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Is A $10 Rent Increase Worth The Hassle?

July 13th, 2009 categories: Selling A Duplex

While talking about rent increases in tough economic times might be like pining for summer in the midst of a Minnesota January, it is nevertheless important to remember the enormous impact on value that even the slightest increase in revenue can make.

There is no greater illustration than this than the gross rent multiplier. As I explained a while back, this figure is simply the price or value of the house, divided by the amount of money it takes in annually.

How do rent increases, or, for that matter, even more laundry revenue, impact the GRM?

Let’s pretend, on average, duplexes in your area are selling at an average GRM of 10.

Your duplex grosses $10,000 per year in rent and laundry income. Therefore, your property is most likely worth $10,000 x 10 GRM = $100,000. (Bear in mind that condition and location always contribute to value as well.)

The economy is bad, so you feel you can’t increase rent. But what would happen if you simply upped it by $10/month for each unit. That would result in an additional $20/month in income, for $220 per year.

What if you could generate $10 more a month in laundry income by increasing the charge for each was by 25 cents? This would result in $110 more for the year.

Combined, you would have increased your annual income by $330.

It doesn’t seem like much, I know. Until, of course, you use it to determine the market value of your property. Multiply the $330 by the GRM of 10 and those minor increases suddenly translate into your property increasing in value by $3300.

Times are tough for everyone, but there are still fair, compassionate ways to increase your bottom line.

Spoken by Kari Lundin | Discussion: No Comments »

Bank Foreclosures and Short Sales: The Best Thing to Ever Happen to Minneapolis Duplex Owners

September 10th, 2008 categories: Buying A Duplex

It’s not news that there are a rash of foreclosures and short sales in the real estate market. Some of this is due to fraud. Some due to spikes in interest rates in adjustable mortgages forcing monthly payments into the stratosphere.

But what might be news is that many foreclosures and short sales are the result of normally responsible people either going to refinance or sell their homes and discovering due to the plethora of foreclosures on the market, their home can no longer appraise for what they bought it for.

If you’re a homeowner and have to move, what do you do? Odds are you opt for a short sale. Or, if things are really dire, a foreclosure.

But here’s what the national media isn’t saying. Once you have a short sale on your credit report, you can’t buy another home for anywhere from three to five years. Foreclosure? Try seven years minimum. Not pretty either way.

What does this have to do with the Minneapolis and St Paul duplex markets?

Well, where are those short sale and foreclosure folks going to live? They’re going to need to rent. As many of them as there are, demand for rentals should soar, which due to that old supply and demand law, will force metro rents to increase. Of course, that means more money in landlords’ pockets.

Makes it seem like a pretty good time to buy rental property; whether a duplex, house or apartment building, doesn’t it?

Spoken by Kari Lundin | Discussion: No Comments »