Archive for February, 2011

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said on February 3rd, 2011 categorized under: Buying A Duplex

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The Lowdown On Duplex Down Payments

said on February 3rd, 2011 categorized under: Buying A Duplex, Financing

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sale house and calculatorMany of you who visit this site do so with the hopes of finding out how much of a  down payment you need to have to buy a duplex or investment property.

And while I’ve talked about it before, it’s probably worth revisiting.

If you plan to live in the property, and this is true whether you’re buying a duplex, triplex, or fourplex, the least amount of money you’d need for a downpayment is 3.5 percent. Of course, everybody’s credit and debt ratios tell different stories, so there may be some exceptions to that, but that figure is generally the norm.

That’s because FHA insures loans on owner-occupied properties up to four units. And right now, the mortgages they insure have the lowerst down payments in the marketplace.

If you’re an investor, you’re not as lucky.

While it’s again largely dependent on things like your credit score, debt ratios and number of properties you own, most investors are required to have a down payment of 25-30 percent to purchase an investment property.

The amount sounds staggering. And yet, when most of my investors in today’s real estate market are realizing double-digit cash on cash returns on their down payments, it’s definitiely worth the investment.

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The young businessman looks at a watch isolated on a white backgI don’t know what Realtors will do with all our free time when a bank doesn’t have to be involved in the negotiations in the sale of a duplex.

But it looks like more and more Minneapolis agents are getting a chance to find out.

For the week ending January 22, 2011, traditional sellers were responsible for 17.4 percent of the duplexes, triplexes and four unit buildings that left the market because of a signed purchase agreement.

That sounds paltry, I know. But it’s up 7.4 percent over the same week in 2010.

Traditional sellers were also responsible for 45.16 percent of the newly listed small multi family properties that hit the market. While that’s still not a majority, it also is an increase of just over 7 percent from the same week last year.

Perhaps this return of sellers with human names was also responsible for the average pended price leaping to $129,912; a significant increase over last year’s average sold price of $78,195. While it’s important to remember pended prices tend to be higher than those on sold prices, it’s difficult to imagine a greater than 10 percent drop, which is the current market average.

Over in the single family market, there were 4.5 percent fewer purchase agreements signed for the week than there were that week of January in 2010. Not great, but not the typical slide of 9.3 percent we’ve seen over the last three months.

There was also a drop in the number of new listings; down 21.5 percent week over week. This is generally good news, but not enough of an improvement  to truly impact the 22,810 properties buyers can presently choose from.