Foreclosures Are Rising: What Twin Cities Duplex and Small Property Owners Need to Know in 2026
According to a recent report from the Minnesota Homeownership Center, the 18,616 pre-foreclosure notices in 2025 were the most since 2015. In the Twin Cities seven-county area, pre-foreclosure notices jumped nearly 50%.
Absolutely no one anticipates a return to numbers like those we saw during the Great Recession. In fact, most experts say this uptick is simply a return to levels normal before some of the Covid-era stabilization measures delayed these filings.
Causes cited for mortgage delinquencies include increases in homeowners’ insurance premiums and rising property taxes.
Whether you’re the owner-occupant of a duplex or an investor, it’s important to remember you are not alone. Life happens sometimes, and there’s no shame in seeking help. Non-profit organizations like PRG and Lutheran Social Services offer free foreclosure prevention counseling. Whether you own a single-family home or small investment property, you must seek help sooner rather than later.
This is important to help you keep the property (if that’s what you want) and to preserve as much of your credit as you can. It’s also important when it comes to tax planning.
When a mortgage lender cancels or forgives debt, the IRS generally treats the forgiven amount as income. Until December 31, 2025, homeowners were eligible for the Qualified Principal Residence Indebtedness (QPRI) exclusion. This exempted debt must have been incurred to buy or do significant renovations to your primary residence, not to a property you rent out to others. This exemption expired at the end of last year and Congress has yet to extend it.
If your duplex, triplex or fourplex is strictly a rental property, the forgiven debt is fully taxable as ordinary income.
However, if you lived in a portion of the property, the QPRI exclusion can apply to the residential portion of the debt, not the entire loan. Of course, this is also contingent on Congress extending the QPRI.
You also may be able to avoid paying taxes on forgiven debt through:
- Insolvency exclusion. Your total liabilities needed to exceed your assets immediately before and after the cancellation of debt.
- Bankruptcy. If the debt is canceled as part of a bankruptcy filing, the bankruptcy exclusion applies.
- Non-Recourse Loans – This is a loan where the lender’s only remedy is to repossess the property, not pursue you personally.
For duplex, triplex and fourplex owners, there’s are issues that are often overlooked; capital gains tax and depreciation recapture. Not only is the debt cancellation a taxable event, if the property increased in value, you may pay tax on the gain. And if you claimed depreciation over your years of ownership, you may have a liability there as well.
If you’re having trouble making your mortgage, give me a call. I’d be happy to discuss options and connect you with the resources that will help you achieve the best possible outcome.