Archive for the 'Selling A Duplex' Category

Comments Off on 3 Ways To Attract Buyers Who Will Pay More For Your Minneapolis Duplex

In today’s Minneapolis and St Paul duplex market, the buyers willing to pay the most money are the first time home buyer owner occupants.

This group is typically looking for a duplex that is in great shape, with some updates and a tenant paying enough rent to make their portion of the mortgage and expenses less than they are currently paying to rent themselves.

While cash flow is important to them, most of the time they are looking for a property that will at least break even if they ever move out.

If you are a Minneapolis or St Paul duplex seller, it stands to reason then that you would want to make sure of three things:

  1. Your property is in good enough condition that it would appeal to a first time home buyer.
  2. At least one unit is either on a month to month lease or vacant so a buyer can move in (this is usually mandatory for their financing).
  3. The unit(s) you have rented is at or near market rent. Many landlords are afraid if they raise the rent they will lose good tenants. What many owners forget, however, is if that tenant leaves, they will likely have to pay market rent to someone else. A buyer will still be interested in your property and keeping your tenant if your rent is 5-10 percent below the market rate. However, if the rent is 50 percent below market rate they are going to a) offer you less money and b) raise the rent to close to market value the moment they can.

If you’re thinking of selling your duplex in the spring, you may want to make improvements with owner occupants in mind over the winter. It’s the best way to ensure your duplex sells for the most money possible.



Why An FHA Duplex Loan Isn’t The Big Bad Wolf

said on August 22nd, 2017 categorized under: Financing, Selling A Duplex

Comments Off on Why An FHA Duplex Loan Isn’t The Big Bad Wolf

Just like you can’t believe everything you read on the Internet, you can’t believe everything you hear in real estate.

Take, for instance, the urban myth that Minneapolis and St Paul duplex sellers shouldn’t even consider an offer for a buyer using an FHA insured mortgage, even if, in multiple offers, it is for significantly more than an offer from another buyer.

An FHA mortgage is one in which the buyer may put as little as 3.5 percent down to qualify for a loan to owner occupy a duplex, triplex or fourplex. While the money is lent to the buyer by a traditional bank, the Federal Housing Administration (FHA) agrees to insure the loan against the buyer defaulting. Just like any insurance, there is a cost to this which is passed on to the buyer as a monthly premium.

Before agreeing to insure the loan, the FHA wants to know that the duplex is safe for someone to live in. So, when the lender sends an appraiser to the property, FHA sends along a checklist. They ask the appraiser to compare the property to their health and safety standards. If the property fails, the item or items must be repaired before they will agree to ensure the buyer’s loan.

Sounds scary, right? Here’s the deal. Almost everything they look for can either be seen by the buyer or their Realtor when they first look at the property or will be called out if the buyer hires a professional inspector.

I think you’ll be surprised when you see how minor the items on the FHA checklist are. They include:

  • The lot needs to be sloped away from the foundation. In other words, water shouldn’t be coming into the basement because the exterior grade drains toward the duplex.
  • All bedrooms need egress windows. (This is required in order for a room to be considered a bedroom anyway!)
  • If the property was built before 1978, it may contain lead-based paint. This can potentially be a health hazard. So, the appraiser makes sure it isn’t cracked or peeling anywhere.
  • All steps and stairways must have a handrail.
  • The duplex has to have a working heating system that’s big enough to heat the property.
  • The roof shouldn’t be leaking – or look like it will leak in the near future.
  • The foundation should be in good enough shape to support the duplex.
  • There shouldn’t be any cracked or broken glass in windows.

In my 16 plus year career, I have had an FHA appraiser have issues with a duplex or single family home less than a handful of times. They involved a cracked pane of glass, some peeling paint, and a handrail. I don’t think a single one of those repairs cost the sellers more than a couple hundred dollars or an hour or two of time; and they were all items that had come up during the buyer’s home inspection!

Refusing a strong clean offer that has an FHA loan because it might require the seller to do minor repairs seems rather ridiculous, doesn’t it?

Comments Off on It’s A Great Time To Be A Minneapolis Duplex Buyer Or Seller

Great news for duplex buyers and sellers!

If you read this morning’s Minneapolis Star Tribune,  you may have seen two articles that may affect your decision to either buy or sell a multifamily investment property in the Twin Cites any time in the next decade.

The first headline screamed the Twin Cities will need nearly 71,000 new apartments in the next 13 years in order to keep up with demand.  The story was based on a report from the National Multifamily Housing Council and National Apartment Associations.

It cited decreasing home ownership, international immigration, and delayed home purchases thanks to shifts in the timing of the drivers of home ownership, like getting married and having children.

Whether you’re thinking of becoming a real estate investor or already own and are considering buying more, this bodes well for the long-term return on your investment. With low interest rates and skyrocketing rents as a result of demand exceeding supply, it is still a good time to buy; despite rising prices and low inventory.

In the same section of today’s news, another story brought good news for Minneapolis and St Paul duplex, triplex and apartment sellers. The number of listings on the market for sale in May fell to a 14-year low. While there were 8,744 new listings, which was roughly the same number as last year, they sold so fast that by month’s end, there were 17 percent fewer than at the same time last year.

In other words, it’s also a GREAT time to be a seller.

If you’re considering buying, selling, or exploring the idea of investing in real estate, please give me a call or send an email. I’d be happy to help you find the path that’s right for you.


Comments Off on What Every Minneapolis Duplex Seller Should Know About Equity

For the last decade, so many duplex owners have found themselves owing the bank more than their property was worth that the words and phrases equity, capital gains tax and 1031 or Starker exchange have rarely appeared in this blog.

My how times have changed.

If you’ve never heard these phrases, you’re about to hear them a whole lot more.

The Internal Revenue Service views your duplex as an investment. And, to that end, if you make a profit on it when you sell, they would like you to give them a cut. Oh, by the way, if you depreciated it all during the time you owned it, they would also like you to give them a piece of that.

By the time it’s all said and done, that nice check you thought you’d get at closing goes from fat to thin in a hurry.

So what can you do about it?

Enter a tax deferred exchange, otherwise known as a 1031 or Starker Exchange.

A 1031 exchange allows you to “trade” your equity from the sale of one property for equity in another property.

This DOES NOT mean you need to find a property just like the one you’re selling, or that you and another seller must literally trade properties.

Rather, it means you must follow a very strict set of rules laid out by the IRS. They are:

  • Buy something of equal or greater value. It may be one property or two, but the sales price of your replacement property needs to be equal to or greater than the one you sold.
  • Don’t touch the money. Any time you touch money from the sale of an investment property, it’s known as “boot”. You will be taxed on whatever amount of proceeds you put in your pocket from the sale. If for example, you have $200,000 in equity and take $20,000 out of it to pay some bills, you will be taxed on the $20,000.
  • Give the money to a Qualified Intermediary. At closing, your proceeds from the sale need to be wired or given to someone known as a qualified intermediary. There are many companies who specialize in this, as well as title companies and attorney’s who may qualify to provide this service. For a small fee, they hold your money until you tell them to wire it as a down payment on your replacement property.
  • 45 days. From the day of closing, you have 45 calendar days to name up to three properties that you may want to purchase as replacements for the property you sold.
  • 180 days. You must successfully close on one of the three replacement properties no later than 180 days from the date you closed on the relinquished property.

Perhaps the best news of all in this is you can continue to exchange into bigger and bigger properties throughout your life. If you choose to cash out at any point, you will have to pay taxes and depreciation recapture back to the day you started this chain.

And if you leave the properties to your kids? All they pay is an inheritance tax.

Give me a call today to find out how much equity you would have to reinvest!

Minneapolis Duplex Theme: Make More Money!

said on June 27th, 2017 categorized under: Selling A Duplex

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Sometimes it seems like there’s a theme when I meet with Minneapolis and St Paul duplex owners who are thinking of selling. The past few weeks have been a very good example of just that.

Many duplex owners who bought at the height of the market in 2004-2007 have spent the last decade waiting for the time when their property was worth as much or more than they paid for it. And that time has finally come.

And while that’s one of the themes I’m finding with recent appointments, it’s not the one that stands out the most.

It’s the fact that time and again, these very same owners who have struggled so long to stay afloat are charging far less than market rent! In several instances, simply following my suggestion to raise rent closer to the market rate meant more than $500 per month more in the owners pocket!

More importantly, perhaps, these duplexes finally became the great investment their owners were hoping for when they bought them years ago.

Keeping the rent you charge at or near market rate not only helps your peace of mind as an owner, but remember, it also plays an important role in what your duplex is ultimately worth. After all, it’s an income property, and its value is determined, in part, by the amount of money it generates!




Comments Off on Selling Your Minneapolis Duplex Contract For Deed – The Good, Bad and The Ugly

In the last year, many Minneapolis and St Paul duplex and investment property owners told me they would sell if not for one thing: taxes.

I suggest a 1031 exchange to all of them. Many, however, realize they will have a difficult time during a time of little inventory finding a replacement property. And others want nothing more to do with rental property whatsoever, so they are in a bind.

There is another solution. While it doesn’t always spring immediately to mind, a contract for deed can help reduce tax obligations. Capital gains tax and depreciation recapture are only levied when you touch the money from a sale. Therefore, if a seller carries a contract on a property, there is time to tax plan and offset any gain realized on an annual basis.

Other benefits of a contract for deed for a seller include:

  • Income – Sellers who don’t have a mortgage on their duplex can use the monthly payments as income. Contracts for deed are often at an interest rate that’s a higher return than other investment options generally return.
  • More Buyers – While we’re currently in a seller’s market,  in times when either the market favors buyers or banks are reluctant to lend money, sellers can broaden their pool of potential buyers by offering more competitive interest rates than a traditional lender or extending credit to buyers who otherwise are not able to qualify for a loan.
  • Cancel the contract and resell the property. If a buyer misses two payments, the seller can reclaim the property without having either a foreclosure sale or going to court. The seller may keep everything the buyer has paid to date and resell the property to another buyer.

Of course, there are also some potential pitfalls of selling a property on a contract for deed. They include:

  • Due on sale clauses in mortgages – If you have a mortgage on your property, selling it on a contract for deed may trigger what’s known as a due on sale clause. Most mortgages have it. Basically, if the lender learns you have sold the property, they can accelerate the repayment schedule and demand to be paid in full.
  • Buyer is unable to make the balloon payment.  Real estate and job markets change. If the buyer is unable to refinance either by using the equity accrued over the time of the contract or as a result of a job loss, the seller is left holding the contract. In this case, the seller can choose either to extend the contract and continue to receive monthly payments or to cancel the contract and evict the buyer.
  • Buyer fails to make monthly payments. If the buyer fails to make payments, the seller will have to formally cancel the contract in a manner consistent with what the law dictates.

While not terribly common in today’s hot duplex and investment property market, contracts for deed can be an excellent way to sell property.


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.

The Spring Minneapolis Duplex Market Has Already Started

said on February 1st, 2017 categorized under: Selling A Duplex

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 It’s a great time to be a Minneapolis or St Paul duplex seller.


How To Win The Minneapolis Duplex Sellers Race

said on January 20th, 2017 categorized under: Selling A Duplex

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.