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What’s The Most Common Type of Rental Housing Anyway?

March 11th, 2010 categories: Multi-Family Property Investing

When I say “rental housing”, what image springs to mind?

Is it a large apartment complex with hundreds of units sprawling over acres of earth?

Or is the image one of single family homes, duplexes or fourplexes?

Most of us dream of parlaying a collection of duplexes into a massive apartment complex or two capable of cash flowing our retirements. And yet, according to a 2008  Joint Center for Housing Studies of Harvard University,  less than 10 percent of all rental units are in buildings with 50 units or more.

Ironically, more than one third of rental units in the country are single-family homes. However, more than half of all rental units are in buildings with less than five units.

In all, the study counted 6.3 million two to four unit rental properties; 1.3 million of which are owner occupied. Eighty-five percent of these smaller properties are owned by either individual owners or couples.

The study also reports the number of households that reported at least some rental income from one to four-unit properties increased by almost a million between 2001 and 2007.

Guess it’s time to replace that mental image of a rental unit.

Spoken by Kari Lundin | Discussion: No Comments »

Go Green And Save When You Fix Your Minneapolis Duplex

March 8th, 2010 categories: Home Repair

When I sit down with someone considering buying their first rental property, I always go over not only the potential revenue the property can generate, but also the certain and probable expenses.

The one expense most prospective owners (and to be honest, listing agents) seem to omit most often is the cost of repairs.

Let’s face it. No matter how new or old your duplexor house is, sooner or later something’s going to break, become outdated or wear out.

I have fixed numbers I use as projected repair costs for each unit per year. Of course, some years nothing breaks and others, everything does. So my estimates are just that; estimates.

It’s usually about then that I also share the names of some of my favorite local shops.

Of course, when and if  something needs repair or improvement, the obvious locations to look for supplies are Home Depot, Menards and Lowe’s.

However, if the repair or upgrade isn’t urgent, it might be easier to stay under budget by shopping at a couple of local treasures.

Building Materials Outlet (formerly Cannon Recovery) is just over the Mendota Bridge in Eagan. For over forty years they’ve specialized in liquidating excess inventory from national distributors and manufacturers.

While their inventory isn’t as reliably consistent as the retail stores, the savings are significant. On any given day you can find French doors, new windows, rolls of carpeting or pallets of tile for as a third less or more than at traditional home improvement stores.

Another local institution that’s not only a great place to save money, but also a green solution is The ReUse Center in Minneapolis.

Read the rest of this entry »

Spoken by Kari Lundin | Discussion: No Comments »

13 Inexpensive Ways To Improve Your Minneapolis Duplex

February 1st, 2010 categories: Home Repair

The spring housing market begins one week from today.

If you’re thinking about selling, that’s important information. However, it’s equally important if you’re a landlord facing a spring vacancy.

Why?

Many of your usual prospective tenants are going to be looking for houses in order to beat the April 30 first time homebuyer tax credit deadline, resulting in more landlords competing for fewer prospective tenants.

What’s more, many homeowners unable to sell their property for what it’s worth have turned them in to rentals, meaning there’s far more competition out there than ever for rental dollars.

Here are ten ways you as a landlord can compete:

1. Get your vacant unit so clean that your mother would stay there.

2. Give every room a fresh coat of paint.

3. If the kitchen cabinets lend themselves to it, apply a fresh coat of paint and updated hardware. You’d be surprised how inexpensive hinges, knobs and drawer pulls can be. Replacing them can immediately give a kitchen a face lift.

4. If your kitchen counters are dated, replace them. You don’t have to put in granite, but many of the larger home improvement chains offer relatively inexpensive laminate counter tops with a similar look and feel to high end stone.

5. Replace switch plates. At pennies a piece, the return on the investment here is significant. Filthy switch plates imply a history of grime. Painted-over switch plates send a message of laziness.

6. Paint the front door. It’s tough to paint in the winter, I know. But you could remove the door, taking it to the warm basement long enough to get it painted and dry. It may be possible to cover the opening with plastic while you’re waiting.

7. Shovel the sidewalks. Fallen on ice yet this year? Enough said.

Read the rest of this entry »

Spoken by Kari Lundin | Discussion: No Comments »

Twin Cities Duplex Market Develops Facial Hair

November 10th, 2009 categories: Twin Cities Real Est

The Minneapolis duplex market is like a 12-year-old boy.  On the surface, it looks the same as it has for the past few months or years. And yet, every now and then, there’s a hint of a new, deeper voice.

MAAR’s weekly activity report came out today. And while single family home sales are still up 42.9 percent over the same stretch last year, with most properties receiving offers that are, on average, 94.6 percent of the list price, the truly interesting news is in the duplex market.

One year ago, just 10.53 percent of the Minneapolis and St Paul duplexes that received purchase agreements were owned by traditional sellers.

This year, banks were not present in 33 percent of the pending transactions.

Last year, the average off market price for the week of a Twin Cities duplex was $120,860. This year, that number was $137,883.

While there were eight percent fewer listings year over year, the better news is that 44.44 percent of that new inventory this year is offered by traditional sellers. This represents a growth spurt of 20 percent year over year, which will ultimately be good news for the market.

Spoken by Kari Lundin | Discussion: No Comments »

Read The Rest Of The Duplex Story: Earn $6500

November 9th, 2009 categories: Buying A Duplex

Sometimes, it pays to read more than just the headline in the newspaper.

The biggest real estate headline last week announced the extension of the $8000 first time home buyer tax credit through April 30, 2010.

But if you stopped reading there, you probably don’t know there’s more to the story.

Now there’s a tax credit for existing homeowners too.

If you’ve owned a home or owner occupied a duplex for the last five years, you are now eligible to earn up to a  $6500 tax credit if you sign a purchase agreement before April 30.

The credit may be applied for purchases of up to $800,000 for single family homes.

While I have not seen a cap on the purchase price of a duplex, only the portion of the property you intend to owner occupy is eligible to earn either tax credit anyway. For example, if you purchased a duplex for $200,000, you would count the value of your half, or $100,000, toward qualifying for the credit.

As always, any type of property you use as your principal residence may qualify for the credit. Vacation homes, however, do not count.

There is some debate among those who have the time to argue such issues as to whether or not the tax credit for existing property owners will help stimulate sales. The naysayers argue as these people have property to sell before they can buy, more inventory will hit the market, therefore further supressing prices.

In my opinion, if those people have duplexes or single family homes appropriate for first time home buyers, the additional inventory would be welcome. There just aren’t that many good lower end properties out there to choose from.

According to the Wall Street Journal,  Mark Zandi, the chief economist at Moody’s Economy.com, agrees with me. He thinks the expansion of the credit will result in 500,000 more home sales by the end of April.

That’s 10,000 more sold properties per state.

There’’s news worth reading.

Spoken by Kari Lundin | Discussion: No Comments »

5 Reasons To Buy A Minneapolis Duplex Now

November 2nd, 2009 categories: Buying A Duplex

Come winter, most duplex buyers turn their thoughts to the holidays and devising survival tactics to make it until spring.  After all,  icey sidewalks and knee deep snow are hardly inspiration for moving, right?

Well, here are five good reasons why everybody should.

1. The Tax Credit – While we’re still waiting for Congress to officially act on extending the $8000 first time home buyer tax credit, signs coming from Washington are encouraging. It looks, at the very least, as if there will be a new deadline of April 30th in order to qualify for the credit. Remember, in Minnesota, if you wait, sometimes it still snows in April.

2. Low Interest Rates – On Friday, both 30-year fixed conventional and FHA loans were at 4.875 percent. For those who are qualified, money is historically cheap to borrow.

3. Banks Don’t Wait Until Spring – Like many buyers, most traditional home and duplex sellers believe spring is the optimum time to move. As a result, they wait until they’ve seen the first robin to put their home on the market. However, banks don’t typically have the luxury of timing the market, and list their foreclosure inventory year-round.  This means there will be plenty of properties to choose from through the long, frozen months.

4. Fewer Buyers to Compete With – One of the challenges people rushing to beat the November 30 first time home buyer tax credit deadline ran into was they were not alone. A mad crush of buyers resulted in multiple offers on the more desirable properties, and a venerable frenzy to get there first. Winter, and its challenges, will keep many of those potential competitiors home until the first thaw; meaning you’re more likely to be able to buy a good property at a fair value, rather than a number that’s been inflated by fear.

5. You’ll Save A Lot of Money- Believe it or not, perhaps due to the preponderance of bank-owned properties on the market, the average sales price of a duplex that sold between October 1, 2008 and Februrary 1, 2009 was $23,000 lower than that of properties that sold between May 1, 2009, and August 1, 2009. 

Last I checked, professional movers didn’t cost anywhere near that much.

Spoken by Kari Lundin | Discussion: No Comments »

How Tenants Can Keep You From Selling Your Minneapolis Duplex

October 5th, 2009 categories: Selling A Duplex

I experienced a bit of frustration this weekend as a tenant stopped me from showing a duplex to a buyer.

The tenant was out of town and didn’t feel comfortable, even if the listing agent was present, letting anyone into her unit. As a result, the listing agent, my buyer and myself had to rearrange all of our schedules to accommodate her return.

Trouble is, the law said we didn’t have to.

While I’ve said it before, it bears repeating. In the state of Minnesota, tenants do not have the right to 24 hour notice if a landlord needs to enter their unit for business purposes. The law says “reasonable attempt to notify”.  Nowhere in state law does it define reasonable attempt.

Of course, this doesn’t mean a landlord should be inconsiderate. Not only does notice keep tenants happy, it gives them the opportunity to tidy up their unit, which ultimately helps it show better.

Many tenants, however, not understanding the process, use this as an attempt to thwart any sale of the property. It’s important, before going on the market, to explain to them that all of the protections afforded them in their lease will remain in effect upon and after the sale.

Fortunately for this seller, it is not a pre-foreclosure situation. Had it been, he would have lost three valuable days on the market, which could have cost him considerably.

Worse yet, had my buyer been less interested, he might never come back.

Spoken by Kari Lundin | Discussion: No Comments »

Why Foreclosed Minneapolis Duplexes Don’t Come With Refrigerators

October 2nd, 2009 categories: Buying A Duplex

When showing a duplex buyer a foreclosed property, I often hear them exclaim, “This one has appliances!”

What’s so special about a refrigerator and a dryer?

Plenty.

Large appliances like refrigerators, stoves, washers and dryers are considered personal property. As a result, they are considered to be owned by the people who lost the duplex to the bank.

More often than not, foreclosure victims take these appliances with them, either to use in a new location or to sell in a garage sale or someplace like Craigslist.

Of course, this means that the duplex buyer has to factor the cost of replacing multiple refrigerators and stoves into her purchase. This can cost several thousand dollars.

So finding appliances in a foreclosed property is a bonus. However, it’s important to remember they are still considered personal property, and the previous owner has the right to reclaim them. Therefore, the bank selling the duplex can’t guarantee a buyer that they’ll be in the property at closing.

Theoretically, anyway, the previous owner could pick them up before the house is sold.

Most of the time, they don’t; saving the buyer significant amounts of cash.

Spoken by Kari Lundin | Discussion: No Comments »

FHA Ruins Minneapolis Fourplex Party

October 1st, 2009 categories: Buying A Duplex, Multi-Family Property Investing

In a lending market that requires an investor to put 25 percent down on a four unit property, and an owner occupant just 3.5 percent on the same building, it would seem happy days are here again for live-in landlords.

After all, don’t more units always mean more money?

In this case, yes. And yes.

It seems the FHAdoesn’t want any one of us to have too much fun. So, they’ve imposed something of a curfew on the triplex and fourplex market.

Guess what?

Before they’ll even think about giving you a loan, they want to know the net rental income of the property is greater than or equal to the monthly payment. In addition to the mortgage itself, the monthly payment also includes property taxes and insurance.

And with property taxes being based on the artificially high values of a few years ago, that’s tough to do.

What’s the net income? Well, that’s 75 percent of the rent collected from the three units you don’t intend to live in. In other words, the property has to be able to pay for itself with 75 percent of the revenue collected from just 75 percent of the units. Read the rest of this entry »

Spoken by Kari Lundin | Discussion: 1 Comment »

Minneapolis Duplex Sales Weekend At The Lake

September 22nd, 2009 categories: Twin Cities Real Est

MAAR released its weekly activity report today and, once again, due to Labor Day falling late this year, it skews any comparisions of the first weeks of September for 2008 and 2009.

At least in the single family sector anyway.

New listings for the week ending September 12, 2009, were down 12.9 percent from the same week in 2008. While pending sales dropped dramatically during the holiday stretch from the week before, the good news is they were actually 7.3 percent higher than they were one year ago.

Meanwhile, the small multi-family market buyers and sellers didn’t seem to notice there was a three day weekend. 

Pending sales were actually up 25 percent week over week, with 73 percent of this year’s purchase agreements coming on lender mediated properties. This is not dramatically different from the 23 percent involving a lender at the negotiating table in 2008.

The average off market price for the week, however, was $111,890;  down from 2008’s $124,100.

There were 43 percent new listings for the week than last year. While upon initial glance this may seem to be last-weekend-at-the-cabin related, the 46 new listings are not too far off the weekly average for the year. Seventy percent of these new duplex opportunities will involve lenders in the negotiations, compared with the 59 percent that did for the week last year.

Next week should provide a more accurate reflection of marketplace patterns.

Spoken by Kari Lundin | Discussion: No Comments »

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