Archive for the 'Multi-Family Property Investing' Category

Comments Off on Fannie Mae Plays Santa For Investment Property Owners

dear santa isolated on blackLast week Fannie Mae released a study that read like an investment property or duplex owners Christmas list.

The survey reads not only like a forecast of the rental market in the months and years to come, but also paints a pretty clear picture of who present and future tenants are likely to be.

According to Fannie Mae’s National Housing Survey in the third quarter:

  • -33 percent of all Americans would be more likely to rent their next home than buy. That represents a three percent increase over January.
  • – Among renters, 59 percent said the next time they move, they are more likely to continue to rent. This figure is up 5 percent since January.
  • – While most people choose to buy a home because of lifestyle considerations, most elect to rent due to financial considerations. With nearly 10 percent unemployment and a flagging economy, this should bode well for the rental market.
  • – 57 percent of renters believe the best reason for renting is the financial benefits.
  • – Based solely on present household financial condistions, 52 percent of today’s tenants believe they are better off renting.
  • – Fannie Mae estimates 64 percent of renters who do not plan to own a home and 50 percent of those who do plan to own a home one day do not have sufficient income to qualify for a mortgage on a median-priced home.
  • – Single people are least likely to own.
  • – The financial and housing crisis has caused home ownership to decline 11 percent for those between the ages of 25 and 29. Homeownership among people over age 35 has declined 5 percent.
  • – Married couples, who are statistically most likely to own homes, represent a declining portion of the population.
  • – 58 percent of single mothers rent.

Ken Bacon, Executive Vice President of Fannie Mae’s Multifamily Mortgage Business added, “More Americans are viewing rental housing as an attractive and sustainable housing option. As a result, we remain focused on helping America’s working families- many of whom have incomes at or below the median in their communities – live in quality, sustainable, affordable rental housing.”

For a full copy of the report, click here.

Who Will Save The Housing Market?

said on December 6th, 2010 categorized under: Multi-Family Property Investing

Comments Off on Who Will Save The Housing Market?

3d super hero with red capeWho or what’s going to save the real estate market?

With another tax credit increasingly unlikely, it won’t be the first time home buyers.

With Congressional talk of eliminating the mortgage interest deduction, it probably won’t be homebuyers, period.

We all know it won’t be the banks.

Who’s left?

As I’ve been saying lately, investors.

And now, I’m not alone in that sentiment. Last week, CNBC featured a profile of a hedge fund investor who’s already sunk $10 million into the real estate market; not to flip the properties he’s acquired but rather, as a buy and hold strategy.(Investing in Foreclosures – CNBC.com.)

As we’ve discussed before, you don’t need to be rich to be an investor. Half of the real estate investors in this country have incomes from their regular jobs of less than $85,000 a year.

 Heck, you don’t even need to buy a duplex. Remember, there are a lot of foreclosed single family homes flooding the market; so many that they’re selling at deep discounts.

People like to rent them.

And the principles of property investment apply to single family homes the same way they do duplexes, triplexes, fourplexes and apartment buildings.

If you’d like to learn more about helping the housing market recover and securing your financial future by investing in real estate, call.

I can’t remember when there’s been a better time to invest in real estate.[vimeo]

Comments Off on Duplex Chick Wishes For Duplex Do-Over

Duplex Chick logos 003I’ve been talking about endings with a lot of beginning duplex buyers lately.

The reason is I see many headed for the same mistake I made; making cash flow their number one goal.

In many respects, this is a good thing. I’ve always believed neither an investor nor owner occupant should ever buy a property that doesn’t make financial sense.

But once upon a time, I too had decided it was the most important criteria in my real estate purchases. So I bought a big building, without a lot of charm or character.

But it cash flowed like crazy.

When it was full.

But when vacancy rates went up, it took money out of my pocket. Seems there were 20 other buildings that looked just like it in my neighborhood; so tenants moved where the rent was low.

So I sold it. At a loss.

If I could have a real estate “do over”, that would be it.

Why? Because ultimately, it didn’t serve my long term goal.

My goal is to amass enough equity so that when I approach retirement, I can put a lot of money down on a big property, a cash flow machine, and have somebody else manage it.

Opting for cash flow right now was like not saving for retirement.

Big apartment buildings don’t appreciate the same way smaller multi-family properties do; simply because there aren’t as many buyers for them.

And I’m still working. So shouldn’t the income from my job should pay my bills?

If I could rewrite the past, I’d buy property in neighborhoods that had long histories of stability. I’d buy in places people want to live because of nearby natural and man-made amenities that enhance peoples lives. I’d buy charm, and I’d be thrilled if it simply broke even.

And that is entirely possible in this real estate market.

See, those neighborhoods will probably stay strong. Those neighborhoods will hold value. And maybe someday, they’ll even once again go up in value.

Someday. Like in 20 or 30 years. Just about the time I’m about to retire.

Maybe I’ll get my do-over after all.

What Does A Real Estate Investor Look Like?

said on November 11th, 2010 categorized under: Multi-Family Property Investing

1 Comment »

rich uncle pennybagsWhen you think of a real estate investor what picture comes to mind?

Donald Trump? Monopoly’s Rich Uncle Pennybags?

After all, it takes a lot of money to invest in real estate, right?

Wrong.

According to the Distressed Property Institute, the median annual income for a real estate investor in 2009 was $87,200. While  this is higher than the $72,900 median for those buying primary residences, it is nowhere near the Trump-osphere.

Actually, nearly half (43 percent) of investors made less than $75,000 per year. In fact, those who made less than six figures a year outpaced those who made more by a margin of two to one.

Apparently, Mrs. Trump and Mrs. Pennybags need some credit as well, as 78 percent of all real estate investors were married couples.

Not only are most real estate investors not rich, they’re also young. Only 22 percent of real estate investors are 45 to 55 years old. In fact, a whopping 50 percent of them are under the age of 45!

If you’ve been dreaming of becoming a real estate investor and didn’t think you fit the mold, know this: there’s never been a better or more affordable time to jump into the market.

You can start small. And there’s plenty of opportunity.

Comments Off on Let Your Minneapolis Duplex Send Your Kids To College

diplomaI was visiting with a friend the other night who was lamenting the poor returns on the 529 college savings plans he had selected as a mean of planning for his childrens’ college educations.

The returns he was getting were miserable.

Of course, I asked whether he’d considered real estate as a tool for saving for college tuition.

With today’s depressed property prices and historically low interest rates, many single family homes, duplexes, triplexes and ing flowing better than they ever have.

In fact, many investors are finding they can actually finance the duplex with a 15-year mortgage at monthly payments just slightly higher than those on a 30-year amortization schedule.

As a result, many parents of young children are realizing real estate is a wonderful way to supplement or grow college funds.

If your children are young, and you purchase an investment property on a 15 year loan, it will have a significant cash flow by the time your kids are college age.

At that time, you can do one of two things; sell it or harvest the equity to have a lump sum for tuition.

Provided you purchased the property right and it cash flowed from the beginning, the only money you will have into it is the down payment. For 15 years, tenants would have been making contributions to your childrens’ college fund simply by paying rent.

Let’s say you bought it for $150,000. Fifteen years from now, even if the property never went up in value, you would have saved $150,000 in the college fund.

And while things are bad now and promise to be for some time to come, odds are that 15 years from now, that investment property will have appreciated somewhat in value.

Remember, you don’t have to buy the most expensive property to get started as an investor. There are many townhouses and condos on the market at affordable prices that would cash flow and be an excellent place to start your investing career.

And by the way, while this web site may be called Duplex Chick, I can write offers on condos too.

Comments Off on Why Real Estate Is Still A Great Investment

Business papers and red pencilIn the economic downturn of recent years, both the stock market and real estate have experienced unbelievable volatility; so much so that it’s difficult at best to know where to invest for long term financial wealth and security.

And the returns on more conservative investment vehicles like bonds and CDs haven’t fared much better.

In fact, according to the Certified Distressed Property Institute, over the last 10 years, bonds have experienced an average rate of return of 4.46 percent. Certificates of Deposit (CDs), on the other hand, have averaged just 3.32 percent.

What about stocks? At the start of the decade, the S & P 500 Index stood at 1469.25. By July of 2010, the Index had dropped to 1027.37; a decline of 30.08 percent.

So what’s been the best investment over the last 10 years?

Real estate.

And no, I haven’t been drinking.

According to the National Association of Realtors, the average sales price for a single family home in 2000 was $138,000. In the last decade, the average sales price for that same property rose to $179,600.

That’s an increase in value of $41,600 or 30.14 percent.

Yes, we’re experiencing what may well be the greatest downturn in real estate values in our lifetimes. But those numbers are based on appreciation and inflated, speculative values.

What if we valued real estate simply for its cash flow?

For example, let’s say you used your self-directed IRA to go out this week and buy a three bedroom house for $100,000. (Remember, you don’t need to buy a duplex or an apartment building to be a real estate investor.)

You are able to rent the house for $1200/month. After taxes, insurance, maintenance and vacancy rates, you net $700 a month in positive cash flow, or $8400/year.

Over ten years, you’ll have pocketed $84,000; even if rents never increase and property never appreciates.

Can you predict returns on stocks with equal confidence?

Historically low interest rates and a surplus of foreclosures and short sales on the market make this a terrific time to re-examine investing in real estate.

And, as we head into that long Minnesota winter when historically there have always been fewer people shopping for real estate investments; the deals are sure to be plentiful.

Comments Off on Buy Duplexes Through A Self-Directed IRA

dollar chrome symbolWith duplex financing more difficult to get and available properties at unbelievable values, many investors are turning to self directed individual retirement accounts (IRA) as a means of financing their acquisitions.

While IRAs exist in a variety of forms and are a method of sheltering retirement savings from certain taxes and lawsuits, it is through a self-directed IRA that an investor may directly choose the investments of the IRA.

Investors may roll over funds from other retirement accounts into a self-directed IRA, where they may invest in anything except life insurance, S-corporations and collectibles.

In other words, the IRA may be used to purchase real estate. However, it’s important to note there are some restrictions in doing so.

Property must be purchased in the name of the IRA, which acts as a trust. Profits and positive cash flow are deposited directly through the IRA’s custodian, which may not be the investor. The custodian also distributes funds to pay bills.

Self-directed IRAs are allowed to purchase real estate in a number of ways; either using all cash, by partnering with another investor or trust, or via leveraging.  For all intents and purposes, the self-directed IRA can invest just as a person would, but the funds are protected by the trust.

Many investors find by using their IRAs to invest in real estate that they earn a steadier appreciation than they would with a stock, in addition to cash flow, which helps boost the return on the investment.

Comments Off on Qualified Real Estate Investment Agents Become Easier To Find

cias logoOne of the best things about turmoil in any industry is it usually results in overdue changes and innovation.

The real estate market is no exception.

In the boom years, many first time and relatively inexperienced real estate investors turned to their local Realtor for guidance. And sadly, many of those agents did not have the necessary training or education necessary to help their clients follow an investment philosophy based on anything other than market appreciation.

Needless to say, when the market began its unprecedented tumble, those investors, as well as many of the Realtors who helped them crashed with it.

To ensure against this ever happening again, the Certified Distressed Property Institute have created an educational program to help properly train Realtors in real estate investment analysis and strategies.

Agents who graduate from this program will become Certified Investment Agent Specialists (CIAS). This designation will not only help educate Realtors, but also help consumers easily find trained, qualified agents to help them in short and long term real estate investments.

I believe a designation like this is long overdue.  And as such, if I miss a day or two blogging this week, it’s because I’m in Austin, Texas, as one of the first one hundred agents in the country to earn it.

Minneapolis Landlords Get Good News

said on October 25th, 2010 categorized under: Multi-Family Property Investing

Comments Off on Minneapolis Landlords Get Good News

young business woman talking with mobile isolated on whiteApartment vacancy rates in the Twin Cities just dropped to a two-year low of 4.2 percent, according to GVA Marquette Advisors.

According to GVA’a “Apartment Trends” market report, this is a considerable improvement over the 6.4 percent for the third quarter last year, and better still than the figure at the end of 2009, which was 7.3 percent.

The report studies 57 geographic submarkets across the Twin Cities. Of those, the urban markets are reporting the best statistics. The city of Minneapolis reports a vacancy rate of just 3 percent, whereas St Paul’s stands at 4.2 percent.

Suburban markets like Minnetonka and Maple Grove, on the other hand, have vacancy rates ranging from 5.5 – 5.9 percent.

GVA reports that the lowest vacancy rates are found in units that rent between $900-1000 per month. Conversely, apartments charging more than $1500 per month are incurring a 4.7 percent vacancy rate.

Overall, the average rent in the Twin Cities has not yet increased dramatically. The current %905/month average is down from last year, but up $3/month from the average in the second quarter of the year.

This is good news for landlords who have endured high vacancy rates and reduced rents for several years.

Comments Off on How Your Minneapolis Duplex Purchase Can Be Like A Wes Craven Movie

Frightened WomanThere’s nothing like a good adrenaline rush.

That’s why people jump out of airplanes, line up for horror movies, watch the Vikings and fall in love.

It’s also what some new investors are looking for when they start hunting for their new duplex.

They want to score a big return; usually in the form of a property that’s worth twice what they paid for it and also throws off so much positive cash flow every day that they can quit their day job. Next week.

They’re looking for that high reward duplex.

Trouble is, experienced investors in every market know that high rewards come only from one kind of investment; one with high risk.

What kind of risk? Well, tenants that require a great deal of hands-on management, buildings in higher crime neighborhoods, and often, properties in disrepair.

Granted, these places generally have a great return on investment; if you’re up for the challenge. Many investors are. Many are not.

When you’re first starting out and want to know what constitutes a good rate of return on your duplex investment, ask yourself some questions. Is the property in a neighborhood where you could potentially lose money? How much time are you willing to spend managing your property? Making repairs?

Most importantly of all, ask yourself what percentage increase in the rate of return your time and effort are worth.

Ever investor has different levels of risk tolerance.

Making a killing on an investment not only provides a huge adrenaline rush, but also fodder for hours of storytelling with friends. So does getting mugged. 

For that kind of thrill, it might be easier to just go to the movies.