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Archive for the 'Buying A Duplex' Category

Why Is A Minneapolis Duplex Worth More Than A Fourplex?

September 3rd, 2010 categories: Buying A Duplex

Have you ever noticed that many Minneapolis duplexes sell for as much as a fourplex?

Why? After all, if there are more people paying rent, shouldn’t the property be worth more?

Not necessarily.

See it all boils down to that law we all learned in our first economics class: the law of supply and demand.

There are simply more prospective buyers for duplexes than there are for four unit buildings.

In the years I’ve been a Realtor, I would say that on average, at least 50 percent of the duplex buyers I’m working with at any given time are owner occupants.

Some are looking as a duplex as an affordable way to move into a neighborhood that’s out of their price range as single family home buyers.

Others are looking to owner occupy the property for a time, before moving on to a single family home while keeping the duplex as an investment.

While the prospect of having a single tenant to manage is palatable to most of these owner occupants, the idea of having three sets of tenants to respond to is overwhelming.

As a result, these owner occupants tend to relegate themselves to duplexes, where they compete with investors who are simply looking to earn a specific rate of return on a property.

More buyers in the market for a property always results in a higher price.

Spoken by Kari Lundin | Discussion: No Comments »

Beware of Black Belt Craigslist Duplex Sellers

September 2nd, 2010 categories: Buying A Duplex

I’ve been finding a lot of wolves in s Sheep’s clothing lately.

Not in my dreams, but rather, on Craigslist.

Every now and then I scan the list of duplexes for sale on Craigslist. As I’m familiar with most of the ones listed by Realtors and active on the MLS, I narrow my search to those properties offered for sale by owner.

I do this for several reasons, one of which is finding that elusive “perfect” property for a client who’s seen everything on the MLS.

But lately when I contact these sellers I am surprised to learn the seller herself is a Realtor.

Now there’s nothing wrong with an agent selling her own property without listing it on the MLS. S he has the same rights to sell it herself and advertise it anywhere she chooses that a seller who does not hold a real estate license has.

The difference is she has a legal responsibility to disclose this information from the start. In other words, her ad should say something like, “owner/agent”.

The reason this is required by law is to protect the consumer. It is assumed the agent has specialized training that makes her an expert in her field, thereby giving her an advantage over someone who doesn’t have the same training.

It’s kind of like walking into a fight with a black belt when all you’ve done is watch Jackie Chan movies.

If you’re aware you’re doing this prior to seeing the property, you have the ability to find competent representation to look out for your best interests.

And you should.

Spoken by Kari Lundin | Discussion: No Comments »

What Does Donald Trump Know About Real Estate?

August 23rd, 2010 categories: Buying A Duplex

The New York Times published an article today with the headline announcing “Real Estate Fading As A Means To Build Wealth”.

I’m sure this came as news to Donald Trump.

While the article focused on single family homes, it also quoted Zillow’schief economist Stan Humphries, who stated, “There is no iron law that real estate must appreciate.”

Well, that’s exactly why duplexes and small multi-family properties are good investments. If you and your Realtor are doing your math correctly, the cash flow can give you a good return;  without appreciation.

Anyone who encourages you to buy an investment property that doesn’t cash flow because “it will go up in value” doesn’t know what they’re doing. How much something will appreciate is entirely speculative.

Successful real estate investors buy properties because they know, going in, what the rate of return on their money will be.

Sure, we all got used to rapid appreciation during the years of the boom market. But savvy investment property buyers were sitting on the sidelines, because the numbers didn’t work.

If a duplex house, triplex or fourplex either pays for itself, or makes your portion of the mortgage affordable, something like appreciation should be seen as a bonus.

After all, if the property never went up in value, at the end of the mortgage term you would have equity equivalent to the amount you paid for it, as well as monthly cash flow.

Small multi-family properties in the Twin Cities are averaging better rates of return than they have in years.

They can be a pretty nice way to supplement your income, even if your last name isn’t Trump.

Spoken by Kari Lundin | Discussion: No Comments »

Why Great Duplex Questions Don’t Always Have Great Answers

August 9th, 2010 categories: Buying A Duplex

As a duplex and small multi-family property agent, I get a lot of questions I can’t answer.

“What’s a good gross rent multiplier (GRM)?”

“Doesn’t a fourplex cash flow better than a duplex?”

“Don’t all duplexes cash flow?”

While I welcome these questions, the problem is there isn’t a universal answer for any of them.

The value of a duplex, triplex or fourplex is determined by a number of factors, including but not limited to its expenses, the number of bedrooms in each unit (which affects the amount of rent collected), the location and the condition of the property.

For example, if a property has a  low GRM, one might automatically think it’s a good investment. However, the problem with this measure of value is that it doesn’t factor in expenses.

If property taxes are high, the boiler’s shot and you can see sky through the ceiling of the third story apartment, odds are it’s not only going to not cash flow in the way you want, but it’s going to require a lot of your cashout of pocket, as well.

The best answer as to whether or not a duplex is a good investment can be found with a Realtor who specializes in that kind of property. He or she should be able to work up an income property analysis spreadsheet for you to help you objectively determine whether or not the property meets your financial goals.

Spoken by Kari Lundin | Discussion: No Comments »

Why Duplex Buyers Should Plan A Trip To The Mall

July 12th, 2010 categories: Buying A Duplex

Sometimes I wonder if duplex foreclosures have been good for Sears.

See, foreclosures often come with many things; abandoned socks, broken toys, dust bunnies…

But they don’t always come with appliances.

Believe it or not, big items like refrigerators, stoves, washers and dryers are considered personal property. As such, the party who lost the duplex to foreclosure has the right to either sell them on Craigslist before they leave, or put them on the moving truck. 

Even if there are appliances on the premises after the bank has taken possession, they can’t guarantee they’ll be there after closing. Most of the time they are, but theoretically anyway, they belong to the previous owner.

As a result, it’s always a good idea to budget for new appliances as you begin the duplex buying process.

Spoken by Kari Lundin | Discussion: No Comments »

Why I’m Falling For Trulia

June 17th, 2010 categories: Buying A Duplex

I fell in love today.

With Trulia.

While I’m generally not a fan of web sites like Zillow and Trulia, largely because much of inaccuracies in property valuations, I may be coming around on the latter.

All because of the addition of a cool little Rent vs. Buy widget in the sidebar of their recently added Rental section.

To make the decision whether it’s smarter to buy a specific property or rent, the calculator asks for the property price, the size of the down payment, the amount of monthly rent you’re paying, and the number of years you’re planning on comparing.

Let’s say we found a $280,000 duplex near one of the lakes with two bedrooms in each unit.  Renting one of the units costs $1100/month.

Over 30 years, Trulia estimates simply being a tenant in the place would cost you $396,000.

On the other hand, buying it would cost $586,217 in mortgage payments. However, Trulia also takes into account things like tax savings, opportunity cost and home appreciation.

When their widget calculates all these factors, it estimates buying that duplex would actually save you approximately $18,625 over 30 years.

Of course, their widget was structured for a single family home.

It doesn’t factor all the rent you would collect. Even if it was just $1100/month over 30 years, with a 5 percent vacancy rate, that would equal an additional $376,200 in income/savings. (Inflation would make that figure greater still.)

It also doesn’t consider that if you rent, that money is your landlord’s. Meanwhile, if you buy, you can eventually sell the property and walk away with the equity.

I wonder if anyone’s ever written a love song for a Widget…

Spoken by Kari Lundin | Discussion: No Comments »

Minneapolis Named Best Place To Buy

June 7th, 2010 categories: Buying A Duplex, Twin Cities Real Est

Last week the web site Trulia.com ranked Minneapolis/St Paul number one on its list of America’s Top Ten Cities To Buy Vs. Rent.

To come up with their rankings, Trulia took the average list price of properties on the MLS and divided it by the average rent on a 2 bedroom apartment, duplex, condo or townhouse in the largest 50 markets in the country.

In other words, according to Trulia’s co-founder and CEO Pete Flint, “Home sellers in hard hit areas are forced to lower their prices to compete with all the foreclosures on the market. As a result, these unattainable markets are so affordable it makes better financial sense to buy than rent.”

With the expiration of the first time and repeat buyer tax credits at the end of April, there is much less competition for the good properties in the market.

Call me. It’s a great time to buy.

Spoken by Kari Lundin | Discussion: No Comments »

Will An Insult Get You A Price Reduction?

May 13th, 2010 categories: Buying A Duplex

One of my seller’s received an offer the other day.

We both got a laugh out of it.

The buyer’s agent had carefully spelled out  the reasons why the buyer didn’t think the property was worth list price.  It included things like: a one car garage, which didn’t suit the buyers needs,  one boiler (meaning the owner pays the heat) and a mention that the heating system was old and sure to die any moment now.

After reading this list of why’s to my seller, I asked if he’d seen the light. Wisely, he just chuckled.

He knew the property only had a single car garage. In fact, he’s been aware of it the entire 20 plus years he’s owned it.

 And, while the boiler is older, the seller is an engineer who specializes in heating systems that service everyone from the Marine Corps to NASA.

Need I state the obvious and say the boiler in his property has been impeccably maintained?

Telling sellers your thoughts about what’s wrong with their property won’t result in a price reduction. They are human, after all, and like most of us, they believe in their property and the efforts they’ve put in to it.

Insulting them won’t convince them otherwise.

Spoken by Kari Lundin | Discussion: No Comments »

Minneapolis Duplex Short Sales May Be Your Prince

April 29th, 2010 categories: Buying A Duplex, Tax Credits

With just hours left to take advantage of either the $8000 first time home st  buyer or $6500 repeat buyer tax credits, you may find the inventory of decent dupelxes offered by traditional sellers and banks gone.

In fact, with time running out, you may feel a bit like Cinderella. Your carriage is about to revert to a pumpkin.

But fairy tales aren’t the only place where magic happens.

In this case, have your fairy godmother Realtor wave her wand at a short sale.

Legal counsel for Coldwell Banker Burnet’s parent company, NRT, has found that in order to qualify for either credit, a fully executed contract must be in place no later than 11:59 pm on April 30, 2010. Counsel further advises that a short sale is considered a legally binding contract when both the buyer and seller have signed the purchase agreement.

The fact that the lender still has to approve the terms doesn’t prevent the contract from being created. Therefore, that contract qualifies the buyer to earn the credit.

Of course, Cinderella still had to wait for her glass slipper to be returned. Duplex tax credit sales are no different. They must still close no later than June 30, 2010, in order for the buyer to earn the credit, which may or may not be problematic.

Spoken by Kari Lundin | Discussion: No Comments »

Can A Duplex Chick In Minnesota Help You With A Duplex In Denver?

April 26th, 2010 categories: Buying A Duplex, Selling A Duplex

Did you know there aren’t any special requirements necessary for a residential agent to sell someone an income property?

For example, a Realtor who spends most of his time selling houses in the suburbs, can help you buy a duplex and not be required to know how to do an income property analysis spreadsheet.

As a result, he may tell you the property with the upgraded kitchen is a better buy, when in reality, it may have a negative cash flow which will cause you to either spend more for your portion of the rent than you wanted or, dig in to your pocket in order to cover the difference between income and expenses.

That’s why it’s so important to find an agent to work with who specializes in these unique properties.  Not everyone does. And when it comes to duplexes, granite counter tops may or may not make a property a better value, but higher rent always will.

While the bulk of my business is in Minnesota and western Wisconsin,  I am always happy to help duplex buyers and sellers nationwide find competent agents in their area to help them in their multifamily transactions. 

Because I specialize, I know which questions to ask prospective agents on a buyer or seller’s behalf, and how to tell whether or not a prospective agent truly knows what he or she is talking about.

Whether you’re looking for a duplex specialist in Los Angeles, Maine, or some point in between, drop me a line or give me a call. I’d love to help you find the right agent for the job.

Spoken by Kari Lundin | Discussion: No Comments »

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