Archive for the 'Buying A Duplex' Category

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

card in jeans pocketIn 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.

Empty Shelves at the Twin Cities Duplex Store

said on March 3rd, 2016 categorized under: Buying A Duplex

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Empty Shelves at the Minneapolis Duplex StoreAs a Minneapolis or St Paul duplex buyer, sometimes it’s hard to understand there aren’t as many duplexes out there to see as there are bottles of shampoo on the shelf at Target.

This is especially true right now.

There are currently just 57 duplexes, triplexes and four unit apartment buildings on the market in Hennepin County.

Ramsey County is only slightly better with 65 currently active listings for buyers to choose from.

That isn’t a lot.

So duplex buyers need to be patient. Very, very patient. In fact, it might not be a bad idea to bring a snack.

And if you’re a Twin Cities duplex owner who’s thinking about selling, the time couldn’t be better. After all, your duplex won’t have to compete for shelf space.

Comments Off on Why I Can’t Help You Help Your Realtor Find A Duplex For Sale

Minneapolis Duplex for SaleFinding a duplex to buy in today’s seller’s market is the equivalent of buying a needle in a haystack.

Duplex buyers often reach out and ask me to help join the hunt. And sometimes they are just looking for hints as to where they can find all of duplex sellers who aren’t on the market in a given neighborhood or suburb.

At this point in our exchange, the state of Minnesota requires me to ask if they have signed a buyer’s representation agreement with another Realtor.

If they have, and that agreement is an “Exclusive Right To Represent Buyer”, the state says I cannot help unless or until it has either expired or they have agreed to cancel the contract. If I don’t honor that contract, I could be fined or even lose my real estate license.

As a buyer, the best thing you can do is sign either this kind of contract, or, a Non-Exclusive Right to Represent Buyer contract with a Realtor.

This document demonstrates to the agent that you are as serious and committed to finding yourself a property as they are. More importantly, it gives them the right to represent, advocate for and advise you throughout your search and the transaction.

If you are working with a Realtor in this capacity, you must have him or her reach out to me directly. The agent should also be working on their own, at a time with such tight inventory, to find you a property.

Of course, if you aren’t working with an agent, please feel free to contact me. While they aren’t quite ready to actively market their properties, I am in touch with a number of duplex owners who, under the right circumstances, would sell.

Comments Off on Why Zillow’s Minneapolis Duplex Auctions Are The New Zestimates

Duplex Sheriff's SaleThe real estate web site Zillow sure causes a lot of misunderstandings.

Initial confusion was a result of their Zestimates. Their algorithm had many duplex and home owners believing their properties were worth tens of thousands of dollars more than they actually were; and more recently, tens of thousands of dollars less.

More recently, Zillow’s “auction” properties have lead many duplex buyers to believe they can show up someplace, get a bidder number, and bit on a property featured on the web site.

Now, in theory, a buyer can do just that. However, at least in Minnesota, there’s an enormous hurdle in the process.

The auction the Zillow properties can be purchased at is the sheriff’s sale.

So what’s a sheriff’s sale?

When a duplex owner falls behind on mortgage payments, the bank tries to get them to get current. After three to four months of missed payments, the lender then issues a Notice of Default (NOD). This notice is published in a local periodical for a period of time, and it essentially states if the duplex owner doesn’t get caught up by the six month mark, the lender will auction the property off at a sheriff’s sale.

At the sale, the bank usually “buys” the property back. While it’s easy to envision this as the bank showing up with a briefcase full of cash, in reality, it’s a paper transaction. At the “auction” the bank is essentially asking if anyone will pay them the amount they’re asking for to

Most of the time, the amount they bid is equal to the amount the duplex owner owes on the property. Every now and then, for whatever reason, the bank decides they’ll take less.

Now, you are welcome to “buy” the property for that amount of money. First, you have to have a cashier’s check in hand sufficient to pay for the property in its entirety. In other words, you need to show up with the equivalent of cash to buy a property you’ve never been inside.

To complicate things further, you can’t just call a locksmith to meet you at the property and let you in. In Minnesota, the current duplex owner has six months to redeem the property. In other words, to pay off the amount of the winning bid, as well as additional attorneys fees and interest.

In other words, you tie up your money for six months. And, to make sure you’re following the letter of the law, you need to hire a real estate attorney to conduct the eventual removal of the current owner.

What happens when the six month redemption period is over and the current occupants have left? You take possession. Best case scenario, they left the place in perfect condition.

More likely, however, as they didn’t have the money to pay the mortgage, they didn’t have the money to do repair and maintenance either.

So again, as with their Zestimate, Zillow’s good intentions result in something that isn’t quite true.

Duplex Sellers Say “Show Me The Money”

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

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duplex mortgageIt’s a great time to buy a duplex.

Judging by the number of calls I’ve been getting, many duplex buyers have already figured this out.

What most have forgotten, however, is in order to buy a duplex, you have to have the money to do so. And you have to be able to prove it.

Telling a seller you have the money, or running a calculation using an online mortgage calculator that says you can afford it doesn’t suffice for proof.

You need a bank to put it in writing that you can.

Duplex inventory in the Twin Cities market is very low. This means there are multiple buyers interested in the great properties that come onto the market.

And in order to even consider your offer, the seller is going to want to see a letter from a credible financial institution saying you can afford it.

This can take a day or, if there’s a hiccup, more. And if you’ve picked out a hot property that will sell quickly, having this document ready or having to wait for it can mean the difference between submitting the winning bid and missing out.

There are many great loan programs out there, and I am happy to connect you with reputable lenders with one that’s right for you.

That way, we can make sure you’re in the best possible position to get the duplex of your dreams.

How To Use The Fair Housing Act To Screen Tenants

said on August 17th, 2015 categorized under: Buying A Duplex, Tenants

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duplex tenant screeningI am in the process of renting a vacant unit I just got done rehabbing.

As I look for a new tenant, I am trying to use my experience with the last residents to guide me.

Frankly, there were warning signs with those people the day they applied to rent the unit that I didn’t heed.

And I’ve since come to the conclusion that had I simply had written criteria for tenant selection present at the property when they applied, they may never have even filled out the paperwork.

The federal Fair Housing Act prohibits landlords from discriminating against a prospective tenant due to race, color, national origin, religion, sex, disability, and familial status. State laws (depending on where you live) may go further. In Minnesota, for example, landlords may also not prohibit someone from renting due to creed, sexual orientation or public assistance.

The easiest and best way to make sure to be in compliance with these laws is to have a written set of criteria as to what you are looking for in a tenant. This list is just a set of guidelines available for prospective tenants to view before applying for the property.

For example, these guidelines may include things like:

  • Must have no criminal background.
  • Must have no prior evictions.
  • Must have verifiable employment history.
  • Must have landlord references.
  • Must have a minimum credit score of 600 (or whatever number is acceptable to you).
  • Must provide a copy of a drivers license.
  • Must provide an application fee (equal to the amount the company you use charges for a background check)
  • Maximum percentage monthly rent must be to income.

It is the last item on the list that would have saved me the challenges caused by my last tenant. After paying rent, they were left with about 40 percent of their monthly income to live on. I discussed this with them at the time, voicing my concern, but didn’t have it clearly stated as a barrier to application.

They were persuasive, and I didn’t stick to my guns. Of course, as soon as life threw them a curve, it affected their ability to pay rent.

Looking back, I wonder if I’d had the written criteria stapled to the application like I do now they would have even applied.

Lesson learned. Not only does having this information on hand protect me from the risk of being accused of discrimination, it would have saved me court costs, rehab costs and all the lost income from the months the property was vacant and being repaired. The tenants who talked me into renting simply wouldn’t have applied in the first place.

 

 

Before You Buy Your First Duplex

said on July 17th, 2015 categorized under: Buying A Duplex

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Buying A DuplexIf you’ve been renting for several years, you may be starting to think it would actually improve your budget if you bought a duplex, instead of renting one.

So now what?

The first thing you’ll need to do, if you haven’t already, is save enough for a down payment. Depending on where you live, this may be as little as 3 percent of the purchase price of the duplex. In some locations, there may also be down payment assistance available.

You will also need to have money in reserves for things like closing costs, property insurance and a home inspection.

Talking with a good lender who is familiar with duplexes early in the process is also important. He or she can help determine the amount you’ll need to save, as well as help you repair any issues that may appear on your credit report.

If you are in the market to owner occupy a small multifamily property, it is extremely important you make sure the loan officer is very clear on that, and that he or she has verified with the financial institution the required down payment for the loan program.

Buyers often come in and tell me their lender has approved them for a 5 or 10 percent down conventional mortgage. In those instances, I advise my client to double check. Those loans are available for single family purchases, but I currently do not know of a comparable program for multifamily properties.

Next, you should try to meet with a Realtor who specializes in investment property. How do you know? You may see their name on duplexes you’ve seen for sale or (hint), read their blog.

A duplex specialist will educate you on how to calculate what your portion of the payment will be, as well as be able to advise you as to any local licensing requirements you may face.

An experienced Realtor will also help you determine your short and long term goals. For example, sometimes the neighborhood you want to live in isn’t the location that will provide the greatest cash flow.

If you want more information about the duplex buying process, be sure to download my Duplex Buyer’s Guide or send me a note.

I’d be glad to help you out.

Minneapolis Duplex Sale May Cause Taxes

said on February 3rd, 2015 categorized under: Buying A Duplex, Selling A Duplex

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Taxes Due At Duplex SaleFor 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.

They include:

  1. 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.
  2. 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.

Comments Off on Is Your Minneapolis Duplex Worth The Number You Want To Hear?

Minneapolis Duplex ValueIs the Realtor who tells you the highest price for your duplex the best agent for the job of selling it?

When it comes to getting a listing, some Realtors will tell you what you want to hear. They’s say your property is worth thousands of dollars more than the other agents, just to get the listing.

Then, when it sits on the market month after month, they will ask you for a price reduction. And by that time, the biggest wave of qualified buyers who are already in the market looking for property will have passed.

When it comes to selling your duplex, it’s important to remember Realtors do not determine the value of your property; the market does. A Realtor’s job is to help you interpret market data in order to price your duplex competitively.

That price will not be based on what you need or would like to have in your bank account after the sale is closed. It is based on comparable properties in your area that have recently sold.

Incidentally, these are the same sales an appraiser will use to substantiate or refute value when your buyer asks for a loan.

In other words, you and your Realtor are going to have to prove, scientifically, the property is worth what you think it is. And the only way to substantiate that is with data.

 

 

 

Minneapolis Duplex Market On A Stick

said on August 19th, 2014 categorized under: Buying A Duplex, Twin Cities Real Est

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Corn dogAs the markers of summer’s end approach in the form of back to school announcements and food on a stick, the Twin Cities duplex market shows no sign of letting up.

Twenty-two duplex, triplex and fourplex sellers accepted offers the week ending August 9, 2014.  Of these, 86.4 percent have equity in their properties. There weren’t any spectacularly expensive sales, and just two pended at list prices below $100,000. So, on average, the group left the market at a final list price of $214,075.

During the same week last year, 21 duplex owners accepted offers on their investment properties. While 90.5 percent of them did not need to involve the bank in negotiations, they sold at an average price of $205,174. While this is below this year’s pended price, it’s important to note sold prices in the current market may be 3-4 percent below the listed price.

There were 31 new listings the first full week of August.  As has been the trend over the last year, most (83.9 percent) are being sold by traditional sellers. There were 29 new listings for buyers to choose from last year during the week, and just 72.4 percent of them did not involve distressed property sellers.

The single family home market saw the number of New Listings rise 8.7 percent for the week. Meanwhile, Pending Sales decreased 5.6 percent. Those two metrics moving in opposite directions resulted in a 9.4 percent rise in inventory.

During July, the Median Sales Price for a single family home in the metro was up 3.4 percent to $215,000. It’s important to watch the Months Supply of Inventory, as it is an early indicator of a changing market. That measure was up 15.8 percent to 4.4 months. This may signal the return to a more balanced market, which is usually achieved when there is a 5 – 6 month supply.

A return to a balanced market, where buyers and sellers are on equal footing, should slow outlandish price increases and return to the market to a more measured, healthy pace.