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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.
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Deadline Pushes Minneapolis Duplex Market
March 9th, 2010 categories: Twin Cities Real Est
There are less than 60 days left to qualify for either the first time home buyer or repeat buyer tax credit.
That looming deadline may well have inspired the Twin Cities housing market’s 13.9 percent year-over-year jump in accepted offers for the week ending February 27.
While not as dramatic, the duplex and small multifamily property market also saw an increase in pended transactions; up 4.4 percent year-over-year.
Of the properties that pended, 19.46 percent were offered by traditional sellers; up from 11.6 percent for the same week in 2009.
While neither year posted particularly inspiring average off-market prices, the figure for the week in 2010 of $83,746, did nonetheless represent an increase of $805 over the year before.
The amount of new duplex inventory continued to trail last year’s mark, with just 45 properties coming on the market for the week. This represents a 30.7 percent drop from last year.
Of these new listings, 28.9 percent were offered by traditional sellers. While that’s a figure that appears thin, it is still more than twice as many as last year.
As the tax credit deadlines loom, let’s hope for continued good news.
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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.
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Minneapolis Duplex Market Hints At Thaw
March 2nd, 2010 categories: Twin Cities Real Est
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.
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A Minneapolis Duplex Isn’t Always About The Numbers
March 1st, 2010 categories: Buying A Duplex
One of the reasons I specialize in helping people buy and sell duplexes is that each and every one, whether it’s strictly an investment property or a place for the owner to live, is that it is both an intellectual and emotional endeavor.
On the one hand, for both investors and owner occupants, the financial analysis is crucial. If you’re an investor, the property needs to meet your financial goals for a return.
If you’re an owner occupant, the numbers also need to work. Most buyers have a very specific idea of how much they’re willing to contribute in “rent” toward their share of the monthly mortgage payment.
But for both an investor and an owner occupant, the return a property gives your heart can be just as important.
There are times when owning an income property sucks. Period. And it’s times like that when a piece of woodwork, a built-in, a view, can be the inspiration to muddle through.
Make sure your duplex is a good investment. Of course. But it never hurts if it makes your heart sing too.
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Don’t Count On Reduced Property Taxes When You Buy A Foreclosed Duplex
February 25th, 2010 categories: Buying A Duplex
If you want to get a muddy answer, call your local property tax assesor and ask what the city or county’s policy is on resetting the market value on a foreclosed property after you’ve purchased it.
Some time ago I heard Dakota County, for example, would not reduce a foreclosed property’s market value to the amount it sold for.
That seemed incredible to me. After all, if something has a tax assesed market value of $300,000, but sells for $150,000, hasn’t the market established that it’s only worth $150,000?
Apparently not. Well, sort of not.
Dakota County is working off of property values from two years ago. This year’s sales, for example, will be logged into their computer program. Whatever standard it arrives at is applied to all the properties in the county, calculated, and new values determined.
The following year the county then sends out a notice to property owners informing them of what their property taxes will be in the year that follows.
So, sales in 2008 were tallied, and new totals sent out in 2009. These totals informed property owners what they would be paying in 2010; giving them much of 2009 to argue against the county’s case.
In other words, if the real estate market is bad this year, we should see overall reduced market values for tax purposes, which will result in lower property taxes in 2012.
According to the assessor’s office in the city of Minneapolis, their model calculates market values on “open market arm’s length transactions”. A property is valued on whatever the comps are and, as the city realizes most foreclosures and short sales are sold at deep discounts, those transactions are largely excluded from the valuation process.
So, taxable market value is largely based on what properties offered by traditional sellers sold for. Of course, these properties are down in value too, but not nearly to the extent of those involving banks in the transactions.
Buying a foreclosed duplex may or may not result in lower property taxes down the road. And it’s important to not project any sort of savings as part of the income property analysis worksheet you do prior to writing an offer.
Clear as mud?
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Don’t Cheat On Your Minneapolis Duplex Agent
February 22nd, 2010 categories: Legal Stuff
One of my buyers cheated on me last week.
He called another agent about a property the agent had listed.
After he told me he’d see only me!
It could cause me not to get paid.
See, in real estate there’s something called “procuring cause”. And it belongs to the agent who caused the buyer to purchase the duplex.
If my client called and asked me to help him see or write an offer on the property, I could have to split my commission with the listing agent. Why? Because that Realtor could argue that he was the one who was responsible for the purchase; having provided my client with the information that caused him to write an offer.
The same could be true if you asked another agent to show you a property, walked through an open house and spoke with the agent, or even called on a newspaper ad.
It doesn’t matter how long I’ve been working with that buyer, how many duplexes I’ve shown him, nothing. And I’d have to split my check because of that one phone call.
Of course, I do practice safe real estate and have a Exclusive Right to Represent Buyer contract in place. However, even that may not protect me entirely.
So my buyer and I had a talk; one in which I reminded him to always disclose to other agent that he’s working with another Realtor.
As part of our understanding, he can’t ask another agent to show him a property, call listing agents for information, and must always tell open house agents he’s working with me.
He understood. And since he’s a good guy, I forgave him.
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Buyers Nod Yes In Minneapolis Duplex Market
February 16th, 2010 categories: Twin Cities Real Est
Back in the day, oh, say, in around 2005-2006, well-maintained properties that were properly priced were selling at a rapid pace, and with multiple offers.
It was almost like an auction, with bidders scrambling to out-strategize and out-maneuver one another.
And while we all know the market has changed since then, there have been some buyers making subtle nods of their heads in recent weeks.
With today’s release of MAR’s Weekly Activity Report came news that the monthly supply of inventory is now at just 5.5 months. While this number still slightly favors sellers, it’s important to remember that a balanced market, where buyers and sellers are on equal footing, occurs when there is a 5 month supply.
For the week ending February 6, MAR reported new listings of single family homes were up 3.8 percent from one year ago. So too were pending sales, with 4.7 percent more properties receiving purchase agreements than in 2009.
While duplex sales for the week were down 3 percent from last year, there was decidedly less inventory for buyers to choose from. The week showcased 23 percent fewer new listings than came on the market the first week of February last year. Of the 2010 new offerings, 10.8 percent were listed by traditional sellers, compared with just 5.3 percent last year.
The average off market price for the week was $121,536. This is up considerably from last year’s $98,528.
Tightening inventory brings increased competition for listings. And while it’s not scientific, I can share that three of my buyers have been involved in multiple offer situations in the last 10 days.
As long as inventory remains tight, expect that trend to continue.
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Clock Ticking On Minneapolis Duplex Tax Credit
February 15th, 2010 categories: Tax Credits
With all the snow on the ground, April 30 seems ages away.
But really, it’s only 74 days away.
Less than three months to find your first duplex or house before the $8000 first time home buyer tax credit expires. Less than three months for repeat buyers to qualify for the $6500 credit.
Yes, it still sounds like a lot of time. Except for the fact that many of the first time buyers I’ve worked with have taken four to six months to define exactly what it is they’re looking for in a property and then find one that matches both their budgets and criteria.
Remember, purchase agreements must be signed no later than April 30, 2010, to qualify for the credit. New owners must take title no later than June 30.
If you’re wondering whether you qualify, just remember; a first time home buyer is defined as anyone who has not owned a home in the last three years.
A repeat buyer must have lived in their homes consecutively for five of the previous eight years.
For either, income limits are $125,000 for single buyers and $225,000 on a joint tax return.
Of course, in either instance, the maximum home price is $800,000.
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Let Fannie Mae Buy You A Refrigerator
February 11th, 2010 categories: Financing
Last week Fannie Mae announced it is offering a 3.5 percent incentive for buyers who purchase and close on a property they own between January 28 and April 30, 2010.
Fannie Mae owned properties can be found both on the MLS and at Homepath.com.
Buyers Homepath properties may receive up to 3.5 percent of the final sales price for:
- Closing costs
- The purchase of new Whirlpool appliances by Fannie Mae or
- A mix of the two at the buyer’s discretion, up to the maximum of 3.5 percent
In order to be eligible for the incentive, offers must be accepted after January 28 and close before May 1, 2010. Investors aren’t eligible for the bonus.
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