Archive for the 'Buying A Duplex' Category

FHA Duplex Loans About To Get More Expensive

said on February 28th, 2013 categorized under: Buying A Duplex

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Home and Stacks of Money Isolated on a White BackgroundIf you’re thinking about buying a Minneapolis duplex with an FHA loan, you should act now or it will cost you money.

If you sign a purchase agreement after March 31, 2013, new FHA mortgages with the amount of your mandatory mortgage premium for loans with 3.5 – 10 percent down payments will rise from 1.25 basis points to 130 basis points.  This would increase your monthly insurance premium on a $100,000 loan from $104.17 to $108.33.

While that doesn’t seem like such a bad deal, the next piece of information might make you think differently. For all FHA mortgages with less than 10 percent equity when they are placed on a property, you will now pay mortgage insurance for the life of the loan. In other words, for 30 years (unless, of course, you refinance).

Prior to this, FHA borrowers were eligible to have their mortgage insurance premiums waived once they had 22 percent equity in the home or had paid the premium for five years.

Over the life of a $100,000 loan, that adds up to $39,000 rather than the $6500 it would have cost you for five years of mortgage insurance.

Again, you don’t need to have closed on the purchase of a property– only to have come to a written agreement to buy a duplex with its seller.

Hurry, or it may cost you a lot of money!

Let Your Duplex Speak For Itself

said on February 11th, 2013 categorized under: Buying A Duplex, Selling A Duplex

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duplexes sell themselvesIf you’re selling your Minneapolis duplex and a buyer’s agent wants to show it to a client, should you be there?

No.

Buyers want the opportunity to objectively look at your duplex; to decide whether it fits their wants, goals and needs in a property, and if not, what they could do to make it so.

While it may seem important to share the property’s history, attributes and benefits with a prospective buyer, doing so when they are in the initial stages of considering your duplex may be perceived as you trying to “sell” them something they don’t want.

Nobody likes to be pressured to buy something, or to feel so smothered we can’t think for ourselves.

Buyers chose a property to buy based on its value compared to other duplexes for sale,  and how well it suits their needs as a place to live and/or an investment.

Telling them the property’s’ history won’t change those facts, but may, in the end, leave the buyer feeling so smothered they chose to buy somewhere else.

And if you’re concerned about somebody stealing something, it is a good idea to remove all valuables from the property before it goes on the market. Most Realtors keep tabs on their buyers, but simple preventative measures can keep the worst from happening.

Save Thousands: Hire A Duplex Expert

said on January 23rd, 2013 categorized under: Buying A Duplex

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duplex expertA recent duplex listing of mine received four offers within 24 hours of being put on the market.

Of the offers the seller received, not a single one of them asked him to assign the rights to the leases or the security deposits to the new owner.

Since it isn’t in the purchase agreement (contract), theoretically, the seller doesn’t have to turn them over.

Imagine the chaos that would cause if the tenants asked for a security deposit refund when they move out, only to discover it no longer exists.

My seller will do the right thing, and turn those over anyway. However, it’s important to note that not every Realtor has experience with duplexes or investment property.  Using an agent whose experience is limited to single family homes could well have cost these buyers thousands of dollars.

It’s a good reminder as to the importance of using a specialist when you buy an investment property.

Comments Off on Why The Highest Minneapolis Duplex Offer Isn’t Always The Best

terms and conditionsOne of the most difficult things for a duplex buyer to understand in how, when in multiple offers, the winning buyer may have offered less for the property than they did.

What’s important to remember is there are two components to any purchase agreement:  price and terms.

Sometimes, the terms of an offer are more important to a seller than a few thousand dollars in price. Those might include one or more of the following:

Cash – Most sellers, including banks, would rather get their money sooner, rather than later. Financed offers usually take around 30 days to close. Cash offers, on the other hand, can close as soon as the title work is finished. More importantly in today’s market however,  is the sale is not contingent on an appraiser determining the property’s value and therefore, the amount a bank will lend on it.

No Inspection – Inspections are a great idea for a buyer. After all, major health and safety defects can cost a duplex owner thousands of dollars. That’s the problem, however. Sellers often recognize the results might also cost them thousands of dollars in either the sales price or repairs.

Conventional Loan – FHA insured loans are approved only if a property meets a certain set of  minimum criteria when it comes to condition. Sellers can either make these repairs, or risk losing the sale. Many duplex owners aren’t willing to take that risk.

Quick Closing – Most sellers, including banks, prefer to get their money as quickly as possible. Financed offers usually take at least 30 days to fund, while a cash offer can close as soon as the required title work is done.

Non-Refundable Earnest Money – To demonstrate their commitment to buy a property, a buyer’s Realtor may write an offer in which, in the event the buyer doesn’t move forward with the offer, the seller may keep their earnest money.

More Earnest Money – A buyer may not only make their earnest money non-refundable, but may also make that amount so substantial that all other offers pale in comparison. A seller may be enticed to accept an offer, for example, because if the buyer doesn’t move forward with the purchase, the seller gets to keep $10,000.

Today’s Minneapolis duplex investors market is extremely competitive, and buyers are doing everything they can to make the winning offer on hot properties. If you find you’re losing more often than winning, you might want to change your terms!



Vacancy Rates Make Duplexes A Great Investment

said on November 5th, 2012 categorized under: Buying A Duplex

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minneapolis duplex investment secretThe secret is out. Minneapolis and St Paul duplexes, triplexes and apartment buildings are great investments.

There are three reasons for this:

  1. Historically low interest rates
  2. Low property values
  3. Extremely low vacancy rates

It’s number three I want to talk about today.

According to a report this morning, Marquette Advisors, who are the folks who compile this data, Twin Cities vacancy rates were up slightly to 2.7 percent for the third quarter. This is .4 percent higher than the third quarter last year.

Of course, this figure is still ridiculously low; especially when you start breaking down those rates by city, and city sections, and their average rents:

Minneapolis- 1.6%, $995

Downtown Minneapolis – 1.7%, $1257

Southwest Mineapolis – 1.6%, $899

North Minneapolis – 1.1%, $872

South Minneapolis – 1.8%, $883

East Minneapolis – 1.5%, $884

St Paul – 2.8%, $910

Twin Cities – 2.7%, $951

On average, rents are up 2.8 percent this year over last; to $951 compared to $925 one year ago.

While things are good, it’s important to remember at some point the market will swing the other way. Vacancy rates will go up, and rents will likely go down.

Right now, however, life is awfully good for Minneapolis duplex investors.

Does Your Duplex Fantasy Match Reality?

said on October 29th, 2012 categorized under: Buying A Duplex

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Duplex investor reading a bookI may be stating the obvious, but if you’re looking to buy a duplex in Minneapolis, it’s important you have realistic expectations.

And often, those expectations should be set in accordance with type of duplex inventory available in the areas you’re considering investing in.

For example, Twin Cities Craftsman-era duplexes, which are typically a short bus ride from the city’s core, were usually built between 1912 and 1929. They were built because with the mechanization of the industrial revolution, fewer people were needed to work on farms, and more were needed to work in manufacturing and services– which were found in the city.

So farm kids moved into town to get a job. And, in 1923 they didn’t have as many wardrobe choices as we do today. So give up any notions you might have about finding walk-in closets.

Of course, people changed with time, as did fashion and architecture.  If you need a place with more than one bathroom and bigger bedrooms, for example, duplexes form the post World War II housing boom of the 1940s and1950s is the era they started to appear.

The trouble for most buyers is, most of the land closest to the city’s core already had buildings on it at that time. So, you’ll find these bigger duplexes with more contemporary amenities a little further out from downtown.

Sure, there’s the exception to every rule, but by en large, this is the case.

Know too that with fuel prices being what they are, you aren’t alone in wanting to live close to work to save on both gas and hours in the car.

As a result, there are a lot of people who want to buy that inexpensive duplex two blocks from one of the lakes. Increased demand always equals higher prices or, in this market, all cash transactions.

There are plenty of great duplex buys in Minneapolis; provided your fantasy of what that looks like matches reality.

Stay open to your options.

Comments Off on Why President Obama Loves Your Minneapolis Duplex

lightrailThe White House cares about your southwest Minneapolis duplex.

OK, so maybe not your duplex, specifically. But they do seem to care about public transportation in Uptown, St Louis Park, Hopkins and Eden Prairie.

Earlier in the week the Obama administrations stated they would expedite the permit-approval process for the 15-mile Southwest Light Rail transit live slated to run between Minneapolis and Eden Prairie.

The expedition is part of the new “We Can’t Wait” program, which aims to expedite infrastructure approvals by processing them more efficiently.

The project’s proposed route connects with the existing Hiawatha and University lines in downtown Minneapolis, and run in a southwest direction toward Eden Prairie between Cedar Lake and Lake of the Isles, along Excelsior Blvd to 17th Avenue in Hopkins, where it will turn south toward a southwest station just west of the Highway 212 and 494 junction.

This should prove to be a boon to property owners along the line, as tenants and home buyers increasingly seek green neighborhoods and efficiencies in fuel consumption expenses.

Is Your Neighbor A Real Estate Investor?

said on October 1st, 2012 categorized under: Buying A Duplex

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Neighborhood InvestorsHow many Americans are real estate investors?

Would you be surprised to learn almost as many as own ROTH IRAs (28.5 million) or shareholders in money marked funds (29 million)?

According to a joint survey by the web sites Bigger Pockets and Memphis Invest, 1 out of every 8 American adults consider themselves to be real estate investors. That’s 28.1 million people.

And what are these people doing during this period of historically low interest rates?

Well, 39 percent of them intend to increase their purchases over the next 12 months, while 26 percent plan to buy as many investment properties in the coming year as they did last year. Combined, that means 4.5 million investors are currently active in the market.

According to the National Association of Realtors, last year investors purchased 1.23 million homes, which was an increase of 64.5 percent over the 749,000 they purchased in 2010.

If you’ve ever thought about becoming a Minenapolis or St Paul real estate investor but don’t know where to start, give me a call. It’s a great way to either supplement your income or fund your retirement.

Why You Need A Map To Buy A Minneapolis Duplex

said on September 27th, 2012 categorized under: Buying A Duplex

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minneapolis duplex mapIf you’re thinking about where you want to buy an investment duplex in Minneapolis, one of the first questions you should ask yourself is where you drive.

Why is driving important to investment real estate?

Because many new investors make the mistake of buying properties too far from where they already travel, which makes managing the property difficult.

In the book FLIP: How to Find, Fix and Sell Houses for Profit, authors Rick Villani and Clay Davis shared an excellent strategy for locating neighborhoods to invest in.

They suggest you get a map of your city that’s divided into neighborhoods or zip codes. Then, take a pen and put a mark on where you live, and where you work.

Next, decide how far you’re willing to drive to take care of your investment property. A better measure might be how much time you’re willing to spend in the car.

If that’s ten miles, draw a ten mile circumference around your office, and another around your home.

Looking at the map, draw a line from the top of one circle to the top of the other. Then connect the two bottoms of the circles in the same way.

The area that falls between those two lines, or where the two circles overlap, should be neighborhoods you either travel through every day, or ones that wouldn’t be tremendously out of the way for you.

And it’s those duplexes you should target, as they’ll be the easiest for you to manage.

Believe it or not, there will be days you really, really don’t want to have to go to your Minneapolis duplex to make a repair or show a vacant unit. The less out of your way it is, the easier that trip will be to do.

What’s The One Percent Rule To Buy A Minneapolis Duplex?

said on September 24th, 2012 categorized under: Buying A Duplex

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one percent rule in duplex investingWhen looking to invest in a duplex, many Minneapolis duplex buyers have a quick rule of thumb they use to eyeball financial information on a property to decide whether it’s a good deal.

For some, that measure is the Cap Rate, which is a ratio of an income property’s net operating income to its fair market value.

Other duplex investors may use the Gross Rent Multiplier, which is a number determined by dividing the fair market value (usually purchase price) by the gross amount of revenue a property generates in a year.

A close cousin of the gross rent multiplier is the Rent-To-Value Ratio. This ratio takes the Gross Monthly Rental Income and divides it by the Fair Market Value of a property.  So, if a duplex generates $2000.00 a month in rent, and its purchase price is $200,000, the Rent-To-Value Ratio would be 1 percent.

Many investors believe as long as you have at least a one percent Rent-To-Value Ratio, the property will cash flow. However, it’s important to note a couple of things.

First, this number may be impossible to achieve in many of the more expensive markets across the nation.

Second, like the Gross Rent Multiplier, the Rent-To-Value Ratio fails to take into account one very big consideration: expenses!

Some properties have higher property taxes than others, some require the owner to pay heating bills, and some have so much deferred maintenance that repair bills will skew expenses.

Like the other measures, the Rent-To-Value Ratio is only an eyeball test.

You should never buy a Minneapolis duplex without doing a complete financial analysis, and asking the seller to provide the data necessary to back your math up!