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Archive for the 'Buying A Duplex' Category
Title Is Everything When Buying With Family
March 5th, 2010 categories: Buying A Duplex, Legal Stuff
It’s often said that blood is thicker than water.
With that in mind, I often have two family members express an interest in buying a duplex together. Each intends to live in one of the units.
Sometimes the buyers are a grown child and a parent who winters in warmer climates.
Sometimes the buyers are siblings.
In one case I even encountered a former husband and wife who saw a duplex as a way to co-parent their children, but continue on with their respective lives.
Sharing a multifamily property can be a workable solution for some people. And while family may well look out for each other’s interests more reliably than friends or acquaintances, it’s important to remember life circumstances can change.
And that’s why deciding how your going to take ownership at closing is so very important.
There are two ways a pair of buyers can take title; either as joint tenants or tenants in common.
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A Minneapolis Duplex Isn’t Always About The Numbers
March 1st, 2010 categories: Buying A Duplex
One of the reasons I specialize in helping people buy and sell duplexes is that each and every one, whether it’s strictly an investment property or a place for the owner to live, is that it is both an intellectual and emotional endeavor.
On the one hand, for both investors and owner occupants, the financial analysis is crucial. If you’re an investor, the property needs to meet your financial goals for a return.
If you’re an owner occupant, the numbers also need to work. Most buyers have a very specific idea of how much they’re willing to contribute in “rent” toward their share of the monthly mortgage payment.
But for both an investor and an owner occupant, the return a property gives your heart can be just as important.
There are times when owning an income property sucks. Period. And it’s times like that when a piece of woodwork, a built-in, a view, can be the inspiration to muddle through.
Make sure your duplex is a good investment. Of course. But it never hurts if it makes your heart sing too.
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Watch Out For The Minneapolis Duplex Hiding Under The Bed
February 26th, 2010 categories: Buying A Duplex
Remember when you were a kid and you were absolutely certain when the lights went off in your room, a monster would crawl out from under your bed? Or, in similar darkness, every doll on your shelf turned into Chucky?
Many of today’s Minneapolis duplex buyers seem to be thinking the same way.
They’re absolutely certain they’re going to lose their jobs and shortly thereafter, their property. Or, worse yet, overpay.
Several have insisted I turn the lights on.
In some circles, fear is an acronym for False Evidence Appearing Real. And it was certainly true of those childhood fears.
It’s also true of duplex-buying fears.
I realize we’re living in economic uncertainty; a time in which caution is a well-advised strategy. However, if you adhere to your goals when you purchase a property, in all likelihood you don’t have to worry.
Most owner occupant duplex buyers have a goal of their portion of the house payment being little more than they’re already paying in rent. In this market we’re able to accomplish that almost all of the time.
What’s ironic is while everyone worries how they’ll make their house payment if they lose their job, they never seem to worry about paying the rent.
When I ask whether they plan to move in with their parents if they lose their job, they recoil in horror. I ask whether they would go to the ends of the earth to not move in with mom and dad, and the answer is always a resounding yes. So if the mortgage is the same amount as rent, what’s the difference?
More importantly, if the property cash flows with two tenants paying rent, moving home to mom and dad’s might actually prove profitable.
Fear of over paying in a property is the monster in the closet. Unless someone is paying cash for a property, the transaction with require some form of financing. Every bank requires an appraisal be conducted before it will give someone a loan. And in today’s market, no appraiser is willing to overstate a property’s value.
Simply put, the bank won’t lend you more money than a property’s worth. You can count on it.
Just like when you turn the lights on, the monsters all go away.
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Don’t Count On Reduced Property Taxes When You Buy A Foreclosed Duplex
February 25th, 2010 categories: Buying A Duplex
If you want to get a muddy answer, call your local property tax assesor and ask what the city or county’s policy is on resetting the market value on a foreclosed property after you’ve purchased it.
Some time ago I heard Dakota County, for example, would not reduce a foreclosed property’s market value to the amount it sold for.
That seemed incredible to me. After all, if something has a tax assesed market value of $300,000, but sells for $150,000, hasn’t the market established that it’s only worth $150,000?
Apparently not. Well, sort of not.
Dakota County is working off of property values from two years ago. This year’s sales, for example, will be logged into their computer program. Whatever standard it arrives at is applied to all the properties in the county, calculated, and new values determined.
The following year the county then sends out a notice to property owners informing them of what their property taxes will be in the year that follows.
So, sales in 2008 were tallied, and new totals sent out in 2009. These totals informed property owners what they would be paying in 2010; giving them much of 2009 to argue against the county’s case.
In other words, if the real estate market is bad this year, we should see overall reduced market values for tax purposes, which will result in lower property taxes in 2012.
According to the assessor’s office in the city of Minneapolis, their model calculates market values on “open market arm’s length transactions”. A property is valued on whatever the comps are and, as the city realizes most foreclosures and short sales are sold at deep discounts, those transactions are largely excluded from the valuation process.
So, taxable market value is largely based on what properties offered by traditional sellers sold for. Of course, these properties are down in value too, but not nearly to the extent of those involving banks in the transactions.
Buying a foreclosed duplex may or may not result in lower property taxes down the road. And it’s important to not project any sort of savings as part of the income property analysis worksheet you do prior to writing an offer.
Clear as mud?
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Why You Should Ask A Duplex Realtor What’s In Her Pockets
February 8th, 2010 categories: Buying A Duplex
Are you having trouble finding the right duplex?
I’ve got some bad news. It’s about to get worse.
As we officially kick off the spring housing market, more buyers and investors are going to jump into the market. Many will be trying to beat the April 30 tax deadline for the $8000 and $6500 tax credits.
That means you’ll have more competition.
And if you’re working with an agent who don’t specialize in multi family properties, the odds are stacked against you.
The single most important reason to work with a specialist is what we have in our pockets.
I’m not talking about lint, or quarters, but what are called “pocket listings”. What are those? Well, we work with sellers too. At any given moment, we know a number of them who are either in the process of putting their duplex on the market, or who haven’t quite yet decided to sell.
Most are willing to show potential buyers their property; even if they haven’t quite made up their minds. And when we run into a buyer looking for a duplex that seems to match a non-MLS duplex we’ve seen, we can make showing arrangements.
Don’t forget, however, that when it comes to MLS listings, we also know the inventory.
On average, I show more than 30 duplexes a month. While many of the properties simply are not fits for any of my clients, some are. (Ironically, they’re frequently the ones with few or no MLS photos.) When I find them, I call.
Established duplex specialists also offer their buyers the advantage of having seen countless properties the last time they were on the market. We don’t remember the bad ones, but the good ones are clear memories.
A good example of this happened over the weekend. A property I’d frequently shown as a short sale reappeared on the MLS as a bank owned property.
The pipes were frozen and both boilers blown. Having seen it in the past, however, I knew the rest of the building was in great shape.
My clients footsteps were the first in the snow on the listing’s sidewalk.
If you’re looking, give me a call and ask what’s in my pocket.
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I Sell St Paul Duplexes Too
February 5th, 2010 categories: Buying A Duplex, Selling A Duplex
I lost out on a duplex listing the other day because I “don’t specialize in St Paul”.
This made me chuckle.
The seller had the impression that because of the frequent appearance of the word “Minneapolis” in my blog headlines, I don’t know St Paul.
I explained to him I do this because according to Google Ad Words, far more people search the Internet for the term “Minneapolis duplex” than they do “St Paul duplex”.
I am, after all, in business. Part of my job as a business owner is to make sure I’m found where people are looking for the type of services I provide.
So, my headlines say “Minneapolis”, even though I list, show and sell St Paul properties just as often; simply because of the popularity of the search term.
The seller, in this case, hired an agent who specialized in his neighborhood. On some level, this is a concept I absolutely understand when it comes to single family homes. After all, there are thousands and thousands of single family homes, and most MLS districts have neighborhoods with wildly different personalities within their boundaries.
Duplexes, however, are another story.
See, there just aren’t as many of them out there.
As a result, duplex buyers I work with tend to cover 5, 10, or even as many as 15-20 MLS districts in their search.
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Two Halves Make A Whole In Minneapolis Duplex Market
February 4th, 2010 categories: Buying A Duplex, Selling A Duplex
What is the most common question I get asked in a duplex open house?
Is it, “What will the seller take?”
No. And even if it were, and I knew the answer (sometimes sellers surprise me), I couldn’t tell you. After all, the seller hired me to look out for her best interests, and by law, I have a duty to do just that.
The number one question is, “Is the whole duplex for sale or just one side?”
Many people don’t understand that while a duplex contains two residences, it has one Property Identification Number or PIN, with the county. It is considered one property.
In order for the two halves to be sold separately, each would need to have its own PIN. While that is possible, and certainly, many fourplexes and larger apartment buildings have been split up and sold independently as condominiums, there is some legal paperwork involved.
One of the challenges in doing this with a duplex is the formation of an association. With larger properties especially, developers who are selling the individual units, hire an attorney to form a homeowners association,.
In the bylaws, all the rules, regulations, dues, and means of resolving disputes are clearly spelled out in advance of the sale. This infrastructure helps prove a mechanism through which to collect and pay for maintenance, improvements and pursue delinquent homeowners.
Most of these associations have a board of directors which is populated by residents of the property. The board makes recommendations in terms of increased fees, exterior paint color schemes, etc., which residents then vote on.
What happens in a duplex if each owner wants the outside a different color? Who casts the deciding vote? Or if one owner stops paying her share?
Tough to resolve. Which is exactly why most duplexes never face being split up and sold separately.
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Minneapolis Duplex Owners Have A Theme
January 29th, 2010 categories: Buying A Duplex, Home Repair, Selling A Duplex
I don’t know whether to call it a trend or a theme, but this week my real estate business has had one.
First, the pilot light on the furnace in a buyer’s new property went out the day before closing. Next, the forced air furnace in one side of a duplex a buyer is considering came back with a yellow flame; which may or may not be the sign of a cracked heat exchanger (which can result in the unit producing unsafe levels of carbon monoxide).
Then I got a call from a rural tenant stating they had no water in the house or any of the outbuildings on the property.
The theme for the week could be ”things break”. However, there’s another one here; whenever possible, get a home warranty.
It seems like everyone from Best Buy to car dealers offer an extended warranty these days. And we’ve all had experiences where the coverage they provided were not worth the additional cost.
I haven’t found this to be the case with most home warranties, however; especially when a client is purchasing a foreclosed property.
Many foreclosures not only have deferred cosmetic maintenance, but the mechanicals like the furnace or boiler and water heater have been ignored as well. Most banks aren’t in the business or maintenance or repair, so whatever’s wrong with the property will most likely be the buyer’s responsibility.
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Once Upon A Time In Minneapolis Duplex Land
January 14th, 2010 categories: Buying A Duplex, Selling A Duplex
Once upon a time, in a land called the Twin Cities housing market, a duplex buyer could purchase a foreclosed or run-down property, renovate it, and turn around in short order and sell it for a profit.
It was a good thing.
Until, of course, Evil Fraud Doers saw it as an opportunity to artificially inflate the value of a property, conspire with an appraiser and sell it for an unreasonable profit.
In 2006, seeing a blight upon the land, along came the Department of Housing and Urban Development (HUD) . They decided to right this wrong by refusing to grant mortgage insurance on any FHA loan on a property where the seller had owned it for less than 90 days. This, they hoped, would keep the Evil Fraud Doers from pillaging and plundering.
It was then that a dark cloud formed and a cold wind began to blow, bringing with it the flying monkeys of foreclosure.
Suddenly there were properties everywhere that needed help. In an effort to encourage investors and rehabbers to fight the wounded inventory, in 2009 HUD briefly lifted it’s “anti-flipping” rules. This allowed properties to be fixed up and resold to first time home buyers who generally had neither the cash nor experience to undertake the battle.
The petulance continued. And yet, HUD ended it’s ban.
So what? If you’re a rehabber just wait three months to sell, right?
Well, the moratorium actually starts the day you close. And it isn’t waiting 90 days to close on a resale. Rather, it’s waiting 90 days before you can even look at a buyer using either an FHA, or often, conventional loan.
And since it’s likely to take 30-45 days to close on a resale, you’re actually looking at having to hold the property a minimum of four months. In other words, if you don’t have you’re rehab property in had by the end of this month, it’s likely you won’t get a chance to resell it.
On the other hand, if you’re a buyer who missed out in one of those multiple offer scenarios on a duplex ripe for renovation and we’re hoping to buy it once the repairs were done, you may have to wait until spring; when everyone else is wishing on stars too.
Wish I had a magic wand to use to lift that anti-flipping rule just one more time. There simply aren’t enough duplexes in good condition and a fair price out their for my clients to buy.
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Have Your Minneapolis Duplex Super Bowl Party – Now
January 8th, 2010 categories: Buying A Duplex
If you’re thinking of waiting until after the Vikings win the Super Bowl to start shopping for a Minneapolis duplex, don’t.
While most Minnesotans tend to think of spring as coinciding with the Twins‘ home opener the first week of April, and the spring housing market commencing with the opening pitch, Realtors know otherwise.
The spring housing market starts February 8; the Monday after the Super Bowl.
With the $8000 first time home buyer and $6500 move-up buyer tax credits set to expire on April 30, not only will there not be a lot of time to find a property, you’re also going to face a lot more competition.
Some of it is already out there. And increased demand always leads to increases in prices.
I can’t think of any other time in the years I’ve been a Realtor when my business has experienced this much activity during the holidays and -22 degree wind chills.
Imagine what the market will be like when you don’t have to wear Carhartts to look at duplexes. Or, heaven forbid, the Vikings play like, well…the Vikings.
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