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If you are considering buying a Minneapolis duplex, or just exploring the possibility of real estate investment, I have an absolutely free way for you to sharpen your skills.
On Thursday, January 19, we will be playing the game Cashflow from 7-9 PM at my office in Edina.
Created by Rich Dad Poor Dad author Robert Kiyosaki, the game is designed to help you quickly raise your financial I.Q., as well as teach you how you can become financially free even on a small salary.
There can be up to six players on each board, and we will have up to three boards going.
Whether you’re a first time investor, real estate professional, or just bored and looking for something to do, please call or email to let me know so we can be sure to save a seat for you!
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Many new duplex investors think the first thing they should do when buying a duplex is hire a property manager.
While I believe in property management for experienced and out-of-state duplex owners, there are a number of reasons I think this is a bad idea for your first duplex investment. Here are the top three:
- Managing the Duplex You Know Your Property - Granted, investment property management can be time-consuming. All of the maintenance and repairs necessary in home ownership are part of owning a duplex as well. Learning that furnace filters need to be changed periodically, or that a downspout has a bad habit of getting knocked off during lawn mowing (resulting in water in the basement), will ultimately help you better keep the duplex in better shape, as well as supervise and gauge the competency of the property manager you do hire.
- Tenant Selection And Management – If you plan to become a lifelong investor, learning how to advertise a property, screen tenants, and keep tenants happy will help keep your duplex occupied and profitable.
- Save The Money – On smaller investment properties, like duplexes, it’s often difficult to generate enough income to cover the costs of a property manager and have cash flow left over. In some communities, property managers typically retain somewhere between 5 and 10 percent of the rental income. In other markets, like Minneapolis and St Paul, duplex property managers charge as much as $100 per rental unit.
Once you’ve become confident in your knowledge of the duplex, and it’s generating enough income to cover the expense, it’s perfectly fine to hire a competent property manager.
That will leave you more time for things like buying other duplexes!
Why?
said on March 31st, 2011 categorized under: Tenants
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One 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.
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Sometimes I think buyers look at short sale duplexes and think to themselves, “The price is the price”.
But short sales aren’t all that different from traditional sales when it comes to your ability to make an offer. What a property’s listed for may not be what it’s worth.
After all, just like every other piece of real estate, it’s only worth what willing to pay for it.
And since the buyer will have to have loads of patience waiting for the short sale to be processed, there’s usually a heavy discount involved as an incentive.
Remember, duplex owners who are selling because they’ve fallen behind in their payments are racing against a clock. In Minnesota, there is just a six month redemption period following the sheriff’s sale; which usually happens when a multi-family property owner is already six months behind in their payments.
In light of the fact that short sales can take months to negotiate, the seller is aware time is finite. This is beneficial to buyers because sellers are often willing to accept deep discounts in order to get the process moving quickly.
Short sale duplex listings typically hit the market at prices that are in keeping with the amount of time left in the redemption period. For example, if a property has not yet gone through a sheriff’s sale, the owner has a little more time in which to attempt to get a higher price.
This is important because while they will not pocket any of this extra revenue, the lender will want to see evidence there was an attempt to sell the property for more; the market simply wasn’t willing to pay it.
This brings to mind an important reminder; if you submit an offer on a short sale, both you and the seller are negotiating with the bank. The seller is charged with demonstrating to the lender they can no longer afford the property. And essentially the buyer is arguing this is the price the market will bear.
As we head into winter, this should become easier to prove.
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If you worked your way through all the Michael Jackson media this week, you might have heard about the report released by Reis, Inc., announcing the national apartment vacancy rate hit a 22-year high in the second quarter.
Reis, a New York based real estate research firm, also found vacancy rates rose nationally to 7.5 percent; an increase of 1.4 percent from the year before. Of the 79 markets they track, 45 showed increased vacancies.
Of course, Reis charges a small fortune for their reports. None of the information leaked to the media so far included the Twin Cities in either the list of ten worst or best markets. We’ll have to wait for Saturday’s version of their report in the Star Tribune to know where we stand.
How does this impact a Minneapolis duplex owner?
Vacancy rates and rental income are like a teeter totter. When one goes up, the other goes down. So it comes as no surprise that Reis says the amount of rental revenue dropped as well.
Why the increase in vacancies at a time when so many people are losing their homes?
Read the rest of this entry »
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Believe it or not, there’s a home improvement show for duplexes.
While it hasn’t gotten a ton of press, if you’re going to be home Wednesday night, you might want to check out the HGTV show, Income Property.
Hosted by Scott McGillivray, the premise is basically this. First time homeowners buy a duplex or a single family home and gets in over their head. Either the rental unit is trashed, resulting in a longer term vacancy or, the owner of a house is financially strapped and needs to generate extra revenue in order to make the mortgage payment.
In the case of the latter, the solution is to turn a portion of their home (usually the basement) into an apartment.
The property owner is given the opportunity to either have the show do a “Lipstick Job”, which is typically a fast turn so the unit can be rented immediately. Or, they can have the big, extensive rehab.
The show has useful tips for both new property owners and experienced investors, including which materials to use to attract tenants, how to decide whether the cost of a renovation will generate an appropriate return, and which repairs and upgrades should be tackled first.
“Income Property” airs in the Twin Cities on Wednesdays at 8:30 pm.
