Duplex Chick

Comment

Last night, I was reminded why I think HGTV bears some of the responsibility for the current duplex market.

My clients and I went back for a second showing of a bank owned duplex where the previous home owner had clearly undertaken some do-it-yourself home renovations.

Trouble was, he didn’t know what he was doing.

Oh, the refinished hardwood floors and exposed brick chimney looked really cool.

Unfortunately, however, the homeowner also forgot to install a heat source on the third floor.

The kitchen cabinets looked good too. I just wish that duplex owner had also bought glass for the broken windows instead of using masking tape.

Fortunately, my clients were wise enough to invite a FHA 203k approved contractor along to the showing so that they could get an accurate and professional opinion of what repairs were going to cost them; before they put in an offer.

After all, if the cost of rehabbing the duplex, when added to the cost of purchasing it, was more than the finished property would be worth in today’s market, they would find themselves upside down once they were finished with the repairs. Just like the previous homeowner.

When you’re looking at buying a duplex that needs either a little or a lot of work, it’s  important to remember that big repairs and improvements aren’t as easy as they appear on HGTV.

If you’re considering using a FHA 203k loan to finance those repairs, it’s not a bad idea to get one of their approved contractors to give you a professional opinion before you even put ink on a page.

There are always unexpected surprises and expenses, that can leave you frustrated and broke. And if you’re ambitious enough to take that kind of work on, you also deserve to be compensated for your time and energy in the form of equity.

Remember to build all of those expenses into your thinking when you write an offer to buy a duplex.

Comment

Every morning I get email updates from Google that contain links to all the duplex news happening around the country and in Minneapolis and St Paul.

Almost every single one of them is about a fire in a duplex.

In fact, this morning I learned about a duplex fire in the Uptown neighborhood of Minneapolis, which is one of the most popular rental areas in the Twin Cities.

The duplex looks like a total loss.

These headlines serve as daily reminders of the importance of doing all you can to eliminate the risk of fire.

Here are a  6 ideas to keep your duplex from becoming a Google headline:

• Keep anything combustible, like bags, paper or rags, at least 10 feet from any appliance that uses gas, like the furnace or boiler, stove, or water heater.
• Install at least one smoke detector on every level of your duplex. And of course, always make sure the batteries are in good working order.
• Be sure you have a smoke detector close to any room a tenant sleeps in.
• Make sure a tenant’s path to any window or door that might serve as an egress is free of clutter and debris.
• If you have a third floor in your duplex, make sure there are two ways for tenants to get out.
• In Minneapolis, duplexes are not required to have fire extinguishers. However, it might not be a bad idea to make sure there’s one or two in each unit, as well as in any common area, like the laundry room.

These safety measures don’t cost much. And they will help both you, and your tenants, sleep better at night.

Comment

If your Minneapolis duplex needs rehab, and Hazleden isn’t what you had in mind, you may want to explore a Rental Rehabilitation Loan from the Minnesota Housing Finance Agency.

Rental property owners who want to make improvements can borrow up to $25,000 for a one or two unit property, or $10,000 per unit for larger properties. The total loan amount cannot exceed $100,000.

The loan is amortized for up to 15 years at 6 percent interest.

There are some restrictions. First, the duplex or investment property must be occupied by individuals or families whose income is less than 80 percent of the statewide median income.

The median income for a family of two or less in Minnesota is $73,100. Eighty percent of that is $58,480, an amount which should help many Minneapolis and St Paul duplex owners qualify.

Income property owners need to have a good credit history to qualify for the loan. The duplex also must have some equity, and a positive cash flow.

The loan is not limited to individual property owners. Partnerships or corporations can also apply, but must be willing to personally guarantee the loan.

The work can’t go on indefinitely. It must be finished within nine months and meet Section 8 Housing Quality Standards when it’s done.

What a great way to make those improvements you’ve been putting off!

Comment

There are two kinds of duplexes in the Twin Cities; those originally built as duplexes, and those that used to be houses.

Generally speaking, those that fall into the latter category often never seem to flow right. There’s always a kitchen in a former bedroom, and a couch and TV stuffed into a corner somewhere.

There’s another problem with metro housing. Many times, there aren’t single family homes big enough to accomodate growing families.

As a result, several times a year I’ll have someone ask me about the process of converting a duplex back to a single family home.

Fair warning. While the process isn’t necessarily complicated, it isn’t something you can just undertake on a whim either.

The city of Minneapolis requires a duplex home owner get Zoning and Plan Review approvals before they will issue a building permit to change the use of the property.

To achieve this, someone from the Zoning department will verify that the conversion is in keeping with the city’s zoning ordinance. After receiving a stamped approval, the duplex owner must then meet with a Plan Reviewer who will make sure your plans comply with housing and construction codes.

The reviewer will need to see floor plans drawn to scale that detail the new layout of the property, as well as the significant changes you’d like to make.

The plans need to be for each level of the home, including even the basement and attic. They must also be thorough enough to include locations of windows, doors, and stairways. They should indicate where new walls are to be built, doors and windows moved to, kitchens removed and so forth.

Ultimately, it may be most useful to have both before and after plans along.

Comment

When I sit down with someone considering buying their first rental property, I always go over not only the potential revenue the property can generate, but also the certain and probable expenses.

The one expense most prospective owners (and to be honest, listing agents) seem to omit most often is the cost of repairs.

Let’s face it. No matter how new or old your duplexor house is, sooner or later something’s going to break, become outdated or wear out.

I have fixed numbers I use as projected repair costs for each unit per year. Of course, some years nothing breaks and others, everything does. So my estimates are just that; estimates.

It’s usually about then that I also share the names of some of my favorite local shops.

Of course, when and if  something needs repair or improvement, the obvious locations to look for supplies are Home Depot, Menards and Lowe’s.

However, if the repair or upgrade isn’t urgent, it might be easier to stay under budget by shopping at a couple of local treasures.

Building Materials Outlet (formerly Cannon Recovery) is just over the Mendota Bridge in Eagan. For over forty years they’ve specialized in liquidating excess inventory from national distributors and manufacturers.

While their inventory isn’t as reliably consistent as the retail stores, the savings are significant. On any given day you can find French doors, new windows, rolls of carpeting or pallets of tile for as a third less or more than at traditional home improvement stores.

Another local institution that’s not only a great place to save money, but also a green solution is The ReUse Center in Minneapolis.

Read the rest of this entry »

Comment

The spring housing market begins one week from today.

If you’re thinking about selling, that’s important information. However, it’s equally important if you’re a landlord facing a spring vacancy.

Why?

Many of your usual prospective tenants are going to be looking for houses in order to beat the April 30 first time homebuyer tax credit deadline, resulting in more landlords competing for fewer prospective tenants.

What’s more, many homeowners unable to sell their property for what it’s worth have turned them in to rentals, meaning there’s far more competition out there than ever for rental dollars.

Here are ten ways you as a landlord can compete:

1. Get your vacant unit so clean that your mother would stay there.

2. Give every room a fresh coat of paint.

3. If the kitchen cabinets lend themselves to it, apply a fresh coat of paint and updated hardware. You’d be surprised how inexpensive hinges, knobs and drawer pulls can be. Replacing them can immediately give a kitchen a face lift.

4. If your kitchen counters are dated, replace them. You don’t have to put in granite, but many of the larger home improvement chains offer relatively inexpensive laminate counter tops with a similar look and feel to high end stone.

5. Replace switch plates. At pennies a piece, the return on the investment here is significant. Filthy switch plates imply a history of grime. Painted-over switch plates send a message of laziness.

6. Paint the front door. It’s tough to paint in the winter, I know. But you could remove the door, taking it to the warm basement long enough to get it painted and dry. It may be possible to cover the opening with plastic while you’re waiting.

7. Shovel the sidewalks. Fallen on ice yet this year? Enough said.

Read the rest of this entry »

Comment

I don’t know whether to call it a trend or a theme, but this week my real estate business has had one.

First, the pilot light on the furnace in a buyer’s new property went out the day before closing. Next, the forced air furnace in one side of a duplex a buyer is considering came back with a yellow flame; which may or may not be the sign of a cracked heat exchanger (which can result in the unit producing unsafe levels of carbon monoxide).

Then I got a call from a rural tenant stating they had no water in the house or any of the outbuildings on the property.

The theme for the week could be ”things break”. However, there’s another one here; whenever possible, get a home warranty.

It seems like everyone from Best Buy to car dealers offer an extended warranty these days. And we’ve all had experiences where the coverage they provided were not worth the additional cost.

I haven’t found this to be the case with most home warranties, however; especially when a client is purchasing a foreclosed property.

Many foreclosures not only have deferred cosmetic maintenance, but the mechanicals like the furnace or boiler and water heater have been ignored as well.   Most banks aren’t in the business or maintenance or repair, so whatever’s wrong with the property will most likely be the buyer’s responsibility.

Read the rest of this entry »

Comment

Sometimes I think I should write questions for “Who Wants To Be A Millionaire”

See, I get a lot of questions I can’t answer in my job. They range from, “Why did the seller think put a toilet in the closet?” (Answer: “I dunno”) to “How much does it cost to put a new boiler in a 4500 square foot triplex?”

While I don’t think I’ll ever have an answer to the first question, from time to time I’ve been able to answer the last by calling a contractor friend for a favor…or 12. I swear, sometimes I can (understandably) actually hear them roll their eyes over the phone.

In an attempt to answer without using my “Phone A Friend” lifeline the other day, I stumbled on one of the most useful websites I’ve ever found.

It’s actually called Whatitcosts.com.

Need a wedding dress? They can give you a ballpark idea of what you’ll need to spend. But more importantly, to this conversation anyway, they can give you ranges for any kind of home improvement you could think of.

While not exact, the prices the site provides are in keeping with figures local contractors have shared.

How much for the boiler? Now I can answer. Anywhere from $3500 – $7000 (dependent on energy efficiency, BTUs, etc.).

I don’t think, however, I’ll ever have an answer as to why some owners make some of the “home improvements” they do.

Comment

One of the challenges facing many duplex and single family home buyers in today’s foreclosure-laden real estate market is that many of these properties havea significant amount of deferred maintenance.

And it’s tempting, regardless of the type of property purchased, to “Pimp My Ride” with every conceivable improvement featured on HGTV or in the aisles of Home Depot.

Before you max out your credit cards, spend all of your $8000 first time home buyer tax credit or burn through your 203(k) construction loan, it’s important to stop and think who you’re improving the property for, and just what your return on those expenditures will be.

Just as improving a kitchen or adding landscaping increases the value of  a single family home, upgrades to duplexes do as well.  Before you start putting granite countertops in your rental units, however, it’s important to ask yourself a couple of questions.

First, if your intention is to ultimately sell the property, think about who your eventual buyer might be. Is your property one that lends itself to an owner occupant? To answer this, simply ask yourself whether you would live there.

Read the rest of this entry »

Comment

Believe it or not, there’s a home improvement show for duplexes.

While it hasn’t gotten a ton of press, if you’re going to be home Wednesday night, you might want to check out the HGTV show, Income Property.

Hosted by Scott McGillivray, the premise is basically this.  First time homeowners buy a duplex or a single family home and gets in over their head. Either the rental unit is trashed, resulting in a longer term vacancy or, the owner of a house is financially strapped and needs to generate extra revenue in order to make the mortgage payment.

In the case of the latter, the solution is to turn a portion of their home (usually the basement) into an apartment.

The property owner is given the opportunity to either have the show do a “Lipstick Job”, which is typically a fast turn so the unit can be rented immediately. Or, they can have the big, extensive rehab.

The show has useful tips for both new property owners and experienced investors, including which materials to use to attract tenants, how to decide whether the cost of a renovation will generate an appropriate return, and which repairs and upgrades should be tackled first.

“Income Property” airs in the Twin Cities on Wednesdays at 8:30 pm.