Archive for the 'Buying A Duplex' Category

Minneapolis Duplex Sales Need Rain

said on July 31st, 2012 categorized under: Buying A Duplex

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Duplex Inventory DroughtThe Minneapolis and St Paul duplex market continued to suffer a drought of new inventory the week ending July 21, 2012.

While there were 31 new listings for the week, which sounds as if it should be a positive number, it actually represents 24.3 percent fewer duplex, triplex and four unit investment opportunities for buyers.

Of the listings to hit the market, 54.8 percent are being sold by traditional sellers. This represents a slight increase of the 46.3 percent of equity sellers for the week in 2011.

Perhaps the best news of all, however, is that 41.2 percent of the property owners who accepted purchase agreements that week did not need permission from anyone at a bank in order to do so. This is up dramatically from the 14.3 percent of last year’s sellers who could say the same.

Of course, fewer bank owned or negotiated transactions usually result in higher prices. This was certainly true for the week, with the average off-market list price at $209,553. This is double the average sold price of $104,231  for the same week one year ago.

Single family home buyers also found themselves doing a rain dance for houses to look at, with overall inventory down 30.7 percent. Meanwhile, pending sales were up 22.7 percent, putting even more pressure on an already withering crop of inventory.

Comments Off on Why You Can’t Get A Great Deal On A Minneapolis Duplex By Calling On A Sign

Great Deal on a duplexI had a phone call today from an aspiring duplex investor.

Nothing unusual in that. In fact, I get a number of these every week.

All of them wanted to know the same thing; was that duplex my sign was in front of still available to purchase and if so, when could I show it to them?

They were confused when I told them there had been an offer on it for months, and we were just waiting to hear back from the bank.

Whether it’s a bargain at a garage sale, or the real estate deal of the century, we all dream of making a pile of money as a result of our efforts.

The trouble is, the only people getting these great duplex deals are the ones working with a Realtor. And even then, duplex buyers are having to compete in multiple offers to get property, or, through the help of their agent, find something not yet available to the public for sale.

Much of the time in a market like this, by the time the sign is in front of the duplex, the property is already sold!

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SocksI wish duplex loans were like socks.

Then there would be a “one size fits all” answer to the question, “How much money do I need to put down to buy a duplex?”

The trouble is, there isn’t a universal answer. There’s actually a different answer for almost every buyer- but before I delve too far into metaphorically custom sizes, let’s start with the basics.

Broadly speaking, if you have great credit, a good job, and some money saved, the minimum down payment for a duplex is:

  • 3.5 percent – If you are an owner occupant using FHA financing. You may only have one FHA loan at a time.
  • 20 percent – If you are an owner occupant or investor with good credit and very little debt.
  • 25 percent – If you are an investor. You must also have in reserves an amount equal to six months of payments, interest, taxes and insurance for the property. This does not have to be liquid, but can be in a retirement account.

Of course, these standards may change if you have higher debt burdens or a lower credit score. The way the bank sees it, the less perfect your credit, the higher risk you are. It isn’t that they won’t lend you money; they just want you to have a higher down payment.

Fair warning. There are many loan officers will tell you there are loans available if you are an owner occupant for as little as five percent down. If someone says this to you, be sure to make it clear to them that you are buying a multifamily property, not a single family home.

The only way to find out for certain what kind of down payment is right for you is to talk to a loan officer who has experience with duplexes, triplexes and four unit properties.

If you need a recommendation, please call. I have several qualified, reliable loan officers who would give you the answer that’s right for you.

Comments Off on Why It’s Better To Buy A Minneapolis Duplex Than Rent One

Minneapolis Skyline from Lake CalhounOver the weekend, Forbes magazine made it official. According to them, it makes more sense to buy a Minneapolis duplex than it does to rent one.

In an article published on June 24, the magazine maintains almost 4 million families have become renters since the foreclosure crisis began.

Forbes’ Best And Worst Cities For Renters

As a result, there is more demand for rental housing, and a stagnant supply thanks to a lack of new construction.

The National Association of Realtors believes this will cause rents to rise an average of 4 percent this year, and another 4 percent in 2013.

To arrive at their rankings for the places best to rent or buy, Forbes used the average rent in the first quarter of 2012 and how much that changed since 2011, vacancy rates, and compared the area’s average monthly rent to the average monthly mortgage payments.

While Minneapolis didn’t “win”, it did finish second to only New York City on Forbes’ list for worst cities for renters. With vacancy rates at 2.5 percent (lower still in the downtowns), the average monthly rent is up 2.3 percent since the same time last year.

Meanwhile, the average monthly mortgage payment has dropped 30 percent since 2006, meaning a mortage payment will, on average, be $122 a month less than rent.

Of course, in a duplex, since you have a tenant paying most of the mortgage to begin with, your costs should be lower still. In some instances, you may even get paid to live in your unit.

Get in touch with me and let me show you how!

Comments Off on Investing In Minneapolis Duplexes Is Like Fishing

bobberBuying a Minneapolis or St Paul duplex right now is a lot like fishing.

When the fish aren’t biting.

I had a client contact me over the weekend. He is growing impatient, and is certain there are duplexes either currently on the market, or have gone off without selling that are great deals, and I’m just not finding them for him.

There are only 257 active duplex listings in the entire metro area right now that don’t already have offers on them.

Normal is somewhere around 1200.

So getting a great deal, simply because you want one, is kind of like yelling at the fish in the lake to get on your line.

It is easy to rush into a duplex that is a bad investment, simply because you want one now and nothing else is available. However, it will take you infinitely longer to divest yourself of that mistake than it would have to just wait for the fish to start biting again.

I reminded my client there are, in fact, plenty of duplex seller fish known to be in the lake. And they will start biting again.

I reminded him too that his agent knows where there’s a school of them. It’s just a matter of time before they decide to list their properties.

My client has one job…

To set his hook as soon as I notice the bobber moving.

Comments Off on How Did That Minneapolis Duplex Sell So Fast?

exteriorIf you’re in the market to buy a Minneapolis duplex, by now, you know things have really heated up.

And sometimes, duplexes seem to be sold the minute they appear on the MLS.

How do buyers get through those properties so fast?

If you’re a buyer working with a Realtor who’s a specialist in duplexes, odds are, you already know how.

Duplex specialists always have their own buyers in mind whenever they speak with a prospective duplex seller. After all, the seller’s property may be a perfect fit for someone the Realtor has been working with for a long time.

When this happens, the agent may ask the seller if it’s ok to let her buyer or buyers look at the duplex before it ever hits the market.

While a sale isn’t guaranteed, many sellers see the possibility of the duplex selling before it’s exposed to a wider audience as a way to minimize stress on their tenants.

If a duplex listing agent hasn’t sold the property to one of her clients, it may be a situation where through her years of experience, she has managed to cultivate a network of other Realtors who have expressed to her they have clients looking for a property in a specific area.  In that case, the seller might agree to let the buyers come through before the property is exposed to a broader audience via the MLS.

There is no rule that a property must ever be on the MLS, or be on it for a specific length of time before it’s sold.

It is the owner’s property, to sell as he or she wishes.

Why Being A Realtor Doesn’t Make You Smart

said on June 7th, 2012 categorized under: Buying A Duplex

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Test GradeThe other day, I showed a duplex that was owned by a real estate agent.

It was overpriced, and the rent was well under market rates.

My buyers asked me why the owner/agent had done that. After all, they thought, shouldn’t an agent know the market better?

Not necessarily.

The state real estate examination and licensing requirements don’t include mandatory knowledge of multi-family property workings. And, well, frankly, anyone can own a duplex without knowing much about the market.

What’s more, many Realtors only work part time. They might see a real estate career as a way to supplement their income, or save a little money when buying property for themselves.

Or, they may have found the rigors of the profession to be too much, and the income too unpredictable to make it a career. But after all of that schooling, they don’t want to drop their license.

True competency in any profession comes from experience, not a piece of paper.

It comes from encountering real-world problems, and finding real-life solutions.

And it comes from specializing in a type of property or a neighborhood; not from simply taking a class.

Minneapolis Duplex Sales Marvel-Ous

said on May 22nd, 2012 categorized under: Buying A Duplex

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whoosh!Like comic book super heroes, Minneapolis and St Paul duplex sales took off the week ending May 12, 2012.

Thirty-three cape-wearing duplex, triplex and four unit building owners accepted offers during the week; 54.5 percent of which did not need to call the bank for permission.

Compare this to last year’s Clark Kent-ish numbers, when just 25 Minneapolis investment property owners accepted offers; of which a mousey 32 percent were equity owners.

The number of new listings coming onto the market continued to be less heroic, however. There were just 25 new duplex opportunities for buyers, with 68 percent of them brought to market by traditional sellers.

Last year, there were 36 new duplex listings, with 41.6 percent of them being listed with property owners who were not in distressed situations.

This dynamic duo of increased duplex buyer activity and little new inventory ka-p0wed last year’s average sold price for the week of $133,604, finishing at an average off-market list price of $179,588. Granted, odds are when those transactions are finally closed and booked as sold, the average price will likely be about 8 percent less ($165,229.95), but it’s still a dramatic improvement over last year.

The single family home market also experienced a Wonder Woman-like transformation, spinning around to finish the month with a median sales price up 12.1 percent to $162,500.

Meanwhile, for the second week in May, pending sales leaped up 18.9 percent, while new listings dropped 11.8 percent.

This one-two punch further cemented this as a seller’s market, with just 4.7 months of inventory currently available. (A balanced market is when there is a 5-6 month supply.)

While this is all wonderful news for our market-decline crusaders, it’s important to remember no matter the comic, villians have a way of springing back to life.

We’re not at our happy ending yet.

Why Cash Duplex Buyers Are Like Race Horses

said on May 7th, 2012 categorized under: Buying A Duplex

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2012 Kentucky Derby Winner, I'll Have Another

2012 Kentucky Derby Winner, I'll Have Another

It seems if you want to buy a Minneapolis duplex these days, you might need to have a large daily limit on your ATM.

That’s because to a duplex seller, cash is like betting on a sure thing.

Many of the best duplex properties coming on the market generate a lot of buyer interest, and are getting multiple offers.

And when it comes to choosing a low all cash offer, or a higher offer that requires the buyer to get a loan, many duplex sellers are  choosing to take less money now.

That’s because to a Minneapolis duplex seller, cash offers are sure to come through, while a financed offer is a maybe.

In a seller’s mind, there are all sorts of things that could go wrong in the process of a buyer obtaining a bank loan.

For example, a furnace might fail an inspection, which would mean the buyer’s lender would refuse to finance the property, cancelling the sale.

Or, an appraisal might come back lower than the purchase price, resulting in the seller possibly receiving less than even the cash offer they have in hand; all due to a single appraiser’s opinion of value.

An offer from a cash buyer can typically close in a matter of days or a week.

Financed buyers, on the other hand, usually take more than a month. This is due to the bank’s requirements for documentation of a buyer’s income, as well as obtaining an independent opinion of value from an appraiser.

To many duplex sellers, especially banks, this is not a sure thing. And they simply want to bet on a buyer who is.

Comments Off on Why Many Minneapolis Duplexes For Sale Are Like Married Men On Match.com

duplexes sold subject to bank approvalWhen my clients are in the market to buy a Minneapolis duplex, they spend hours on the Internet, pouring over photos, and often, falling in love with a duplex they can’t buy.

It isn’t because they can’t afford it.

It’s because the duplex is like a married man.

When a Minneapolis duplex seller receives an offer on his property, he generally doesn’t want to advertise it as being sold until the buyer has removed all of their contingencies. Contingencies are essentially, “I’ll buy it if…” conditions.

For example, “I’ll buy it if I don’t find anything too horrifying in a home inspection that you won’t fix or pay for,” is a contingency.

In today’s market, the most common contingency is, “I’ll buy it if your bank agrees to sell it to me for the price we agreed on.” Of course, this “if” can take months to answer.

And while the seller is waiting for that answer, he usually doesn’t want to lose out on getting any potential back-up offers from other buyers. After all,  sometimes short sale buyers often grow tired of waiting and walk away from the purchase.

Knowing that, many of my clients want to go see these duplexes, in spite of their “already have an offer in at the bank” status.

I will oblige them, provided they understand that seeing a duplex that’s essentially sold, is kind of like dating a married man and actually expecting him to leave his wife.

In other words, my buyer falls in love, and spends all of her time wishing, waiting and hoping the deal will fall apart rather than moving on and finding a duplex that’s not only right for her, but actually available to be purchased.

The truth is, almost all of my clients move on to find another great duplex.

(I must admit, I’m a little concerned about of what that says about their dating histories!)