Comment
There’s nothing like a good adrenaline rush.
That’s why people jump out of airplanes, line up for horror movies, watch the Vikings and fall in love.
It’s also what some new investors are looking for when they start hunting for their new duplex.
They want to score a big return; usually in the form of a property that’s worth twice what they paid for it and also throws off so much positive cash flow every day that they can quit their day job. Next week.
They’re looking for that high reward duplex.
Trouble is, experienced investors in every market know that high rewards come only from one kind of investment; one with high risk.
What kind of risk? Well, tenants that require a great deal of hands-on management, buildings in higher crime neighborhoods, and often, properties in disrepair.
Granted, these places generally have a great return on investment; if you’re up for the challenge. Many investors are. Many are not.
When you’re first starting out and want to know what constitutes a good rate of return on your duplex investment, ask yourself some questions. Is the property in a neighborhood where you could potentially lose money? How much time are you willing to spend managing your property? Making repairs?
Most importantly of all, ask yourself what percentage increase in the rate of return your time and effort are worth.
Ever investor has different levels of risk tolerance.
Making a killing on an investment not only provides a huge adrenaline rush, but also fodder for hours of storytelling with friends. So does getting mugged.
For that kind of thrill, it might be easier to just go to the movies.
Comment
As a Realtor, I get asked a lot of questions.
They range from, “What were they thinking when they installed the bathroom here?” to “Won’t people just make us an offer, even if we list our duplex at a higher price?”
I don’t know the answer to the first question. And the answer to the second is usally no.
But these days, the question I get asked most often is “Does a duplex qualify for the $8000 first time home buyer tax credit?”
And while I’ve discussed it here before, then answer was and is yes.
For the record, multifamily homes like triplexes, four-plexes and apartment buildings qualify too. However, the property must be used as your principal residence. It’s also important to note you can only get credit for the part you live in.
The credit has been structured so that any first time home buyer who has a binding purchase agreement in place by April 30, 2010, can receive up to 10 percent of the property’s purchase price, not to exceed a total of $8000 in the form of a tax credit.
Since only one half of the duplex would be used as your principal residence, you can only use the value of one half of the property to qualify.
For example, if you pay $160,000, your half would be worth $80,000. If you buy a duplex for $100,000, however, your half is worth $50,000. Your tax credit would then be 10 percent of your half , or $5000.
The same would be true if you bought a four-plex for $200,000 and lived in one of the units. The value would again be $50,000, giving you a credit of $5000.
Of course, to receive this credit, you must not have owned a home in the past three years. If you’re single, you can’t earn more than $125,000 a year and if you’re married, the two of you can’t earn more than $225,000.
Purchase agreements must be signed no later than April 30, and the transaction must close no later than 60 days after that.
Call me if you want to beat the deadline.
Comment
Believe it or not, in some sectors of the Twin Cities housing market have begun to thaw. In fact, it feels like spring: of 2006.
Realtors and our clients are once again experiencing multiple offers and having to rush to see newly listed properties before they’re gone.
Unfortunately, the bulk of this activity is in first time home buyer territory; namely, those properties below $225,000.
But there are hints in MAR’s Weekly Market Activity Report that perhaps things are loosening up. For the week ending February 20, pending sales were actually 9.9 percent higher than they were for last year. This is the first year-over-year increase we’ve seen in weeks.
With just 5.39 homes available for each active buyer in the market, a 17.7 percent increase in the number of new listings for the week may help those facing multiple offers find homes. There are 6.9 percent fewer homes available for purchase this year than there were at this point in 2009.
In the small multifamily sector, traditional sellers continued to gain ground on the banks. Twenty-five percent of the owners of properties that received purchase agreements were people, not corporations. Of those listings new to the marketplace, 48.14 percent were being sold by people with actual names.
While the number of pended duplex sales was down 38.5 percent, the good news is the average price they left active status at was $121,509. This represents a significant leap over last year’s sold price of $94,671.23.
As we head toward the $8000 first time home buyer and $6500 repeat buyer tax credit April 30 deadline, we’re sure to see even more signs of spring.
