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I must admit, never would have thought about using duplex investing as a way to buy a professional sports team.
I might have had I known the history of Los Angeles Lakers owner, Dr. Jerry Buss.
Now I’m a long time Laker fan. But I just assumed he made his money as a doctor. You know, the kind that tells you to open your mouth and say “Aaahh.”
Turns out he made the money he used to buy the team as a real estate investor.
It seems when he was a chemistry professor at USC, he thought he needed something to supplement his income. So, in the 1960s he took $1000 and invested in a West Los Angeles apartment building.
Over time, he was doing so well as an investor that he gave up being a professor.
When it comes to professional sports team ownership, he’s not alone.
Minnesota Vikings owner Zygi Wilf is known as a real estate developer. However, after a brief stint as a used car salesman, he and his brother Harry started buying apartment buildings.
Today, they own over 100 commercial properties and over 30,000 apartment units.
Owners of the Miami Dolphins, St Louis Rams and Denver Nuggets, among others, also made their fortunes investing in real estate.
In a down real estate market, with single family homes, duplexes, triplexes and apartment building selling at clearance sale prices, can you think of a better time to start investing?
Can you imagine owning the Lakers?
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When I tell a duplex buyer we can’t see a property because the seller has already accepted an offer, I am often asked how much it sold for.
My answer is always the same.
”I can’t tell you.”
I’m not trying to be secretive or evasive. It’s just that even if I know the answer, the law prohibits me from telling anyone until the sale of that property is complete and title has changed hands.
Realtors who list duplexes for sale have a responsibility to the sellers they represent. And that is to act in their best interest at all times.
Imagine for a moment that the duplex agent and seller have agreed to put a property on the market for $200,000. The seller is extremely motivated, and so when an offer comes in at $150,000, he accepts it immediately.
The buyer has a few contingencies, or conditions, that have to be met in order for the contract to be fully executed. He has, essentially said to the seller he will buy the duplex provided everything checks out OK in an inspection, and of course, provided he can get a bank loan.
While the buyer and seller are negotiating any issues that may have come up during the inspection, you tell your Realtor you love the duplex and would pay $200,000 for it all day long.
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To quote Bette Davis in “All About Eve”, fasten your seat belts, duplex buyers and sellers. We’re in for a bumpy ride.
RealtyTrac, the nation’s leading source for foreclosure data reported that while foreclosure activity was down nationally for the third straight quarter, there were signs it was beginning to ramp back up.
Remember, starting last October when the robo-signing controversy cropped up, banks have dramatically slowed their foreclosure filings while being investigated for their paperwork.
Realty Trac President Rick Sacchio stated, “Third quarter foreclosure activity increased marginally from the previous quarter, breaking a trend of three consecutive quarterly decreases that started in the fourth quarter of 2010. This marginall increase in overall foreclosure activity was fueled by a 14 percent jump in new default notices, indicating that lenders are cautiously throwing more wood into the foreclosure fireplace after spending months trying to clear the chimney of sloppily filed foreclosures.”
Notices of default were filed on 195,878 U.S. properties in the third quarter; a jump of 14 percent from the previous quarter.
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I had the opportunity to participate in a webinar with RealtyTrac’s Senior Vice President Rick Sharga the other day.
RealtyTrac is a firm that tracks foreclosure trends in 2500 counties across the country. Sharga shared unbelievable statistics; the most remarkable of which was that 70-80 percent of all foreclosures are NOT listed on the MLS.
In fact, of the 900,000 bank owned properties (REOs) in this country, just one third are listed on the MLS.
Two thirds are not.
That’s 600,000 properties of shadow inventory; an average of 12,000 per state.
RealtyTrac estimates 1.2 million homeowners are in the foreclosure process right now. Of these, just 20 percent have their properties listed for sale.
More stunning yet is that somewhere between 5 – 5.5 million property owners are seriosuly delinquent on their loans. While some will manage to get current, RealtyTrac estimates that 4 million more foreclosures will hit the market within the next three to three and a half years.
While this is catastrophic to home and duplex owners, it also represents an unprecedented opportunity. And both seasoned and first time investors are recognizing just that.
But guess what?
Even though it’s a slow real estate market, the great deals are still tougher to find and, typically, attract multiple offers.
Unless, of course, your Realtor knows where they are before they hit the market.
Last week I had a client who’s been looking for a duplex in an outer suburb write an offer on an REO that isn’t listed yet.
I have other clients doing the same. Several are watching duplexes already in the foreclosure process where the owner has refused to sell; waiting for the moment the bank gains control so they can submit an offer.
In fact, right now I am tracking over 100 duplexes, triplexes and small multi family properties in sought after Minneapolis and St Paul locations that are somewhere in the foreclosure process.
If you’re thinking about investing, there’s never been a better time. But if you’re working with an agent who can’t find you property before everyone else knows about it, you’re working with the wrong agent.
Call me. I’d be happy to help.
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OK, would everybody PLEASE put your duplexes on the market?
Call me crazy, but I have a long list of buyers and, believe it or not, there’s not enough good duplexes out there for them to chose from.
Now before you accuse me of having lost my marbles, the market data for the week ending August 28, 2010, backs me up. That week alone, the amount of new inventory that became available for sale was down 46 percent from the year before.
Of those new listings, 58 percent were offered by traditional sellers, compared to just 35 percent for the same week in 2009.
Pended sales were down too, though at a 10 percent decline, not as dramatically. Of those property owners who accepted purchase agreements, just 7.4 percent did so without a lender involved in the negotiations. Last year for the week, 13.33 percent of the sellers could say the same.
Perhaps the decline in inventory contributed to the higher average off market list price for duplexes of $121,264.81; which is significantly above last year’s sold price of $86,228. Of course, the list price and sold price are rarely one in the same these days, so the gain may not be as significant as it first appears.
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I’ve been finding a lot of wolves in s Sheep’s clothing lately.
Not in my dreams, but rather, on Craigslist.
Every now and then I scan the list of duplexes for sale on Craigslist. As I’m familiar with most of the ones listed by Realtors and active on the MLS, I narrow my search to those properties offered for sale by owner.
I do this for several reasons, one of which is finding that elusive “perfect” property for a client who’s seen everything on the MLS.
But lately when I contact these sellers I am surprised to learn the seller herself is a Realtor.
Now there’s nothing wrong with an agent selling her own property without listing it on the MLS. S he has the same rights to sell it herself and advertise it anywhere she chooses that a seller who does not hold a real estate license has.
The difference is she has a legal responsibility to disclose this information from the start. In other words, her ad should say something like, “owner/agent”.
The reason this is required by law is to protect the consumer. It is assumed the agent has specialized training that makes her an expert in her field, thereby giving her an advantage over someone who doesn’t have the same training.
It’s kind of like walking into a fight with a black belt when all you’ve done is watch Jackie Chan movies.
If you’re aware you’re doing this prior to seeing the property, you have the ability to find competent representation to look out for your best interests.
And you should.
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Did you know there aren’t any special requirements necessary for a residential agent to sell someone an income property?
For example, a Realtor who spends most of his time selling houses in the suburbs, can help you buy a duplex and not be required to know how to do an income property analysis spreadsheet.
As a result, he may tell you the property with the upgraded kitchen is a better buy, when in reality, it may have a negative cash flow which will cause you to either spend more for your portion of the rent than you wanted or, dig in to your pocket in order to cover the difference between income and expenses.
That’s why it’s so important to find an agent to work with who specializes in these unique properties. Not everyone does. And when it comes to duplexes, granite counter tops may or may not make a property a better value, but higher rent always will.
While the bulk of my business is in Minnesota and western Wisconsin, I am always happy to help duplex buyers and sellers nationwide find competent agents in their area to help them in their multifamily transactions.
Because I specialize, I know which questions to ask prospective agents on a buyer or seller’s behalf, and how to tell whether or not a prospective agent truly knows what he or she is talking about.
Whether you’re looking for a duplex specialist in Los Angeles, Maine, or some point in between, drop me a line or give me a call. I’d love to help you find the right agent for the job.
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With just 8 days left to qualify for both the $8000 first time home buyer’s and $6500 repeat buyer’s tax credit, it’s important to remember that a duplex qualifies for both.
Remember, the credits are for up to 10 percent of the purchase price of the property, with the total benefit not to exceed $8000 for a first time home buyer, or $6500 for a move-up or repeat buyer.
For a duplex, qualification is based on the percentage of the property the buyer intends to owner occupy. For example, if the purchase price for a duplex was $200,000, and the buyer lived in half, her tax credit would be based on a purchase price of $100,000, with the total not to exceed the caps set by the federal government.
To be eligible for the first time credit, a person may not have owned a home in the last three years. Repeat buyers must have lived in their home for five consecutive years of the last eight years.
Both tax credits require that buyers have a binding purchase agreement in place no later than April 20,2010. However, these purchases have until June 30, 2010 to close.
Remember, FHA financing may be used for most duplexes, triplexes and fouplexes; meaning an owner occupant need only have 3.5 percent saved for a down payment.
Investors, on the other hand, are still restricted to conventional loans requiring 20 to 25 percent down as minimums.
