December 19th, 2008 categories: Multi-Family Property Investing, Tenants
| Discussion: No Comments »
December 5th, 2008 categories: Buying A Duplex, Multi-Family Property Investing
| Discussion: No Comments »
November 10th, 2008 categories: Multi-Family Property Investing
I’m a good Realtor. I make sure that I never sell a property that has monsters hiding in the closets or under the beds.| Discussion: No Comments »
October 24th, 2008 categories: Multi-Family Property Investing
These days, it seems Wall Street might as well be the name of the latest Wes Craven horror movie. It’s been a financial bloodbath featuring screams in the night, followed each morning by another casualty and the utter inability of police or government to track down the villain.| Discussion: No Comments »
August 11th, 2008 categories: Multi-Family Property Investing
In the past, one of the most lucrative tax loopholes for real estate investors was the provision that allowed an owner to move into a rental or investment property, and after living there for two years, realize and capital gains tax free, up to the individual $250,000 or married couple $500,000 limits.
In Minnesota, this benefit was especially attractive to those eyeing retirement in warmer climates. Why? Well, let’s say you wanted to retire five years from now. Both the Florida and Arizona real estate markets are, perhaps, in even more dire circumstances than the market here. Theoretically anyway, it might be a great time to pick up that vacation condo on the beach in Santa Barbara.
If you found a bargain, you could rent it out until you were ready to retire. It’s reasonable to assume that over enough time, that property will increase in value. Well, that appreciation is taxable. However, if you moved into the home for at least two years, Congress said they would not tax you on that increase when you sold.
As of January 1, 2009, that is no longer the case. When the president signed the Housing Bill into law two weeks ago, the rules changed.
Now, any properties purchased after that date will be subject to an amended version of this law. Investors will now be asked to pay capital gains taxes for the years of appreciation when they did not live in the property. So, if you owned a condo in Phoenix for five years, and lived in it for two, you would be taxed for the three it was tenant occupied.
If you’ve been thinking of purchasing a vacation property, or an investment property to ultimately move in to, a wise strategy may well be to act before year’s end. In all the doom and gloom of the coverage of today’s market, not one prognosticator has ever said the market housing prices will never increase again. When they do, it would be awfully nice to be able to shield those gains.
| Discussion: No Comments »
June 16th, 2008 categories: Buying A Duplex, Multi-Family Property Investing
There are many differences between the purchase or sale of an owner-occupied single family home and a multi-family property. One of the most important is the time of the month that you close the deal.
When you purchase your own home, it’s a good idea to try to schedule a closing date toward the end of the month. That way, you save on the amount of interest you pay.
However, when you buy an income property, you want to do just the opposite. Why?
Well, rent is collected at the first of the month. If the purchase agreement for the property is written properly, the seller is responsible for collecting the rent that month, then assigning the pro-rated balance to you at closing.
Example? If rent is $300 a month per unit, and there are four occupied units, he or she would collect $1200. If there are 30 days in the month, and you close on the fifth day, you would be entitled to 25 days of rent or $1000.
| Discussion: No Comments »
June 10th, 2008 categories: Buying A Duplex, Multi-Family Property Investing, Selling A Duplex, Twin Cities Real Est
The weekly MAAR activity report came out and there appears to be a bit of good news in the single family and multi-family home markets.
New listings of single family homes continued to drop, being 23 percent behind the same week in 2007. Meanwhile, pending sales increased 4.9 percent over last year; a number that represents the biggest year-over-year increase in 117 weeks (29.25 months!) This is only the third increase in that time. The second happened just two weeks ago.
Meanwhile, the multi-family market continued along at a healthy clip. Sales of 2-4 unit properties were up 182.4 percent over the same week last year. Of these sales, 84 percent were for properties in a short sale or foreclosure situation.
New listings in the multi-family category decreased by 22.2 percent, meaning, for now anyway, supply has begun to decrease.
It will be interesting to see whether Freddie Mac’s August lending restrictions impact this market.
| Discussion: No Comments »
June 9th, 2008 categories: Financing, Multi-Family Property Investing, Twin Cities Real Est
If you’re planning on loading up on 1-4 unit investment properties during the down market, you’d better do it now.
In May, Freddie Mac made changes in its lending guidelines. As of August 1, 2008, a borrower may no longer have more than four financed 1-4 unit properties, including the one being purchased. What’s more, in order to refinance, the borrower must have owned the property for at least six months prior to getting a new loan.
Present Freddie Mac guidelines allow an investor to have up to 10 financed properties.
Until now, neither Freddie Mac nor Fannie Mae required a loan to be seasoned. This change will likely have the greatest impact on rehabbers and others intent on purchasing the property with the intention of refinancing to pull cash out.
The announcement of this change may help explain the recent run on properties priced under $100,000.
This will also effect owners who hold title as an LLC. If you own your property as an LLC, but need to qualify for a loan as an individual, you’re going to need to hold title as an individual for at least six months prior to a refinance. I know, I know. That appears to contradict what I said yesterday. You’re going to have increased liability exposure during this time frame; which you may want to address via an umbrella insurance policy.
So just get a loan from a lender who doesn’t resell conforming loans to Freddie Mac or Fannie Mae, right? Ha ha. That requirement eliminates almost all of them. Freddie Mac and Fannie Mae are privately capitalized, government sponsored entities that purchase the majority of conforming loans. They then repackage these loans and sell them as mortgage-backed securities to investors. This helps replenish the money supply of available money for mortgages.
Commercial loans will not be effected by this.
As the money supply grows ever tighter, I see the rebirth of the contract for deed on the horizon…
| Discussion: No Comments »
June 8th, 2008 categories: Buying A Duplex, Legal Stuff, Multi-Family Property Investing
One of the concerns multi-family property investors often have is how to protect themselves in the event a tenant suffers an injury on one of their properties. Namely, how can he or she protect their real estate portfolio?
A relatively easy way to do this is to form a Limited Liability Company or LLC, and either take title or, via a quit claim deed, change the ownership of the property to the LLC.
An LLC is often suitable for single owner or smaller companies. It is a hybrid between a partnership and a corporation, except that it is often more flexible. One of the advantages of an LLC, is the owners have limited liability for the actions and debts of the company.
The process of establishing an LLC is relatively easy and inexpensive. It is created by filing the Articles of Organization with the Secretary of State, for which the state charges a filing fee. This is something you can do yourself, or if you’d rather, you can enlist the help of a real estate attorney.
If you create a unique LLC for each property in your portfolio, then each is owned by a separate company. Each should have its own checking account and bookkeeping. This helps establish a record of it truly being a separate entity.
That way, in the event someone is injured on one property, and they are successful in litigation, the only property in play is the one owned by that LLC.
| Discussion: No Comments »
June 3rd, 2008 categories: Buying A Duplex, Multi-Family Property Investing, Selling A Duplex, Twin Cities Real Est
The Minneapolis Area Association of Realtors (MAAR) just released it’s weekly activity report for the week ending May 24. For the second straight week, pending sales are relatively flat; down just 1.4 percent from the same week last year. Over the same time period, new listings declined 6.4%. The total listing supply declined too, which is an oddity for the spring housing market. In other words, it kind of looks like things might be stabilizing.
Of course, MAAR doesn’t keep track of the same kind of data for duplexes. So, we’re left with me and my abacus.
In the week ending May 24,68 new duplex listings came on the market in the Twin Cities metro area. This represents an increase of 179% over the same period last year. That would be disastrous were it not for the fact that duplex sales for that same week are up 46% over last years mark. Of those, a full 87% were short sale or foreclosed properties.
I know, Realtors saxy the market is picking up all the time. I don’t compile the statistics, but I do know that in the last week I’ve had clients who wanted to write offers on two different properties. Both were either selling in multiple offers or already had accepted purchase agreements on them. These were foreclosed buildings in great locations that required a little bit of cosmetic repair. However, both also had positive cash flows of several thousand dollars a year. That’s something investors haven’t seen in this market for years.
| Discussion: No Comments »