Duplex Chick

Comments Off on Help The Twin Cites Send Truckloads of Help To Houston!

The Keller Williams Realty Integrity offices in the Twin Cities are working together to send a truckload of supplies to help the people of Houston.

Please bring donations to any of the market centers listed by Friday, September 8. We will load them into semis and deliver them.

Comments Off on Buying A Minneapolis Duplex On A Contract For Deed: The Good, Bad and The Ugly

Every now and then, duplex buyers tell me they want to purchase a property with a contract for deed.

A contract for deed is an alternative means of financing in which the seller acts as the lender for the duplex purchase rather than a bank. The buyer makes monthly payments to the seller and takes immediate possession of the property.

Terms of the loan are negotiable. The seller and buyer agree on an amortization schedule and interest rate.

One common misunderstanding is that a seller must hold a contract for deed for 30 years. Nothing could be further from the truth. Most contracts for deed are for five years or less, with a balloon payment. In other words, when the balloon payment is due, the buyer will need to refinance.

There are advantages and disadvantages to a contract for deed for both a buyer and a seller. In this post, let’s look at it from the buyer’s point of view.

Pros

• Low down payment. Some sellers require little to no money down. (In my career, however, I have found this to be the exception.)
• Homesteading. If a buyer intends to owner occupy a duplex, he or she can qualify for reduced property tax and other property tax benefits.
• Mortgage interest deduction. As the owner, a buyer can qualify for the mortgage interest and real estate tax deductions of their income taxes.
• Easier to qualify. A seller may decide to give a buyer with a less than perfect credit score a chance to buy, or not care about the buyer having a slightly higher debt to income ratio.
• May not appear on your credit report. Unless the seller reports the terms of your contract and repayment history to the credit bureaus, which may help you qualify for a traditional mortgage on other properties.
• May appear on your credit report. If you have credit issues and the seller does report payment history to the credit bureaus, it may help improve credit scores.
• Lower transaction costs. Seller financing does not have loan origination fees or loan application fees.  While it is a very good idea to use a title company to close the transaction, some of their costs may be reduced also.

Cons

• Higher down payment. Sellers typically want a down payment above and beyond their costs of selling. Agents commissions and title fees can be as high as 7-10 percent. As a seller may want at least a 10 percent down payment. Other sellers will only carry a contract for deed if the risk is low. To them, this may mean a 40 or even 50 percent down payment.e
• Faster foreclosure. If the buyer misses two payments or defaults for other reasons, the seller doesn’t need to go to court. He or she simply cancels the contract and takes possession of the property.
• Balloon payments. When it’s time to refinance, interest rates for traditional mortgages may be higher, or the buyer’s credit score may prevent him or her from qualifying for a loan. If the buyer is unable to refinance, the seller may opt to cancel the contract with a 60-day notice, and keep any down payment, equity, or principal that has been paid off.
• Repair and maintenance.  While negotiable, the seller may require the buyer to be responsible for keeping the property in good repair.
• Seller retains the title. In other words, the seller can put a mortgage or a lien on the property unless you recorded the contract with the county.
• Unfavorable terms. Loans through banks are regulated to protect consumers. Sellers are not required to have the same standards and may offer terms that favor them.
• Seller may sell the contract. Sometimes sellers have a financial need that causes them to want out of the contract for deed before it balloons. In this case, they may choose to sell the loan to another investor who may be less forgiving. The buyer, on the other hand, most likely will not have the option to sell his own interest in the property.
• Property taxes and insurance are not escrowed. Most buyers using traditional financing choose to have a portion of their monthly mortgage payments escrowed to pay property taxes and insurance.

A contract for deed can be a wonderful way to acquire property if you can find a seller willing to carry the loan. There are advantages to the seller as well, and I will cover them in my next blog.

Comments Off on Why The Fed’s Rate Hike Doesn’t Affect Duplex Mortgages

Last week the Federal Reserve raised interest rates.

Believe it or not, this does not necessarily mean interest rates on duplex mortgages will necessarily follow suit.

When the Fed raises interest rates, it is actually raising the amount banks charge to lend each other money overnight so that they meet their minimum required reserves.

Banks typically pass this increased cost on by raising interest rates they charge consumers for “short term” loans.

So when Federal Reserve Chair Janet Yellen announces a rate hike, why does everybody panic?

Here are four ways an announced rate hike may impact your cash flow as a duplex investor:

1. Home Equity Loans and Lines of Credit – Many investors use these loans to aquire or improve rental property. Banks consider this short-term debt. Therefore, these loans are most often have variable interest rates, which the bank ties to the interest it is charged to borrow short-term money. Of course, the rate they charge consumers is always higher.
2. Credit Card Rate Hikes – If you use a credit card to purchase materials for your rental property and don’t pay the loan off every month, you will likely see a spike in the amount of interest you pay.
3. Stuff Costs More – Of course, if businesses have to pay banks more to borrow money, they have to increase revenue in order to remain profitable. They do this by raising prices. This may cause consumers to spend less and to some extent, change their ability to pay rent.
4. Jobs and Pay- If businesses are earning less, and people can afford less, the economy slows. This gradually leads to fewer people being hired, and those with jobs, are less likely to receive raises.

Of course, the Federal Reserve raises interest rates in order to slow inflation- in which prices rise rapidly.

Comments Off on Do You Save Money When You Call A Duplex For Sale Sign?

When you call the number on a “For Sale” sign in front of a Minneapolis duplex and use the listing agent as your Realtor, can you save money?

Many people are under the belief that because that agent is getting a commission for both the buyer and sellers in that case, if the buyer asks, the agent will give them some of the commission.

That may be true with some Realtors, but not me. Here’s why.

When the seller signs a contract to put their duplex on the market, they are doing so with a real estate brokerage. A real estate brokerage is a company like Keller Williams Realty Integrity Edina.

That contract, and the terms the brokerage are willing to pay to any other real estate brokerage, is published on the multiple listing service. If that number will be reduced. if either the listing agent of the buyer and sellers agent have both sides of the transaction, that information needs to be published on the MLS, as it puts Realtors from other companies, and their buyers, at a disadvantage.

Second, the contract signed between the seller and the brokerage is between those two parties.  Payment comes from the seller’s proceeds from the sale. In other words, it comes from their equity.

Buyers are not entitled to money from a contract they are not involved in.

Finally, and perhaps most obviously, why should a Realtor, brokerage or seller give a complete stranger a portion of their pay or equity?

Comments Off on How to Get Others To Fund Your Retirement

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.

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

Last 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.

Comments Off on Foreclosure or Short Sale in Your Past? You May Be Able to Buy A Duplex

House wrapped with Foreclosure tape front view

If you lost your home to foreclosure or had no alternative but to do a short sale during the housing crisis that began in 2007, there’s good news. You may be eligible to buy again.

Each type of loan has a waiting period following a financial event that prevents a duplex or home buyer from securing financing prior to the end of that time.

• Bankruptcy – Chapter 7 – To obtain an FHA or VA loan, you must wait two years from the date of the discharge. To obtain a conventional loan, you must wait four years.
• Bankruptcy – Chapter 13 –With permission from the court, you must wait one year for an FHA or VA loan, and two years for a conventional mortgage.
• Foreclosure – Your clock on this starts ticking on the date the deed transferred, not the date of the Sherriff’s Sale. For an FHA loan you must wait three years, the VA requires a waiting period of two years, and you must wait seven years.
• Deed in Lieu – Three years after you transferred your property to the bank, you may obtain an FHA loan. The VA requires a bit less time, at two years. And a conventional loan requires a four year wait.
• Short Sale – From the day you closed on the sale of your property, you must wait three years to obtain an FHA loan, two years for a VA loan, and 4 years to qualify for a conventional loan.

As you begin to consider the possibilities, you may consider that for many, buying and living in one unit of a duplex is a way to hedge against financial uncertainty. Income from the tenants helps offset not only the cost of home ownership, but usually, also reduces the owner occupants cost of living as well.

More often than not, the owner who lives in his or her duplex ends up paying less in “rent” than he or she had when renting from another landlord.

Comments Off on Minnneapolis Duplex Buyers and Sellers Near Their Limits

If you’re thinking of buying to owner occupy or selling a Minneapolis or St Paul duplex, you may think you can pay or ask any price in the world. After all, with an FHA insured loan, all a buyer needs is 3.5 percent down, right?

Not so fast.

Here’s a conversation we haven’t had in a long time.

FHA has limits to the size of the mortgage insurance they’ll provide.

While these numbers vary by where the property is located, it’s important to remember that there are caps.

In the Twin Cities seven county metro area, for example, FHA loan limits are:

• Single Family – $326,600
• Duplex – $418,100
• Triplex – $505,400
• Fourplex – $628,050

While these numbers don’t limit the amount you can spend, they do restrict the amount of the FHA insured mortgage you can get.  You are welcome to come up with a bigger down payment to make up the difference.

What do I mean? Well, If you write an offer on a duplex for $450,000, your minimum down payment is 3.5% or $15,750. The purchase price of $450,000 – your down payment of $15,750 leaves you with $434,250. FHA will lend you $418,100. $434,250 – $418,100 leaves you with an additional $16,150 in cash you must come up with to purchase the property.

This also impacts Minneapolis duplex, triplex and fourplex sellers. After all, the lower the down payment requirement is for a loan, the bigger the pool of prospective buyers you have. Less buyers means fewer people competing for the opportunity to purchase your property, which may impact value.

After nearly a decade of not having to worry about hitting the ceiling of FHA mortgage insurance, it’s important to be aware of how the reduced limits of the real estate crash may still effect Minneapolis duplex values today.

Comments Off on Buy These Minneapolis Duplexes Before They Hit The Open Market

Charming S. Minneapols Duplex

This list usually includes things like getting a Truth In Housing inspection, touching up paint, or simply decluttering a property. And because you never get a second chance to make a first impression, the Realtor recommends the tasks be completed before the property is exposed to thousands of buyers on the Multiple Listing Service (MLS).

If you’re looking to buy a duplex, especially with as little inventory as there is right now, knowing about these properties before they go on the MLS gives you a head start on the competition.

On your mark, get set, go!

I have the following properties coming on the market as soon as the sellers finish their “to do” lists. However, because I’m the listing agent, I can get you in to them now.

Uptown Duplex – 2 bedrooms down, 2+ up. Front porches on each floor, hardwood floors, and tons of light. Leases end in May, so either unit will be available for an owner occupant. $400,000.

S. Minneapolis Duplex – Beautifully maintained. Hardwood floors, arched doorways, wonderful light. 2 bedrooms up, 2 down, 2 car tuck under garage. Screened porch, fenced yard, and your own raspberry patch! $300,0000.

S. Minneapolis Duplex – Impeccably maintained duplex with room for master suite on third floor. 2 bedrooms up, 2 down, built-ins, fireplace, hardwood floors and a 2 car garage. Needs some cosmetic updating. $250,000.

N. St Paul Fourplex – Cash cow. Four three bedroom units with their own furnaces. All new windows. $399,000.

Edina Condominium – Spacious 2 BR, 2 BA in a park-like setting. Pool, exercise room, garage. Will be priced right.

If you have interest in seeing any of these properties before you have to compete with the buyers using only the Multiple Listing Service, give me a call at (612)290-5998. I’d be happy to get you in.

Comments Off on Can’t Find A Minneapolis Duplex For Sale? Have Your Realtor Check Her Pockets

In a Minneapolis duplex seller’s market, what’s the best thing a duplex buyer can do to help find a duplex?

Ask your Realtor what’s in her pocket.

I’ve written about pocket listings in the past, but it seems worth doing so again.

At any given time, an agent who actively works in the duplex market may be in touch with duplex, triplex or fourplex owners who are at varying states of selling their property.

Some Minneapolis duplex owners may be open to selling their property, but haven’t fully made that decision yet. Others may be in the process of getting the duplex freshened up, painted, and truth in sale of housing repairs tended to. Still others may not be thinking of selling their properties at all – unless the price was right.

Because I specialize in Minneapolis and St Paul duplexes for sale, I have a long list of people who fit any number of these descriptions. If a buyer who is working with me gives me a description of their perfect property and it just happens to match one owned by one of my future sellers, I will do my best to arrange a showing.

In this tight duplex market, I also have many Realtors calling me to ask if I have future duplex sellers for their clients. Of course, having never spoken with their client, I have a difficult time imagining exactly what it is they’re looking for.

More importantly, I’m often so busy trying to find my own buyers the right property, I don’t have time to hunt for their buyers too.

And of course, if it’s o.k. with the duplex sellers, my buyers always get in first. It’s the advantage of working with a duplex specialist.