In recent months you may have heard that both the cities of Minneapolis and St Paul are experiencing historically low rental vacancy rates.
As in below 3%.
Thanks to the foreclosure crisis and tighter lending standards, more prospective home owners have been forced to rent until the both the economy and real estate market improves.
So what does this mean to an investment property owner, duplex buyer or seller?
As always, when supply exceeds demand, prices go up.
In recent months, a number of established Minneapolis duplex and investment property owners told me they’ve been able to increase rent for existing tenants and vacant units for the first time in years.
If you’re a duplex owner thinking of selling, this is good news. If you can keep your rent in line with the market, your property will have more annual gross revenue, which is one of the major components in determining value. The more income a duplex generates, the more it’s worth.
On the other hand, if you’re thinking of buying, this information should give you a sense of urgency. Regardless of whether or not a property is distressed (lender owned or subject to a short sale), values will go up because market rents have increased.
In other words, if you buy before prices increase, you’re more likely to get a bigger return on your investment dollar.