired $600,000 worth of property for just $19,500. Even if those properties never go up in value, your tenants will pay them off for you. So after 30 years, you have $600,000 to retire with, and your only contribution was your down payment.

This seemed impossible. After all, while the American Dream loan is considered conventional financing, doesn’t charge mortgage insurance and has income restrictions, yet in many other ways it’s very much like an FHA loan.

So I double checked with Conor Hesch, who is one of the just 8 highly trained loan officers for U.S. Bank’s American Dream loan. Sure enough, it’s true.

If you’re a first time home buyer, this and today’s low interest rates represent a tremendous opportunity for you to change your financial future, and how you live in retirement.

Call or email me at kari@duplexchick.com to get started on owning your very own real estate portfolio.