Archive for the 'Tenants' Category

Duplex Foreclosure Doesn’t Mean Free Rent

said on October 24th, 2011 categorized under: Tenants

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duplex rent checkI recently received an irate phone call from a Minneapolis duplex owner’s tenant, informing me he no longer had to pay rent, as the property was in foreclosure.

Like him, many tenants living in pre-foreclousre duplexes mistakenly believe they are no longer obligated to pay rent.

But this is not the case!

Minnesota law states the duplex owner, regardless of his or her status with her lender, retains all legal rights and priveledges with the duplex until title changes hands.

In a Minnesota duplex foreclosure, this happens at the end of the redemption period, which is six months after the date of the sheriff’s sale.

Typically, duplex owners who are at least three months behind on their mortgage payments receive a “Notice of Default” from the bank. At that time, a sheriff’s sale is scheduled; usually six weeks from that initial notification.

However, in today’s market, many lenders are reluctant to carry more foreclosed duplexes on their books, so they may push the sheriff’s sale date back one or more times.

During this time, duplex landlords, retain the right to collect rent, evict delinquent tenants and rent out vacant units.

It is important to note, however, that after the sheriff’s sale has occurred, duplex owners must disclose to prospective tenants the property’s foreclosure status.

If you’re behind on your duplex mortgage payments, things are bad enough. Don’t let your tenants make them worse.

Duplex Landlords Get Clean

said on September 12th, 2011 categorized under: Tenants

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clean your duplexI spent a good part of my weekend cleaning a rental unit.

It reminded me just how important it is to be crystal clear with duplex tenants before they move in as to what you will accept as being clean when they move out.

I hadn’t been with this one.

As a result, I got to do things like scrub four years of dog nose prints off of windows, use every known bathroom cleaning chemical removing years of bathtub grime, inhale the fumes from two full cans of Easy Off oven cleaner, and scrub the exterior and interior of a refrigerator.

 Well, that and there was one working light bulb left in every fixture that required at least four.

Not to mention, I haven’t even started on the basement yet.

These were great tenants, and I know how much they need their security deposit back.

However, my time is valuable too. And I now find myself wishing I had written a dollar amount in the lease specifically for cleaning the duplex upon move out.

It will definitely be in the next tenant’s lease.

Comments Off on Thinking of Selling? Get Your Duplex Tenants To Agree To Move Out

duplex tenancy agreementA number of duplex sellers have recently asked whether or not they should renew their leases with tenants if they are considering selling.

After all, what if a buyer wants to live in one of the units?

My answer?

Of course!

Many duplex owners who are on the fence about selling now or at some point in the near future are consulting with an attorney to have move out clauses added to their leases.

In essence, these landlords are asking that tenants agree to move out given proper notice (whatever the state law recommends) in the event they sell the duplex to someone who wants to owner occupy their unit.

This allows the duplex seller to present his or her property as a valid option for a buyer who is not only looking to acquire an investment property, but for a place to live as well. And those kinds of buyers, by the way, make up a big part of the market.

Yes, a few tenants are resistant to the idea, as they fear having to move during the winter, over the holidays, or in the middle of the school year.

Most of my prospective sellers are able to overcome this by explaining IF they decided to sell, it’s likely to be a process that won’t happen overnight.

For example, it might take time to select a Realtor, have a truth-in-housing report done (if required), make repairs to prepare the duplex for sale, have photographs taken and possibly, create a virtual tour.

Once it’s actively for sale, even an immediate offer would result in an additional 30-45 days for the buyer’s mortgage to be funded.

More likely, however, it might take a bit longer to find the right buyer.

And if it’s a short sale, where the property is no longer worth what is owed, negotiations with the lenders involved could take even more time.

Once duplex tenants realize the clause in the lease doesn’t mean they’ll have to move out tomorrow, most, while not necessarily happy with the idea, seem to view the clause as a reasonable request.

Which allows future duplex sellers to keep their options open- which is almost always a good thing.

How To Fill A Vacant Duplex

said on July 14th, 2011 categorized under: Tenants

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duplex chick signMy Duplex Chick duplex “for sale” signs occaisionally do interesting things.

Like attract buyers.

And tenants.

It seems the 2.7 percent vacancy rates in the cities of Minneapolis and St Paul have people looking for help finding a place to live. So they’re calling any residential income property related sign they see.

Well, mine anyway.

While vacant rental units are often listed on other Multiple Listing Services (MLS), around the country, it is a relatively new feature in the Twin Cities.

Property owners can work with a Realtor to get vacant units featured not only on the MLS, but web sites like Zillow as well.

Tenants who are relocating to Minnesota and who are familiar with this service because of having lived in markets like Chicago and Las Vegas, where it’s common, often contact agents for help finding a place to live as they transition.

And of course, there’s all the people who already live here looking for places too.

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What Is Market Rent On Your Duplex?

said on June 23rd, 2011 categorized under: Tenants

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duplex for rentIf it’s a great idea to keep your Minneapolis or St Paul duplex rented for as close to market rents as possible, how do you determine what that amount is anyway?

I wish there was a scientific formula. However, I happen to think non-scientific web sites like Craigslist, Oodle and Hotpads, are a great place to start.

Take a look on those web sites, local newspaper web sites, or take a look at the local newspaper. Try to find rental units like yours in your area and nearby neighborhoods and see what they’re renting for.

If you’re driving through your area and see an orange and black “For Rent” sign in a front yard, pull over and see if there’s a unit description on the sign. If not, you can always call to find out what’s offered with the property and how much it’s renting for.

Be sure to compare amenities. Locations. And if there are photos included in an online or print ad, do your best to compare condition. Try to determine whether or not the landlord in the ad pays for heat, if so, that unit will rent for more than one where the tenant is responsbile for his or her own utility bill.

If there are only 2 bedroom duplex vacancies in the area and your property has an empty 3 bedroom unit, take the amount of the rent advertised and divide it by the number of bedrooms. For example, a 2 bedroom unit that rents for $1000/month is renting, essentially, for $500/bedroom a month.

Then take the $500 and multiply it times your 3 bedrooms. This will put your rent at $1500/month. However, please note that more bedrooms sometimes results in an economies of scale; with less demand for big units, and a greater lack of privacy for those who occupy them.

Of course, the best way of all to maximize the rent you collect is to try to fill a vacancy. If you advertise one amount, and don’t get any response, odds are you’re charging too much.

On the other hand, if your phone never stops ringing, you may be under valuing your property!

Minneapolis Duplex Owners: Tell Your Tenants About Insurance

said on May 25th, 2011 categorized under: Tenants

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tornado damage ky 1aThe recent tornado in north Minneapolis reminded me of how important it is that duplex owners encourage their tenants to get renter’s insurance.

While the damage to a duplex or apartment building itself is covered under the owner’s insurance policy, coverage for the tenants belongings is their responsibility.

Many tenants not only don’t know this, but if they do, fail to understand that a building fire or destruction from a tornado can wipe out everything they own, without a means of reimbursement.

Most of the major insurance companies like State Farm and Allstate offer some form of renter’s insurance. Just like property or automobile insurance, rates vary according to location of the property, desired deductible and credit score. Most of the time, however, it runs about $25-35 a month.

This extra cost might seem impossible for some tenants, but opting whether or not to purchase it is ultimately their decision.

As Minneapolis and St Paul duplex owners, however, perhaps doing a better job of explaining what renter’s insurance covers to our tenants will mean less of them are wiped out financially in the event of another big storm.

How To Scrub Duplex Vacancies

said on March 31st, 2011 categorized under: Tenants

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The Fastest Way To Fill Your Investment DuplexOne of the biggest mistakes I see new Minneapolis duplex investors make over and over again is that of over-improving a property.

What do I mean?

The new duplex owner thinks the only way anyone on the planet will ever rent their property is if they completely gut the kitchen, install granite counter tops and hardwood floors and even, in one instance, move the tub from one side of the bathroom to another.

While many of these improvements are nice amenities, most of the time they aren’t necessary and won’t ever generate enough additional rent to justify the expense.

What’s the most important investment to make?

Cleanliness.

And I don’t mean just running a vacuum over the carpet.

All trash and personal belongings should be removed from the property prior to making it available. Clean the carpets. Scrub beneath appliances and inside of them, in cupboards and on their doors and sweep out the garage. Freshen the caulk around the tub in the bathroom In short, clean everywhere.

Try to de-personalize the unit by using fresh, neutral colors for paint and flooring.

And here’s an often overlooked detail…change the switch plate covers!

Nothing screams “has been filthy” like freshly painted walls with black marks all over the light switches. It sounds picky, I know, but I notice it immediately. It will cost just pennies to swap them out, yet immeasurably help your vacant unit rent quickly.

What if your vacant duplex is hospital-clean and you still don’t have anyone calling from your Craigslist ads? Lower the rent. Fifty or one hundred dollars a month can price you out of the market, leaving you scrambling to make up for months of vacancy. It’s always better to get $850 a month for rent immediately than hold out for three months to get $900.

Duplex vacancy rates both in Minneapolis and across the nation are at lows not seen in more than a decade. It shouldn’t take being featured on HGTV to fill an empty unit.

Duplex Owners Can Let The Meter Run

said on January 24th, 2011 categorized under: Tenants

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Electric Power MeterThere are two types of duplexes; those where the tenants pay the utilities and those where the landlord does.

And because two comparable properties cash flow differently because of the expenses, each, of course, has a different value.

Many times the reason a duplex owner pays for all of the electric or gas in a building is because of the expense of having separate meters installed, not to mention the considerable cost of installing a second boiler, furnace or water meter.

What can a landlord do if she would like to increase her cash flow but doesn’t have a chunk of change to perform all the utility separations?

Bill the tenants.

In order to do so, the landlord must first provide prospective tenants with a notice of the total utility bills for the year on a month by month basis.

Next, she must have a fair way to split the bills and invoice the tenants. The Minneapolis duplex investors I know who do this usually divide it up proportionately according to the tenant’s share of the total finished square feet of the building. Regardless of the method, however, it must be detailed in the lease.

While it isn’t required, most landlords include a copy of the utility bill. However, the landlord must be willing to provide these bills if the tenant asks.

Billing tenants for utilities also triggers one more requirement. By September 30 of each year, a landlord who bills for utilities on a single-metered building most let tenants know in writing that there may be low-income energy assistance programs available. This written notice needs to include the phone number for that program.

Of course, the landlord doesn’t determine how tenants within the unit split a utility bill among themselves.

It’s important to note that under this rule, a landlord who causes the interruption of utility services may be required to pay tenants triple the amount of damage the interruption caused or $500, whichever is greater, as well as attorneys fees.

Minnesota Duplex Owners Face January Deadline

said on January 10th, 2011 categorized under: Tenants

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Vector Ornate Certificate TemplateIt’s January in Minnesota. If you’re a duplex landlord, you know what that means.

Time to fill out your Certificates of Rent Paid(CRPs).

The state of Minnesota requires anyone who was a landlord in 2010 to fill out a CRP for the amount of time he or she owned the rental property.

And no, these aren’t formal certificates. Rather, they’re a form the state of Minnesota requires investment property owners to fill out.

It can be found here.

Owners should give one CRP to any married couple, and invididual forms to any adult, unmarried tenant.

If two or more unmarried adults shared a unit, take the total amount of rent they paid for the year, and divide it by the number of adults living there; regardless of how much each of them paid.

Caretakers who received rent credit are entitled to a credit equal to the amount they would have paid in rent had they not exchanged labor and services for all or a portion of it.

Section 8 tenants are given credit only for the amount of the rent they personally paid; not the amount subsidized by the government.

It’s important to remember you should also in your calculations any rent a tenant paid for a storage space, garage or parking space. However, you should not include damage deposits, late fees or delinquent rent.

CRPs must be mailed by January 31, 2011, so we procrastinators still have a little bit of time.

Of course, the rest of you probably already have yours done!

Comments Off on Who Gets The Security Deposit When A Duplex Sells?

Full sack locked by gold lockThe other day a tenant asked me if the duplex owner would be refunding her damage deposit before the property sold.

Shortly thereafter, a seller asked if he would need to do the same.

The answer in both cases is “no”.

Most real estate investment agents include an addendum to any purchase agreement that asks for any damage deposits and interest they’ve accrued to be assigned to the buyer at closing. In addition, the addendum should include language that assigns the leases to the buyer at closing.

The seller is also not allowed to make any deductions for any damage the tenant may have already caused.

The reasons for this are simple. The tenant is protected by the lease, which survives the sale. Any transfer of a security deposit prior to the end of that lease is a recipe for drama.

For example, what if the seller gives the tenant her money, and she never gives you a deposit? How long will it take to evict her? How will you pay for any damages the property suffers?

What if there never was a damage deposit at all?

And from the tenant’s perspective, what if the seller decides to withhold the entire deposit because of perceived damages that may or may not be there; leaving both you and the tenant in a financial hole?

A properly drafted purchase agreement signed by both the seller and buyer is a legally binding contract and when it comes to leases and security deposits, ensures the protection of everyone involved.