Archive for the 'Selling A Duplex' Category
Comments Off on Is Your Minneapolis Duplex Right For A First Time Home Buyer?
A recent news story about the lack of houses for sale for Twin Cities first time home buyers said a lot about the duplex market without ever naming it at all.
According to the broadcast, there were fewer houses on the market in January of 2017 than there have been in any other month in the last 14 years. The biggest shortage of inventory is in homes priced below $300,000.
While the story didn’t say it, the same is true of duplexes. In fact, in January there were just 253 active duplex, triplex and fourplex listings on the Multiple Listing Service; compared to well over 800 at the height of the market in 2005-2006.
What do starter homes have to do with duplex values?
When the prices for houses in the first time home buyer category (below $300,000) rise and become less affordable, buyers start exploring other options; like duplexes.
If you’re a duplex owner with a property in a highly walkable neighborhood that’s in great condition, this is good news for you. One of the first alternatives first time home buyers explore as a means of keeping payments within their budget is duplexes. After all, the rent allows a more expensive duplex to actually be more affordable for a homeowner than a less expensive single family home.
One of the first alternatives first time home buyers explore as a means of keeping payments within their budget is duplexes. After all, the rent in effect reduces the cost of a more expensive duplex for the owner occupant, making as, if not more affordable than a single family home.
As a result, duplex prices go up as a result of increased demand from home buyers.
Right now, demand is high because supply of both quality duplexes and entry level single family homes is so low.
This has resulted in rising prices, making it a good time to be a duplex seller.
Comments Off on The Spring Minneapolis Duplex Market Has Already Started
Nothing makes Minneapolis and St Paul duplex buyers come out of hibernation like 40 degree temperatures in January.
Most years, this happens the week after the Super Bowl. This year, however, buyers can’t seem to wait that long.
Trouble is, there’s very little on the market for them to buy. In case you think I’m telling you a tall winter’s tale, consider this: in January of 2007, there were 1445 active duplex, triplex and fourplex listings for sale on our Multiple Listing Service. Check out this table. MLS Duplex Inventory Since 2007
And at the end of December 2016? 279.That’s 100 fewer than were on the market even in January of 2016.
By en large the vast majority of buyers who have been reaching out to me in the early weeks of 2017 have expressed a desire to owner occupy an income property. Most have expressed a desire to live in either Minneapolis, St Paul, or first ring suburbs. Many of the properties currently on the market are in far out
Many of the properties currently on the market are in far out locations, or have too much deferred maintenance to qualify for the most common forms of owner occupant financing (FHA and the American Dream loan).
That means if you own a Minneapolis or St Paul duplex that’s in good shape, you could cash in if you decide to sell. You won’t have a lot of competition.
If you’re ready to simplify your life, or are just tired of being a landlord, give me a call at (612)290-5998 or send me an email at firstname.lastname@example.org It’s a great time to be a Minneapolis or St Paul duplex seller.
Comments Off on How To Win The Minneapolis Duplex Sellers Race
Selling your duplex in the spring is like a track event at the Olympics.
Countless Minneapolis and St Paul duplex, triplex and fourplex sellers heard the market was hot. So over the winter they painted, updated, fixed and maybe even raised rent so they would be ready to sell in April or May.
In fact, they are simply waiting for that first blade of grass to stretch up through the snow,before they take rush onto the market with everyone else.
How can you compete, let alone beat these duplex sellers who spent their winter in training?
Run the race alone. After all, even those of us who are out of shape can win any race if we have enough of a head start, right?
So it’s important to understand that the spring real estate market begins the week after the Super Bowl.
Oh, I know. You’re thinking we’re sure to have snow, maybe even cold. Who wants to buy a duplex then?
Lots of people.
See, after the holidays, and the playoffs, we Minnesotans are looking for things to do. And we count the remaining weeks until spring, inside, on the Internet.
And if you’re a duplex seller who has your property ready to go then, you get the undivided attention of those Minnesotans who are ready to do something.
And if you wait until April or May?
Get out your gold shoes.
Call or email me today to see what you can do to win the race.
Comments Off on 8 Things To Consider Before You Sell Your Minneapolis Duplex Yourself
You may have heard there’s a shortage of inventory on the Minneapolis and St Paul duplex market and as a result, it’s a sellers market.
As a result, the thought may have crossed your mind to sell your duplex yourself. After all, if investment properties are such a hot commodity, why not save the commission and sell it yourself, right?
Well, have you ever tried to save a little and it ended up costing you a lot? I sure have. And selling your duplex yourself may be like that time.
Here are 8 things to consider before deciding to sell your duplex yourself:
- Pricing your property – Unfortunately, the value of your duplex is not determined by the amount of money you have into it, or by the amount you’d like to get out of it. Rather, it is determined by the amount someone else is willing to pay you for it. And even if you found a buyer willing to pay what you want or need, if it’s more than what the market believes it’s worth, a bank won’t lend them the money for it. Value is determined by comparable sales in the neighborhood.
- Sold properties include Realtors commissions – When determining the value of a property, both buyers and appraisers typically look at comparable sales on the Multiple Listing Service (MLS). All of these sales included commission. So, the true value of your property is the price, minus that commission.
- Buyers hope to save the commission too – When a buyer works with a Realtor, they are not responsible for paying that agent commission. Rather, it is taken out of the sales price of the property. Buyers benefit from an agents knowledge of the market, experience in negotiations, and guidance throughout the process without paying a thing. Why would they work with a For Sale By Owner unless: a) that owner agreed to pay their agent or b) agreed to pass the savings on to them.
- You’ll probably pay a buyer’s agent anyway – Chances are a Realtor may see your ad on Craigslist or Zillow and ask if you’d agree to pay a commission if they sell the property to their buyer. This may be somewhere in the range of 2.5- 3 percent, meaning rather than saving 6 or 7 percent, your saving half that amount.
- You’ll have out of pocket fees even if your property doesn’t sell – Realtors pay the costs of putting a sign in your yard, putting it on the MLS, hiring a professional photographer, creating a virtual tour and all other marketing expenses, regardless of whether or not the property sells. These costs will become yours if you sell the property yourself. What’s more, you may choose to hire an attorney to help you with the paperwork. Attorneys charge by the hour regardless of whether or not your property actually sells. Realtors don’t get paid unless the sale closes.
- Time wasted with discounters and tire kickers – If someone calls on an ad you placed, you have no way of knowing whether or not they can actually afford your property. And yet, you leave work or your family to show it to them anyway. Sadly, there are a lot of people who can’t afford a property, but simply enjoy looking at real estate who end up wasting your time. Others are discounters, looking to save money by dealing directly with you. They hope either you don’t know what you’re doing, or are desparate enough to simply give them a deal in exchange for being done with it.
- 92 percent of all for sale by owners don’t sell on their own – According to statistics from the National Association of Realtors, only 8 percent of all for sale by owners are successful. The rest either listed their property with a Realtor, or decided not to sell.
- Properties sold using a Realtor actually net the seller 13 percent more than if the owners sold it on their own. Again, according to a NAR study, sellers actually net more money if they use a Realtor than they do on their own. That’s NET; which means after commissions and other costs of selling!
If you’ve attempted to sell your duplex on your own, incurring the costs of lost time and money, then end up listing with a Realtor anyway, you may have cost yourself more than you hoped to save?
Contact me if you’re thinking of selling your Minneapolis or St Paul duplex.
Comments Off on Vacant or Full? How Should You Sell Your Minneapolis Duplex?
I am often asked by Minneapolis and St Paul duplex sellers who are thinking about putting their property on the market whether it’s better to have the building leased, or a vacant unit when it goes up for sale.
The best answer is, it depends. If your property is one an owner occupant may find appealing, know that it is a requirement for FHA insured mortgages that the buyer be able to move in within 60 days of closing. If both your units are leased, you have made it difficult for any owner occupant to consider your duplex; and right now, that’s a large percentage of today’s duplex buyers.
So should you just leave it vacant? This certainly makes showings easier and gives you a chance to put it in tip top shape. It also provides a new owner with an opportunity to lease it at market rent,. However, if it’s a financial burden to you, it isn’t necessary.
One option may be to have a tenants or tenants on month to month leases. This may concern residents, as they frequently believe that if the duplex goes up for sale, they won’t have time to find a place to live.
Clearly explaining the process to tenants may help alleviate these fears. Most lenders are taking 30-45 days to complete the funding of a loan on a property. Additionally, standard lease language usually requires tenants to receive 60 days notice before being required to move.
Duplex sellers should never agree to give a tenant notice until the day of closing. After all, if you tell a tenant to leave early, and the buyer fails to perform on the purchase, you’re left with a vacancy!
Simply explain to your tenants that at minimum, they will have 90 to 100 days or more between the time you accept an offer and having to move — that is, if they are even asked to do so. Any amount of time you’re on the market before your property sells will add give them even more time.
And of course, there is always the possibility they won’t be asked to move at all and can stay right where they are!
Comments Off on Three Reasons Minneapolis Duplex Prices are Soaring — And Why That May Be About To Change
By now, you’ve probably heard that duplex prices in Minneapolis and St Paul have rebounded to at or near the healthy highs of 2005.
This price rebound is the result of three things:
- Historically low interest rates – One of the rare silver linings of a slower economy is interest rates are often kept low by the Federal Reserve in order to help stimulate economic activity. The economic downturn resulted in nearly a decade of inexpensive loans, which helps duplexes cash flow better than at higher rates.
- Lack of inventory – Low interest rates gave many would-be duplex sellers an opportunity to refinance their loans, which made their duplex cash flow like never before. This resulted in fewer owners putting their properties on the market. If you think back to high school economics class, you’ll recall the law of supply and demand. When supply is low, prices go up.
- Low vacancy rates – During the economic crisis, many would-be homeowners lost their homes to foreclosure or sold for less than what they owed. With their credit tarnished and perhaps even a job loss, many became renters. Meanwhile, many would be first time home buyers found themselves burdened by large student loan debt or simply unable to get a job. Others came to view home ownership as risky. They too chose to rent, rather than buy.
All of this has resulted in a giant shortage of Minneapolis duplexes, triplexes and fourplexes on the market in the Twin Cities.
In fact, there are currently just 195 small multi-family properties available for sale on the Multiple Listing Service. This includes the seven county metro area, as well as western Wisconsin and out state locations.
To put this in perspective, in December of 2007, there were 1104 properties on the market.
In other words, it’s a great time to be a duplex seller, because you won’t have as much competition.
That is, until spring.
You see, many long term duplex owners have told me they are ready to make a change in their lifestyle, and for the first time in more than a decade, are thinking of selling. And if they do, then the lack of inventory part of the rising price equation goes away.
You may also have heard that the government’s economic report has been entirely positive since September, leading many to believe the Federal Reserve will raise interest rates when they meet later this month.
And if interest rates go up one percent, that changes the cash flow on a $300,000 duplex by roughly $3000 a year. That can make a duplex that was a good investment to one with negative cash flow in a hurry.
If you’re thinking of selling, please contact me. Even if you decide the time isn’t right, I’ll be sure to give you my thoughts on how you can make sure your property is a good investment for you for years to come.
Comments Off on Should You Sell Your Minneapolis Duplex Now or Wait Til Spring?
There’s a nip in the air, the leaves have begun to change, the Vikings still have a winning record and you’d really like to sell your Minneapolis duplex.
And because you’ve lived here a while, if not your whole life, you know snow is just around the corner.
Is it even worth it to try to sell your duplex now? Or should you just wait until spring?
After all, who wants to move in the ice and snow, right?
Lots of people. In fact, they’re looking — and starting to look, right now.
For the last two to three years, we’ve had more Minneapolis and St Paul duplex buyers in the market than we’ve had sellers. That’s due largely to low vacancy rates, which have resulted in higher rent and more cash flow for most duplex owners.
Because the supply of duplexes for sale is lower than demand, prices have risen. This has largely not deterred buyers, as historically low interest rates, coupled with higher rent, has meant the properties were still affordable and/or made financial sense.
As more and more duplex owners hear prices are up, however, the amount of inventory has inched up ever so slightly. Come spring, this trickle may become a deluge.
With more inventory, duplex sellers will face more competition. Buyers won’t feel quite the same sense of urgency to pounce on a great listing, as they become confident another one will come along.
Worse yet, if interest rates go up as little as one percent, prices will change. That’s because a one percent raise in interest on a $300,000 mortgage means an increase in payments of $3000/year or $250 a month. That can take a property from a positive cash flow to a negative, or from affordable to expensive in an instant.
Of course, none of us can know the future. And the more certain we are of things as they are, the more likely they are to change.
If you’ve been thinking about selling your Minneapolis or St Paul duplex, now is a great time to do so. Feel free to email or give me a call to talk about it.
Comments Off on One More Way To Exchange Your Captial Gains: Without The Management Headaches
As many seasoned investors approach retirement, they become less interested in dealing with the down sides of duplex investment; mainly tenants, trash and toilets.
The problem with long term real estate investment is when you no longer wish to be a landlord, the IRS believes you should compensate them for your exit strategy – through capital gains tax and depreciation recapture.
Of course, there is a way out through a 1031 or Starker Exchange. But what, if like so many others, real estate is such a great investment and you have so many properties that you can’t find a property with no to little management to exchange your money into?
Enter tenants in common (TIC) investment, which we detailed last week, and Delaware Statuatory Trusts (DST).
A DST are derived from Delaware Statutory law as a separate legal entity which is created as a trust, that qualifies for a 1031 exchange. A real estate sponsor firm simply buys a large property under the DST umbrella and opens up the trust to potential investors, who may purchase an interest.
Because up to 100 investors or more may be pooling their money, the assets in a DST are usually large institutional properties that most investors could not afford on their own. For example, a DST property may be a 500 unit apartment complex, a large shopping mall, or a large, prestigious office building in a desirable location.
There are a couple of advantages to investing in a DST, rather than in a Tenants in Common property. First, because DST’s may have more than 35 investors, the size and quality of the property may not only be greater, but the cost per investor may be considerably lower as well.
Lenders prefer DST’s as well. With a TIC, each investor gets their own loan for their share of the property. In a DST, however, there is one loan, which gives lenders greater security.
Of course, with any type of investment, you should be sure to do your due dilligence on not only the financial performance of the property, but also the sponsor of the DST.
As always, be sure to talk with your tax advisor before you sell a duplex, triplex or fourplex so you know the potential tax ramifications; if any.
Comments Off on How To Sell Your Duplex And Own Investment Real Estate — Without the Headaches of Property Management
Things in life change.
For many long term Minneapolis and St Paul duplex sellers, those changes include coming to a time when children, grandchildren, or a simple desire to simplify life mean an interest in selling their investment property.
The challenge in doing so, however, is the often substantial capital gains tax and depreciation recapture, which can leave many duplex sellers with very little to show for decades of toil.
That leaves you with a 1031 exchange into another piece of real estate. That is, if you can find one that makes financial sense.
Aren’t there alternatives?
We recently discussed NNN properties, which afford investors rental income with stable tenants and very few management demands.
That isn’t the only option available however.
In recent years, a popular real estate investment alternative has become tenancy in common investments, often referred to as a TIC. This is a property that is co-owned with a pool of other investors. And, since the taxpayer gets a deed to real estate as a tenant in common, it qualifies for a 1031 exchange.
With the pooled resources of multiple investors, many TICs are able to purchase larger commercial properties with established tenants, while management responsibilities are handled by management companies.
Syndicators of TICS are called sponsors. Investment opportunities can be made directly by the sponsor or by brokers. Most sponsors treat TICs as if they are securities, as they meet the definition in the state or states the properties are located in. In spite of this, TICs still qualify for 1031 exchanges.
It’s important to know that while TICs are a great real estate investment that don’t require hands on management, they aren’t as liquid as a property you own alone. It’s also crucial you check on the credibility of the sponsor and his or her track record.
If you are thinking about selling your duplex, call or email me today. The market is hot, and there are ways for you to continue your career as a real estate investor, without the day to day responsibilities of property management.
Comments Off on What If I Sell My Duplex And Can’t Find A Replacement Property?
Working With a Exchange
I’ve spoken with many longtime Minneapolis and St. Paul duplex owners in recent months who would love to sell and retire from a career in rental property if only they could avoid capital gains tax.
Of course, as seasoned investors, they are aware of the option of doing what’s known as a 1031 or Starker Exchange, which allows you to reinvest the money into another property without paying taxes. The challenge with this, however, is right now, it’s either difficult to find a good replacement multifamily property or the duplex owners are just tired of managing property.
Believe it or not, there are other solutions.
Duplex sellers don’t have to exchange into other multifamily property. In fact, commercial investment properties, triple net properties, TIC investments, and Delaware Statuatory Trusts are all viable alternatives to owning duplexes.
But what if you don’t want to manage property any longer?
Today, let’s talk about something called a triple net property, which is often identified by the letters NNN. A net leased property is often a retail store or mall. The tenant, or tenants, pay a Central Area Maintenance fee which covers all basic maintenance to the property, insurance and property taxes. Landlords are only responsible for structural repairs, like replacing a roof or HVAC system.
Of course, this results in greatly reduced managerial duties, as the tenants are taking care of most items.
Typical NNN lease tenants include stores like Walgreens, Starbucks and Sprint.
Not owning their stores frees capital for these companies to grow their businesses. In return, solid, stable companies with good credit ratings reduce the risk to NNN investors.
While these properties can be expensive, the proceeds from the sale of many metro duplexes may be more than enough for the down payment on a property like this.
Next time, we’ll talk about TIC invesments.