Archive for the 'Buying A Duplex' Category

Why Buying A Duplex Is Like Asking Someone Out

said on August 29th, 2011 categorized under: Buying A Duplex

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you can see my heartHave you ever wanted to ask someone out, and by the time you finally got up the nerve, discovered they’d just started dating someone else?

Buying a great duplex investment can be exactly like that.

Because great duplexes don’t stay on the market for long, just like all the attractive, smart, funny, kind, financially secure people who are actually interested in dating don’t stay single for long.

I am constantly amazed that buyers think the greatest duplex deal in the world will last the 5 to 7 days it takes them to decide to write an offer.

Even in a down real estate market, the great duplex deals are snapped up quickly.

And when they’re gone, no amount of shoulda, coulda, wouldas will bring them back.

If you’re thinking of buying a Minneapolis duplex, be ready to act quickly. Have your mortgage pre-approval letter ready to go, be committed to a Realtor who specializes in duplexes, and don’t be afraid to write an offer.

And remember, if it’s rejected, it’s not because you dress funny or smell weird.

It’s because the seller wanted more money, more time, or simply changed her mind. However, if the answer is yes..

Just be sure to make your purchase contingent on an inspection. That will give you, and if you choose, a qualified inspector, an opportunity to go over the property thoroughly before you go forward with the purchase.

And if you and the seller can’t come to an understanding about how to fix any problems, whether physically or financially, you can break up with the duplex.

Just like dating.

Why I Love Buying At Duplex Estate Sales

said on August 22nd, 2011 categorized under: Buying A Duplex

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estate_saleI love duplex estate sales.

Not the kind where there’s a bunch of stuff displayed in the driveway and if you’re lucky, you’ll find something you can buy for a dollar and score big with later on Antiques Roadshow.

I’m talking about duplexes that were owned by people who have passed away, and their heirs are now trying to sell the place.

I don’t mean to sound morbid.

Really, I don’t.

But here are three great reasons to buy duplexes from dead people:

  1. America’s Greatest Generation Took Care Of Things – Having survived the Great Depression, there was a generation of people who grew up knowing the importance of maintaining what they had rather than buying more of something new. For example, while their 1950’s-installed linoleum may not be the latest product featured on HGTV, it often looks like it was installed yesterday. The roof, the furnace, the windows– all of the expensive items– however, are likely to be new or in perfect working order.
  2. Rents Are Usually Low – If a seller has owned a property for a long time, odds are he or she no longer has a mortgage payment, and has become friendly with the tenants. And if they’re good tenants who have always paid on time, odds are the owner didn’t increase rent for fear of them leaving – for years.  The good news with income property is that banks lend on the current revenue a property generates (unless it’s vacant, when market rents are projected) vs. the revenue the property could or should bring in.
  3. Rehabbing Is Easy- Because the big things, like furnaces and roofs, have been maintained, most improvements these duplexes need are cosmetic. The carpet might need to be removed (revealing pristine hardwood floors), or the wallpaper. You may find the kitchen cabinets are so old they’re actually wood and can be painted or stained rather than replaced.

There’s only one problem with duplex estate sales. You can’t predict where or how you’re going to find them!

Why Buying A Duplex Is Like Senior Photos

said on August 18th, 2011 categorized under: Buying A Duplex

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bad duplexesBuying a duplex can be a lot like having your senior photos taken in high school.

Selecting the right outfit and photographer is a bit like getting pre-qualified for a loan and selecting a Realtor.

And if you decide you want to see every duplex on the market,  it’s kind of like digging through all the proofs where your eyes are half-closed or you had a hair sticking up on the back of your head.

What would that experience be like if, instead of weeding through 80 proofs (like I had to) in order to find the one or two good ones, you just saw the good ones?

And what if instead of seeing the duplexes with mold in the basement where the light fixtures had been ripped off the walls, you just saw the ones that were right for you?

There are a lot of duplexes listed for sale all over the Internet. And, if you’re anything like me, it’s easy to write a mental story of how wonderful the property is based on a few good or bad photos.

It’s easy to get discouraged when time and again, those stories don’t come true.

I used to show buyers a lot of duplexes. The more they saw, the more disappointed they became.

So I don’t do that anymore.

I ask my duplex buyers a lot of questions. And then I do my very best to run out and find properties that match their answers.

It saves us both a lot of time. And disappointment.

Why It’s Now Cheaper To Buy A Duplex Than Rent One

said on August 17th, 2011 categorized under: Buying A Duplex

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Buying Vs Renting A Minneapolis DuplexWith the slide of  real estate values over the last five years and declining vacancy rates, it is now cheaper to buy a duplex than rent one in most U.S. cities.

According to our friends over at the real estate web site Trulia, in 74 percent of the country’s 50 biggest cities,  buying a duplex or home was cheaper than renting.

Of course, there were the usual exceptions in cities like New York  and San Francisco, where renting was still the lower cost alternative.

A number of factors have conspired to make this a terrific real estate buying opportunity, like interest rates at or below 4 percent (as of last Friday), and the tax benefits of property ownership like the mortgage interest deduction and ability to write off the part of the duplex you don’t live in.

Leading the way as the best city to buy a property rather than rent was Las Vegas, where the median price of a two bedroom, two bath condo or townhouse was around $60,000.  This translates to monthly mortgage payments of $256 on a 30-year fixed loan at 5 percent interest. Throw in additional expenses like association fees and property taxes of around $300 a month, and the $556 total is still well below the market average for a comparable rental of $810 a month.

While Minneapolis and St Paul duplexes didn’t win the national affordability index, the Twin Cities nonetheless did finish with a ranking that indicated it is better to explore the option of owning rather than renting.

For a complete list of results, click here.

And of course, no matter where you live, if you’re interested in buying a duplex, I will be happy to help you find a qualified Realtor to guide you through the process.

Comments Off on Why Duplex Short Sale Lowball Offers Get Rejected

half off duplexesSome of the best duplex deals out there are short sales.

Not only are they often in better shape than the foreclosures, but there tends to be a better selection of duplexes to choose from.

Some people even think they are such good deals that you can outright steal them.

This is such a common belief that I’ve been getting lowball offers on my Minneapolis duplex listings all summer long.

I understand the impulse. After all, the seller may need to get out, no matter what, and the buyer has to wait a long time for an answer. So heck, that’s worth a good deal, right?

Except there are some problems with that thinking.

First, the seller may be required by the lender, especially if the duplex has a second mortgage, to bring money to the table to keep the mortgage holder from pursuing a deficiency judgment even after the property has been sold or lost to foreclosure.

Needless to say, the bigger the offer the seller receives, the greater the likelihood is there will be some money available to give the second lien holder.

So don’t be surprised if the seller gives you a counter offer.

Second, not every short sale owner is in foreclosure or behind on payments. Many need to sell their duplexes due to a job relocation, marriage, divorce, death or any number of other legitimate reasons.

“Short sale” is NOT synonomous with foreclosure, it simply means the seller owes more than the property is currently worth, and is “short” in the amount he or she owes the bank.

Third, the banks aren’t stupid. Well, not always. They hire Realtors to do something called a Broker’s Price Opinion or BPO before they agree to any sale. Essentially, they retain an agent who doesn’t represent the buyer or the seller, for independent opinion of what  a property is worth.

These agents are familiar with the market, and have access to not only data on duplexes that have recently sold, but also those currently for sale. If an offer on a duplex seems way out of line with the market, they will advise the bank to respond to the purchase agreement with either a counter offer or an outright rejection of the price.

All of this doesn’t mean you can’t simply make an offer on a duplex listing. Just know the odds and be realistic.

Why You Need A Math Wiz When You Buy A Duplex

said on August 12th, 2011 categorized under: Buying A Duplex

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duplex mathFor a liberal arts major, I sure do a lot of math. Duplex math. Investment property math.

I’ve gotten pretty good at it.

(This would come as a great surprise to my high school algebra teacher.)

If you’re thinking of buying a duplex either as an owner occupant or as an investment, it’s important you hire a Realtor who’s good at math too. Well, duplex math anyway.

Many people make the mistake of hiring an agent who’s a friend of the family, or one who sends them really cool refrigerator magnets to guide them in buying their first duplex. After all, aren’t all rental properties good investments?

Not if they don’t cash flow.

And even if they do, are they generating the best possible return on your investment?

I gotta run. I’m off to show a client a duplex that has a 46 percent cash on cash return!

Comments Off on What Foreclosure Statistics Mean To Duplex Owners

Whether you’re an investment property owner or prospective duplex buyer, when you read or hear RealtyTrac Vice President Rick Sharga [youtube][/youtube] share their monthly foreclosure statistics, you should mentally respond with the following thought…

“And all of those people will need to rent.”

For example, while the headline on this week’s report was “Foreclosure Activity Falls to 44-Month Low in July”, the rest of the story went on to state that while lenders already have 850,000 homes on their books nationally, there are another 1.1 million property owners in earlier states of foreclosure…and all of those people will need to rent.

There may also be as many as three million more properties that will be foreclosed upon before the housing market improves…and all of those people will need to rent.

Remember the pay option mortgages? The ones where you could pay interest only, interest plus principal, and so forth? Well, $200 billion of those mortgages are due to start resetting this year. It will be difficult for those homeowners to refinance, because the mortgages are on properties that have lost a great deal of value.

And if those folks face foreclosure?

All of those people will need to rent.

The greater the demand for places to live, the higher rents go.

Has there ever been a better time to invest in duplexes?

Probably not in our lifetimes.

Let Microsoft Rehab Your Duplex

said on August 10th, 2011 categorized under: Buying A Duplex

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increase rent at your duplexI saw a really easy duplex rehab opportunity yesterday. And it wouldn’t require a hammer, nails, or even a mop.

In fact, it could be rehabbed using Microsoft Word.

Because the only thing it needed was notice to the tenants that increased their rents.

And it reminded me that sometimes, in a world filled with HGTV, there are more kinds of rehab opportunities than those that involve a paintbrush.

The property I looked at was being sold by an estate. Having owned it for decades, the elderly couple who it had once belonged to were realizing terrific cash flow in retirement because they didn’t have a mortgage payment.

They had also come to like their long term tenants, and didn’t want to risk seeing them leave as the result of increased rent.

Or, it seems, by asking them to sign a new lease.

While the remedy here seems obvious, it isn’t to a lot of duplex buyers and investment property investors. They simply look at a listing as being overpriced in relationship to its revenue stream, and move on.

What they failed to realize, is that they could have bought the duplex for a value based on the rents that were in place. And “rehabbed it” within 90 days of closing into a cash flow machine — without having made a single trip to Home Depot.

5 Reasons Why You Lost Out On That Minneapolis Duplex

said on July 29th, 2011 categorized under: Buying A Duplex

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minneapolis duplex bidding warsI know it’s hard to believe in light of what the media’s been saying, but my duplex buyers and are actually running into multiple offer situations in the investment property market.

What kind of properties are we seeing bidding wars on?

Usually aggressively-priced Minneapolis and St Paul duplexes located in popular neighborhoods that are in good to very good shape.

Most of the time they’re owned by the bank, Freddie Mac or Fannie Mae.

And most of the time, there’s a feeding frenzy of buyers, making the sale of the duplex an awful lot like an auction.

So what kind of properties are being accepted on these properties? A winning bid may have one or more of the following characteristics:

  1. It was the highest offer. Remember, banks lent the previous owner far more money to buy the duplex than they will recoup selling it. 
  2. It had the fewest contingencies. While it’s always wise to have an inspection done, you may find doing one, without your offer being contingent on being satisfied with the results to be more appealing to an institutional seller.
  3. It had the biggest down payment. Sellers often view the down payment of an offer on a duplex to be an indication of the financial strength or weakness of the buyer. Right or wrong, the thought is the more someone has saved for a down payment, the more apt they are to be financially healthy.
  4. It had the biggest amount of earnest money. Similar to the down payment amount, a larger sum of earnest money conveys a similar message of strength.
  5. It was all cash. In a volitale duplex market, sellers often fear their property not appraising for the amount they either have it listed at or have accepted a purchase agreement for. In the event that happens, they will find themselves either having to renegotiate a contract with the buyer, or relisting the property all over again. A cash offer is not contingent upon an appraised value, and is therefore, more of a “sure thing” to the seller.

Now I realize it isn’t always possible to employ any or all of the tactics above. However, knowing them may help you understand the “why” of losing out in multiple offers.



Comments Off on There’s More To The Minneapolis Duplex Story Than The Headline

more to duplex story than headlineYou may have heard of this thing called the Standard & Poor’s Case-Shiller index. The media would have you believe it’s the nation’s most important source of information when it comes to duplex and single family home sales.

The report, which was released yesterday,stated for the second straight month, average prices for homes and duplexes sold in 16 of the 20 major metropolitan markets included in the survey were up. Granted, it was an average of just over 1 percent, but up is, after all, up.

So how did the Twin Cities fare?

Dead last.

As in experiencing a double-digit decline in sold prices of 11.7 percent; the largest drop in the nation.

This was a huge surprise to not only me, but the other Realtors in my office as well.

We’ve been incredibly busy, with offers coming in on listings that have lingered for some time and buyers having difficulty finding good property to buy.

In fact, to us it seems like the market’s improving.

And all the data coming from the Regional Multiple Listing Service in our area backs us up.

Yes, prices were down in May. But so were a lot of other things.

And that’s good news.

The Months Supply of Inventory dropped 1.6 percent to 7.9 months worth of housing. A balanced market is when there is a 5 month supply.

New listings were also down 5.5 percent between May and June, with the total amount of inventory for the year down 15.9 percent

And get this. Pending sales were up 48.1 percent.

Guess it pays to read the rest of the story.