Archive for the 'What Does That Mean?' Category

What Is The Cap Rate On That Minneapolis Duplex?

June 18th, 2009 categories: Buying A Duplex, What Does That Mean?

Balancing Home Symbol And PercentageWhether you’re interested in investment property or simply happen to scan an ad for an income-producing property, odds are good that sooner rather than later, you’re going to hear the term “cap rate” or “cap”.

So what exactly is it?

A cap rate, or “capitalization rate” is simply the ratio between the net operating income a property produces, and the original price paid for the property.

To determine the net operating income or NOI, simply take the gross revenue a building produces and subtract all of its expenses except the mortgage and depreciation.

Then simply divide the NOI into the price of the property.

For example, if a building has a net operating income of $10,000, and it could be purchased for $100,000, it would have a cap rate of 10. $100,000/$10,000 = 10.

There are several ways of looking at a cap rate. One perspective is that it is simply a measure of how fast an investment will pay for itself. 

Using the property above as an example, the purchased property will pay for itself, or be “fully capitalized” after 10 years (100% divided by 10 percent).  If the cap rate were 5 percent, it would take 20 years for the property to be paid off.

Another way to view the cap rate is how much return the building would provide if it were completely paid off.  The 10 cap would be ten percent of the purchase price, which, compared to a savings account, is a nice return.

How can the cap rate be helpful when looking for investment property?

Read the rest of this entry »

Spoken by Kari Lundin | Discussion: 1 Comment »

Colorful Signs Mean Minneapolis Duplex Not A Happy Place

April 2nd, 2009 categories: What Does That Mean?

condemnationWe’ve all seen them: orange, yellow, pink, blue–  brightly colored pieces of copier paper boldly attached to the doors or windows of countless duplexes and homes in the Minneapolis area.

What do they mean? Well, unless you park your car and get out to look, we usually haven’t a clue.  We only know it must be bad.  After all, this is Minnesota. We don’t usually like to draw attention to ourselves.

So what are they?

According to the city of Minneapolis, they’re notices placed on buildings as a result of city housing inspections. Each color has its own specific meaning and level of alarm.

Bright Orange – Condemnation.  The building is condemned and residents must move by the date on the placard.

It’s also important to know the water department also uses bright orange stickers to notify occupants that the water will be shut off due to payment delinquency if not paid by a specified time.

Faint Yellow -Warning:  Do Not Occupy.  The building is hazardous and tenants have to move by the date on the sticker.

Bright Yellow- Notice.  This notice states if necessary improvements haven’t been made by the date mentioned on the sticker, the property may be condemned. Occupants may have to move if the repairs aren’t completed in time.

Gold Yellow – Unlawful Occupancy. This notice offers an explanation of the specific reason it was posted in the middle of the page. Reasons may include: too many people living in the property, too many units, no rental licencse or non-conforming units in the building.

Read the rest of this entry »

Spoken by Kari Lundin | Discussion: No Comments »

What Is A Minneapolis Duplex Anyway?

March 13th, 2009 categories: What Does That Mean?

DublinEvery now and then I get called by someone to either come out and tell them what I think their duplex is worth, or, I have a buyer send me a link to a property they like and believe is a duplex.

Inevitably, as I get closer to the address, I realize I’m in a sub-division. And I know instantly there’s been a misunderstanding.

Many people confuse twin homes and duplexes. While the two property types bear many similarities, as well as the potential to change categories, there are some significant differences.

A duplex is a house that has separate apartments or living quarters for two families or groups of people. While the units may share a wall, or floor and ceiling, they do have separate entrances.

Of course, these characteristics are true of a twin home as well.

So where do they differ? Well, a duplex has one legal description and property identification number. It is usually owned by one party, who is responsible for the the lot and insurance.

On the other hand, a twin home has two separate legal descriptions and property identification numbers. The sides or floors of the property are generally owned by different parties. There may also be a home owner’s association or set of rules as to how the units maintain the exterior of the property, which may require a monthly fee.

Can a duplex become twin homes? Yes, through some legal work which generally involves forming an association and getting each property separate property identification numbers.

During the real estate boom, many duplexes were purchased and subdivided with the intention of being resold as twin homes. When they didn’t sell, the owners simply continued to use them as rental properties.

Spoken by Kari Lundin | Discussion: No Comments »

Let’s Ask the Magic Eight Ball to Interpret Minneapolis Duplex Sales

November 25th, 2008 categories: Selling A Duplex, What Does That Mean?

 

Are we at the bottom of the market? We could look at MAAR’s weekly activity report this morning for hints. Then again, these numbers are confusing. We might have more fun asking the Magic Eight Ball and getting the side of the floating triangle that says, “Who Knows?”

According to MAAR, the trend of pending sales being significantly above those from the same time a year ago continued.  In fact, sales were up a whopping 19.1 percent.

Of course, the tendency toward lender-mediated sales remains equally robust. Of the properties that received purchase agreements, 53.5 percent involved a bank at some level. What’s more, 41.9 percent were in the lower tier of pricing; being listed at $150,000 or below; usually first time home buyer territory.

The number of single family homes new to the market continued its downward trend, with new listings being 9.0 percent below last year’s mark.

This was not the case in the small multi-family home sector, however. New listings were up a staggering 265 percent. The silver lining in this news, however, is that while last year’s new listings were 80 percent lender mediated, the number of bank-involved properties during the same week this year dropped to 75 percent.

On the pending sales side of the duplex market, the surge continued. Forty-eight properties received purchase agreements; up 369 percent over the same week last year. Of these, 85 percent were lender mediated. Last year, all of the pended properties included a bank in the negotiations.

While the average sale price of the pended homes dropped from last week’s mark, so too did the figures for 2007.  The 2007 figure reflected an average sale price for duplexes of $130,270. This year’s mark was $105,560.

This week’s figures certainly send mixed messages. However, there does appear to be a leveling off of the number of short sale and foreclosure properties.

Spoken by Kari Lundin | Discussion: 3 Comments »

Why Realtors and Real Estate Agents Are Not Equal

November 17th, 2008 categories: What Does That Mean?

YouTube Preview Image
 
I took a Code of Ethics class last week which is required of all members of the National Association of Realtors (NAR).  While suffering through three hours of dry material, I was reminded of a pet peeve. I’m a REAL-TOR. Not a Real-I-Tor.
 
Yeah, yeah. I know. Everybody says “Real-I-Tor”; not just folks with Minnesota accents as thick as Marge Gunderson’s. I don’t know where it came from, I only know we don’t all say “Doc-I-Tor”, so it must not be a result of a consonant followed by “tor”.
 
While the mispronunciation is only a minor nuisance, I do want to offer the following clarification: not every real estate agent is a Realtor.
 
For an agent to use the title Realtor; a word which is, in fact, trademarked, an agent must be a member of NAR and adhere to that organization’s Code of Ethics. The code is a set of guidelines originally implemented in 1913 to establish a professional standard of conduct among members. The code governs a Realtor’s Duties to Clients and Customers, the Public, and other Realtors, creating the highest ethical standards for agents in any transaction. Real estate agents who are not members of NAR are not held to the same high ethical standards and rules of conduct, nor the organization’s measures for enforcement.
 
The next time you need help with a real estate transaction, be sure to ask your agent whether he or she is a Realtor.

Spoken by Kari Lundin | Discussion: No Comments »

Why “As Is” Isn’t Code For “Surprise” On Your New Minneapolis Duplex

October 29th, 2008 categories: Uncategorized, What Does That Mean?

In today’s real estate market, many buyers are alarmed when they see the words “as is” in an MLS listing, or are asked to sign a corresponding addendum as part of the purchase agreement. In their minds, “as is” translates to a Pandora’s Box of problems and surprises that they have no right to know about until they own the property.
 
But they’re wrong.
 
Generally, buyers see this phrase in three situations. First, the property is bank owned. As the banks employees have never lived in the property, and in all likelihood have never even been in it, they have no knowledge of a history of water in the basement, leaking roofs or ice dams.
 
The second usually occurs when the property is an estate. In that case, the seller has passed away, and the property is being sold by his heirs. Now, the kids might remember dad saying something about a roof leak in the duplex a while back…but was it in 1998 or last year? In other words, they may be able to remember some things, but probably not to a legal certainty.
The final situation may occur when a seller simply doesn’t want to make repairs or vouch for the condition of the building.
 
If a buyer decides to purchase an “As Is” property, he still has the rights to review a Truth-In-Housing Report (if required by city) and to hire an inspector for a thorough going over. In the event something troubling is found, he may then either ask for it to be repaired or attempt to renegotiate the price.
 
It is important to remember when contemplating the purchase of an REO property that banks are in the money business, not the home repair business. Most of the time, they will opt for a price reduction.

Spoken by Kari Lundin | Discussion: No Comments »

Does REO Mean That Twin Cities Duplex Comes With A Time/Life Music Collection?

August 28th, 2008 categories: What Does That Mean?

Sometimes talking with a Realtor can be like a conversation with your doctor. The shift in the housing market has resulted in a new language; one that leaves many people either saying, “Huh?” or scrambling for a dictionary.

YouTube Preview Image

For example, REO is a term we’re starting to hear more of. And no, it has nothing to do with REO Speedwagon.

So what is it? Well, REO is an acronym for “Real Estate Owned”. This a label for a property that has gone through a sheriff’s sale without receiving a bid for more than the loan amount. Most of these properties do not sell because there is more owed on them than their fair market value. The previous owner was unable to redeem, or pay off, the loan in the six month period that following the auction, and the bank has taken title and control of the property.

We often hear these properties referred to as foreclosures. In actuality, foreclosure is the legal proceeding during which the lender gets a court ordered termination of the property owner’s (mortgagor’s) legal right of redemption.

Semantics, I know. But if you hear the term REO, it’s safe to assume the bank is in control.

Spoken by Kari Lundin | Discussion: No Comments »

Copyright © 2008 Duplex Chick     Agent Login     Design by Real Estate Tomato     Powered by Tomato Blogs
Directory of Real Estate Blogs