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Why Is A Minneapolis Duplex Worth More Than A Fourplex?

September 3rd, 2010 categories: Buying A Duplex

Have you ever noticed that many Minneapolis duplexes sell for as much as a fourplex?

Why? After all, if there are more people paying rent, shouldn’t the property be worth more?

Not necessarily.

See it all boils down to that law we all learned in our first economics class: the law of supply and demand.

There are simply more prospective buyers for duplexes than there are for four unit buildings.

In the years I’ve been a Realtor, I would say that on average, at least 50 percent of the duplex buyers I’m working with at any given time are owner occupants.

Some are looking as a duplex as an affordable way to move into a neighborhood that’s out of their price range as single family home buyers.

Others are looking to owner occupy the property for a time, before moving on to a single family home while keeping the duplex as an investment.

While the prospect of having a single tenant to manage is palatable to most of these owner occupants, the idea of having three sets of tenants to respond to is overwhelming.

As a result, these owner occupants tend to relegate themselves to duplexes, where they compete with investors who are simply looking to earn a specific rate of return on a property.

More buyers in the market for a property always results in a higher price.

Spoken by Kari Lundin | Discussion: No Comments »

What A Market Recovery Will Never Reimburse You For

June 11th, 2010 categories: Selling A Duplex

The other day a familiar duplex came on the market.

For the second summer in a row.

It’s a well-maintained property in a sought-after pocket of Minneapolis. As those kinds of properties are somewhat rare, I was happy to see it on the market again; this time at a price that makes more sense.

The irony is, a client of mine wrote an offer on this property last summer; at a number within negotiating distance of the price it’s listed at now.

The trouble is, my buyer bought a different duplex last summer.

And this year, that lovely duplex will likely generate an offer not too different from the one my clients wrote one year ago.

So, what’s the seller out?

A year of property taxes, insurance, maintenance expenses, water bills and the time and effort spent managing the property; all spent during a year they wanted to be done owning a duplex.

A year of lost time and effort to achieve exactly the same result.

I can’t think of a better way to illustrate the importance of pricing a property correctly the first time it hits the market.

After all, no amount of market recovery will ever reimburse you for lost time.

Spoken by Kari Lundin | Discussion: No Comments »

Minneapolis Duplex Sellers Rush To Beat Tax Credit

May 4th, 2010 categories: Twin Cities Real Est

Thank God that shipment of newly listed single family homes and duplexes hit the market just in time for the expiration of the first time and repeat buyer tax credits.

I’m being sarcastic, of course.

But with 2,147 new single family listings for the week ending April 24, representing an increase of 19.1 percent over last year, and duplex and multifamily listings up 32.7 percent year over year, it does appear sellers were rushing to get their properties on the market before the incentives ended.

Traditional sellers represented a clear majority of the new to market duplexes, with 60,9 percent of the new listings. This represents a significant jump from last year’s 21.2 percent market share.

Of the multifamily properties that received purchase agreements over the week, 38 percent were offered by traditional sellers. While not the majority of the transactions, this figure nonetheless represents healthy improvement over last year’s 7.9 percent.

This increase in traditional seller market share may also account for the average off market price of $155,428 compared to $88,026 for the same week last year.

Have the tax credits had an impact? We won’t know until the numbers for last week come in, but pended single family home sales for the week were up 9.8 percent over the same stretch last year.

Guess we’ll have to wait until next week’s report to see if sellers, as well as buyers, benefited from the tax credit’s end.

Spoken by Kari Lundin | Discussion: No Comments »

Minneapolis Duplex Sales Round The Bases For Home

April 20th, 2010 categories: Twin Cities Real Est

As the $8000 first time home buyer and $6500 repeat buyer tax credits round the bases for home,  the Twin Cities housing market appears to be staging a late inning rally.

For the week ending April 10, 2010, the number of new listings to hit the market was up 47.9 percent over the same week last year. In spite of this leap, there is still just 6.5 months of housing inventory in the marketplace; the lowest supply in years.

Pending sales were also ahead of last year, though the 3.6 percent jump wasn’t enough to seal a victory.

Meanwhile, the Twin Cities duplex market seems to need a seventh inning stretch.  The number of properties to receive purchase agreements for the week was down 39 percent from last year. Of those transactions, 32 percent belonged to traditional sellers, with the balance involving some sort of negotiations with a lender.

This slow re-emergence of the traditional seller has served to boost the average price a property leaves active status on the MLS at. For the week, this figure was $106,489; a grand slam when compared with last year’s $80,873.

While excess supply can often lead to falling prices, the week’s  23 percent year-over-year gain was as welcome as a seventh inning stretch. Much of the existing inventory had been sitting for a while, and the appearance of great new listings gave duplex buyers in search of a tax credit something to cheer.

Remember, the deadline for both tax credits is April 30. By then, buyers must have a signed purchase agreement in place, with closing on the property occuring no later than the end of June.

Spoken by Kari Lundin | Discussion: No Comments »

Don’t Let Your Tenants Suffer Burnout

April 19th, 2010 categories: Tenants

We’re living in economically challenging times.

As a result, most of us are cutting back on “extras”.  For some, that means opting to stay home and watch cable rather than going out.  To others, that may mean choosing to make a peanut buttersandwich  rather than bologna.

Unfortunately, for some tenants, that also means going without renter’s insurance.

First, if you’re a landlord and your lease doesn’t include language clearly stating that it’s your tenant’s responsibility to get insurance for her belongings, it should.

The reason is your owner’s insurance policy doesn’t cover the contents of your duplex.

In other words, if a fire, tornado, hurricane or earthquake topples your property, your losses may be covered, but your tenants belongings.

Most major insurance companies, like Allstate, Geico and State Farm offer some form of renter’s insurance.

While you must tell your tenant of their obligation to buy coverage, it’s a good idea to require them to provide you with proof they’ve done so.

After all, times may be hard but they’d be tougher still if you lost absolutely everything and didn’t have insurance.

Spoken by Kari Lundin | Discussion: No Comments »

Minneapolis Duplex Market Open To Interpretation

April 13th, 2010 categories: Twin Cities Real Est

Sometimes interpreting the Minneapolis/St Paul duplex market is a bit like reading tea leaves.

There might be some meaning in the patterns.  But they’re open to interpretation.

For the week ending April 3, 2010, the number of new duplex, triplex and fourplex listings was up 18 percent over those properties new to the market for the same stretch last year.

Of these, 49.23 percent were being offered by traditional sellers. This figure meant a year-over-year decrease in lender owned or mediated listings of 20 percent.

However, it should be noted that the number of pended transactions for the week represented a drop of 9.5 percent year-over-year.

This decrease in sales activity did not seem to impact the average off market price, however, which was $119,734.  While not the obvious improvement of recent weeks, this figure was nonetheless just over $9000 higher than last year’s sold price.

Of those properties that received purchase agreements, 26.32 percent had people sign the purchase agreements rather than financial institutions. This represents a traditional seller gain of nearly 10 percent year over year.

The single family market was a bit easier to interpret. There were 11.8 percent more homes that received purchase agreements than did last year.

The number of active listings on the market are also up, beating last year’s by half a percent.

Further good fortune is promised with the news that the average number of days a property is on the market before being sold has dropped to its lowest in years, while the percentage of the list price a property sells for rose. Most properties now sell within 2.7 percent of their asking price.

Spoken by Kari Lundin | Discussion: No Comments »

Duplex Market Has Something Up Its Sleeve

April 6th, 2010 categories: Twin Cities Real Est

Was it a rite of spring?

Or a magic act?

Either way, the Minneapolis duplex market managed to pull a rabbit out of its hat the week ending March 27, with pended sales up 62.5 percent from the same week one year ago.

Of those proeprties that received purchase agreements, 28.21 percent were signed by traditional sellers. While this seems like a disappearing act compared to previous weeks, it’s important to note that ALL of the pended sales for the week in 2009 were offered or mediated by financial institutions.

A still more stupendous feat may well be the fact that the average off market price for the week was $110,077. This made last year’s average sale price of $64,605.

For the week, new inventory performed something of a disappearing act; dropping 26.15 percent from last year. Again, this should help put upward pressure on prices.

The opposite was true in the single family home market. New listings for the week were up 29.4 percent over one year ago.

The good news is pending sales were up 13.8 percent, with the total number of signed purchase agreements topping 1000.

While not as impressive of a trick as making an airplane disappear, has managed to reduce the Supply-Demand Ratio to just 4.39 homes per buyer; the lowest it’s been in years.

Let’s hope there’s more magic yet to come.

Spoken by Kari Lundin | Discussion: No Comments »

Underwater Duplex Owners Gasping For Air

April 2nd, 2010 categories: Twin Cities Real Est

Remember when someone used the word “underwater” images of scuba diving came to mind?

These days when I hear the term, my first thought is of mortgages. Thanks to recent media headlines, it looks like that will continue; unless, of course, I decide to go to the Bahamas.

In either case, it looks like it would be wise to have extra oxygen on board.

In the last two weeks, US News & World Report named Minneapolis/St Paul the seventh most underwater housing market in the country. Their data, collected from Zillow,  reports that average Twin Cities home prices are down 29 percent since their peak in 2006.

In February, the Minneapolis Area Association of Realtors reported the average sale prices of Twin Cities homes was up 6 percent from February of 2009.

So if that trend continued, how many years would it take for us to be thinking of swim fins when we hear the word underwater?

Five.

Five years to regain that 29 percent decrease in value. And that’s IF we realize 6 percent in appreciation. Most economists forecast a more measured number ranging from 3 to 5 percent. That means it could take as many as ten years to be back on track.

Read the rest of this entry »

Spoken by Kari Lundin | Discussion: No Comments »

Let Your Tenants Fill Your Vacancy

April 1st, 2010 categories: Tenants

In today’s affordable housing market, many Twin Cities duplex owners are getting THAT call from tenants.

You know the one. It starts with, “I bought a house and am moving out”.

Somehow, those tenants often forget they signed a lease, which may still have time left to run.

At that point, the landlord should remind the residents they are legally obligated to pay the rent on the balance of their lease.

In all likelihood, this won’t have any impact.

The tenants leave, and the only option the duplex owner has is to pursue legal recourse, which tends to cost money.

However, what would happen if during the telephone conversation, the landlord suggested the tenants might remedy the situation by subletting or assigning the apartment.

What’s a sublet? Well, it’s a transfer of rights to the unit for a limited period of time. During that stretch, the original tenant is still responsible for the lease, rent payments, and may reserve the right to return.

How does that differ from assignment? In assigning the lease, the tenant turns over the responsibilities of the lease to the new resident, and absolves herself from any responsibility for or interest in the unit.

How does the landlord protect herself against the risks of an unknown tenant?

Read the rest of this entry »

Spoken by Kari Lundin | Discussion: No Comments »

How Does Your Minneapolis Duplex Agent Sleep?

March 25th, 2010 categories: Selling A Duplex

If you ask me to come over and give you a price opinion on your Twin Cities duplex, do you want me to lie?

I could. But I won’t.

Some agents will.

And I wonder how they sleep at night.

They’ll tell you your property is worth much more than the comparable sales and market data suggest. How do you pick them out?

They’re usually the agents who give you the highest value.

Of course, you want as much money as possible for your property.

So you hire that agent.

Trouble is, he won’t get that price for you. He just wants the listing.

So he’ll tell you what you want to hear and beg your forgiveness later.

Realtors call this “buying a listing”. Basically, the agent agrees with you about the property’s value; knowing full well it’s over-priced.

The trouble is, the agent isn’t buying the duplex. Someone out in the marketplace is.

Most agents and their buyers have seen your competition. Sooner or later, either through a lack of showings or a lowball offer, the market will inform you that your listing is overpriced.

Look, we all think our pieces of real estate are worth more than they really are. But ultimately, they’re only worth what someone is willing to pay for them.

Right now, that isn’t as much as it used to be.

I recently lost two listings.  The agents who put their signs in the yard had prices did so at prices $20,000-30,000 higher than those I gave the sellers.

Neither property has sold. Which is the point of the whole excercise.

I specialize in duplexes, and I do my very best to price properties according to what market statistics suggest. In spite of this, listings sometimes still linger on the market for reasons I don’t always readily understand.

But I didn’t lie to the seller so I could put a Duplex Chick sign in the yard.

And that helps me sleep at night.

Spoken by Kari Lundin | Discussion: No Comments »

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