Archive for the 'Multi-Family Property Investing' Category
Comments Off on Millenials Won’t Be Moving Out of Duplexes Soon
Is there a reason investment properties continue to be among the hottest sectors of the real estate market?
The answer may be found with millenials. After all, a recent study by CoreLogic found that 60 percent of applicants for rental housing between 2011-2015 were millennials.
And that means student loan debt.
The total amount of student loan debt in the U.S. has mushroomed from $380 billion in 2004 to $1.3 trillion in 2015. The only collective consumer debt that’s bigger is mortgages.
Nearly half of all millenials (48%) in 2015 had student loan debt. This represents a 10 percent increase over just 8 years ago.
The average amount of student loan debt was $31,900 for adults between the ages of 20-34. In 2008, this average was $22,500. The median balance was up 53.7 percent to $18,600; an increase of more than $6500 over the $12,100 median in 2008.
Repaying this debt may be the reason so many of today’s renters are millenials.
With no sign of this changing soon, odds are millenials will continue to rent, keeping vacancy rates low.
Low vacancy rates mean higher rents, which make it a great time to be a landlord.
Comments Off on Make Your Vacation Home A Great Investment
If you already own a home or live in your duplex, you may want to explore the possibility of buying a vacation home for your own enjoyment, and as an investment.
If you’re purchasing an investment property in today’s mortgage market, you’ll be required to put 20 or 25 percent down.
But if you’re purchasing a second home, such as a winter residence in a warmer climate or a cabin on a lake, you are only required to put 10 percent down. The property must be a single family residence. In other words, it can be a condo, townhouse or house. It cannot be a duplex, triplex or apartment building.
Lenders are not asking you to live in your second home a minimum number of days or months in order to qualify for this loan. You may go for one weekend or for six months.
When you’re not there, you can leave it vacant. Or, rent it out as AirBNB or VRBO.
In other words, you can have short term residents buy you a vacation property.
Want a cabin up north or a condo on the beach? Why not let someone else buy it for you?
All the principles of duplex investment apply to vacation rentals as well. You just need to know how to use them.
Comments Off on Minneapolis Real Estate Still The Best Investment
Last month Bankrate released its latest Financial Security Index poll, and discovered one fourth of the respondents said they would rather invest in real estate with money they won’t need for the next 10 years.
That doesn’t sound like a lot until you look at the rest of the numbers.
Real estate beat out CDs and savings, which just 23 percent of those polled thought was a good place for a long term investment. Sixteen percent of those surveyed thought the stock market or precious metals would yield the best 10 year strategy, and just 5 percent thought they should put their money in bonds.
Due to the dot-com crash of the early 200s and the slide of the financial crisis of 2008-2009, many people don’t trust the stock market. This holds true in spite of the fact the stock market has benn on a bull run (when prices rise and investors are confident in the market) since 2009.
Real estate may inspire investor confidence, in spite of its own crash during the financial crisis, as a result of it being a tangible asset that, as an investor, you can see and touch.
While it may not be as liquid as money in a savings account or even stock, if the return isn’t what it should be, can you physically improve or manage differently to help change your rate of return. An investor may improve their cash flow by doing something as simple as picking up a paint brush, cleaning up the yard, or screening tenants more stringently. It’s tough to that with a stock.
If you believe real estate is a great investment, but aren’t sure how to get started, give me a call or email me. You’ll see why so many people believe it’s the best possible way to make sure you’re protecting your financial future.
Comments Off on Increase Your Duplex Cash Flow Through Short Term Rentals
Over the last few years, many of my investment property clients have told me they have dramatically increased the cash flow on their properties by furnishing a unit and using it as a short term rental through services such as Vacation Rental By Owner (VRBO) and Airbnb.
These services allow for short term rentals. In some cases it may be for a couple of days, and in others, several months. Because of the short term nature of the tenants stays, owners are able to charge a premium rent. In some cases, this is as much as double what a unit may rent for on a long term basis.
With the Superbowl and Final Four on the horizon, this may be especially appealing to Minneapolis duplex owners.
Of course, this is a relatively new way of running a rental property, which has cities across the nation scrambling to create regulations to make sure these properties are not exempt from the standards other types of investment properties are held to.
In San Francisco, for example, the city wants Airbnb landlords to display their city rental license number in all of their advertising as a way of insuring every owner is, in fact, running a legal unit.
In St Paul, the city council just created a committee to develop standards and rules and a way to collect taxes on the properties.
Minneapolis, however, doesn’t plan to add new rules because they haven’t experienced any problems with short term rental properties.
In Savage, there is a city ordinance which prohibits renting a property for less than 15 days which effectively bans short term rentals.
Even if your city has no restrictions on vacation rentals, you may encounter other hurdles. For example, if you purchase a condominium or townhouse where rentals are allowed, you may discover that applies only to long term tenancy.
The moral of the story is this. If you’re thinking of using your investment property for short term rentals, be sure to check with your city for the latest rules and restrictions.
Comments Off on What Are The Two Kinds of Minneapolis Duplexes?
Would you believe me if I told you there are two different kinds of duplexes?
And no, I’m not referring to a side by side compared to an up/down.
One kind of duplex cash flows.
The other kind helps an owner occupant afford a lifestyle.
Sometimes the difference is hard for people to understand. After all, shouldn’t all duplexes cash flow?
However, there’s one thing that’s radically different about a duplex, triplex or fourplex from any other kind of investment property; it’s eligible for FHA financing.
FHA financing is available only to buyers who intend to live in the property, and it requires just a 3.5 percent down payment.
Many duplex buyers don’t buy the property for the immediate cash flow. Rather, they purchase it for a long term investment that, for the moment, will offset their own living expenses
Rent, believe it or not, has gotten expensive. As a result, many tenants begin looking to purchase a home of their own. Some quickly realize that a house payment isn’t any less expensive; particularly if they want to live in a hot neighborhood.
However, they often realize if they buy a duplex, not only is their portion of the mortgage payment reduced by the amount of rental income, it is quite often even less than they were paying in rent.
This epiphany means an owner occupant buyer is typically willing to pay more for a duplex in a sought after neighborhood than is a duplex investor looking for a specific rate of return. This drives prices up to where they no longer make sense for many real estate investors.
That’s a hard thing to understand if you’ve been watching late night infomercials on how to make millions in real estate.
But in many markets, it’s reality.
Comments Off on How To Learn Real Estate Investing – For Free
If you’ve ever dreamed about investing in real estate, but just weren’t sure how to begin, you can learn for free this Wednesday at the monthly Minneapolis-St Paul Cashflow game.
Cashflow 101 is a board game created by Rich Dad Poor Dad author Robert Kiyosaki that teaches the basic principles of his book in a fun, easy to learn way. Not only does the game provide an opportunity to learn about real estate investing with very little risk, it also gives you a chance to meet and network with other investors.
The Minneapolis-St Paul Cashflow group meets at 7 pm the second Wednesday of every month at the Knights of Columbus Hall at 1114 American Blvd W in Bloomington. Food and beverages are available.
Hope to see you there!
Comments Off on How Your Duplex Investment Specialist Can Help You Have Bigger Pockets
Ever heard of the web site Bigger Pockets?
It’s a great site full of useful information for both new and experienced real estate investors. From simple, basic investment strategies and education to more sophisticated methods for the experienced investor, odds are you can find an article there that will be useful to your real estate investment career.
What you may not find there, however, is local market data that is specific to what your real estate goals and tolerances are.
For example, you may find someone who swears you can get a certain rate of return in your city. And while that may well be true, it might be in a neighborhood you either know nothing about, or one that may not be geographically convenient for you or even a place you’d like to invest.
You may also find that what’s true in Dalhart, Texas, isn’t what’s true in Minneapolis, Minn.
First, laws may differ between states, counties, and even cities. Second, one may have lower levels of unemployment than the other, which drives demand for housing, increases rents and the cost of acquiring rental property, and makes higher rates of return more challenging to realize.
Finally, it is the Internet. Sometimes people will tell you only part of the story. For example, someone may tell you they are able to purchase real estate in a hot part of a city at deep discounts. What they won’t tell you, however, is that they spend every single spare minute of their time tracking down people who are behind on their mortgage payments, or that the properties they purchase need tens of thousand of dollars of improvements and repairs before they can be rented.
So how can you make sure you have a local read on what the investment property market is like in your area?
Contact a local Realtor who specializes in investment property. Go in to his or her office and have a conversation about the market, what their clients are finding, and where they see the market going.
If you’re in the Twin Cities, please feel free to contact me for that conversation. I’m always happy to share what I know.
Comments Off on A Duplex Investor’s Moment of Truth
I spent much of my weekend doing the final cleaning on a rental property.
I have been working on it in earnest for three months. And as I thought about the amount of effort and money I’ve recently sunk into the place, I remembered that as great as rental property investment is, there are also times when it’s a lot of work.
This was one of those times.
If you’re new to investing, or are thinking about becoming a rental property owner, stories you hear from more experienced investors may be all glory or all horror.
Investment property ownership can be a little bit of both.
It’s wonderful that for little more the cost of a down payment, tenants will help you contribute substantially to your personal wealth or retirement account.
In exchange, every now and then, you’re going to either find yourself picking up after them or paying someone else to do it.
I have had many tenants who have left rental units in such great shape that all I had to do for the next resident was change the lock.
And I have had others who’ve let their pets destroy woodwork, not cleaned toilets for their entire residency, and left a household full of broken furniture behind.
Great tenant screening goes a long way toward solving these problems. But sometimes, life deals even the best person a blow and as a result, their habits and their standards change.
Everything worthwhile in life requires some effort.
Including rental property.
Comments Off on Minneapolis Among Top Rental Markets
It’s a great time to be a landlord.
According to the recently released All Property Management‘s Rental Ranking Report for the first quarter of 2015, the U.S. home ownership rate is at its lowest rate in 20 years.
This has caused vacancy rates to fall and rents to rise, making rental property a great investment.
The Report considered factors like area vacancy rates, rent variance, capitalization rate, property appreciation, job growth, the average number of days it takes for a property to sell, job and rental availability and the costs of taxes and insurance.
When the numbers were crunched, Minneapolis and St Paul were named the top market in the Midwest to own rental property, and one of the top 5 in the nation overall.
The Twin Cities saw rents rise an average of 5.36 percent over last year, an average of just 43 days on market for a property to sell and a metro wide vacancy rate of 4.4 percent, which is just over half the national average.
Prices and rents have risen dramatically in the metro over the last few years; making it a great time to buy or sell a duplex, triplex or fourplex.
Comments Off on National Duplex Sales Lose Market Share
The National Association of Realtors (NAR) recently issued my favorite of all their reports; the Investment and Vacation Home Buyers Survey 2015.
I love this report because it’s the only one I know of that offers a national data on current trends in the smaller sized investment property market. For NAR’s purposes, it’s important to note the term investment property may mean a duplex, small apartment building, condominium, townhouse or single family home.
In 2014, 19 percent of all homes sales in the United states were investment properties. While this represents a market share of nearly one out of every five sales, it does mark a downward trend. One year ago, 20 percent of all real estate purchases were for investment purposes. In 2011, investment property was 27 percent of the market , and even in the boom of 2005, 28 percent of all properties were purchased for investment.
This may be the result of declining bank inventory, low vacancy rates and higher rents nationwide. Forty-four percent of those investors purchased a distressed property (foreclosure or short sale).
Thirty-seven percent of investment property buyers bought with the intention of renting to others, while 17 percent purchased primarily because the property was a good deal. Fifteen percent of buyers purchased the property for it’s long term potential for price appreciation. One curious statistic for the year is the median price for investment properties dropped from $130,000 to $125,000.
The vast majority of these transactions– 58%, were in urban or suburban areas. Sixty-one percent of these sales were detached single family investment properties. Twelve percent were detached single family homes, 9 percent were townhomes or a row house, 13 percent were duplexes, triplexes or fourplexes, while 5 percent were condos or apartments in buildings with more than 5 units.
Eighty-six percent of investment property buyers in 2014 believe now is a good time to purchase real estate. In fact, 62 percent said there’s a reasonable chance they will buy another within the next two years.
Of course, that’s good news for investment property sellers, who will find a pool of strong buyers waiting for new inventory.