Archive for July, 2013

Minneapolis Duplex Sales A Puzzle

said on July 30th, 2013 categorized under: Twin Cities Real Est

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Puzzle houseI’ve been puzzled by the Minneapolis and St Paul duplex weekly market statistics the past few weeks.

Why?

Well, the pieces don’t seem to make a complete picture.

For instance, 64.7 percent of the pended listing sales for the week ending July 20 belong to traditional sellers, compared with just 50 percent for the same week in 2012.

So the gradual diminishing supply of bank-owned or negotiated duplexes for sale should bode well for traditional sellers, right? After all, buyers purchase distressed properties at a discount. So it stands to reason that the more properties being sold by traditional sellers, the higher the prices.

Not over the past few weeks.

Last year’s average sold price for the third week in July was $217,871.  This year’s average off market list price, however, was $207,141. And the average list price is usually a little higher than the sold price. This makes the fourth consecutive week this has happened.

The only plausible explanation I can come up with is the increase in interest rates has caused buyers to either qualify for a reduced mortgage amount, or be unwilling to take lower returns on their investment thanks to the reduction in cash flow caused by the higher cost of borrowed money.

There were 31 new duplex, triplex and fourplex listings during the week.  At 67.7 percent, most of these belong to traditional sellers. One year ago there were 34 new listings; just 47 percent of which were brought to the market by equity sellers.

The single family home market saw pending sales up 6.2 percent for the week, and does not appear to be experiencing the same anomalies as the small multifamily market.  New listings were up 25.1 percent, while inventory continued to be down 14.3 percent.

The Median Sales Price for single family homes for June was $210,000; up 17.5 percent from June 2012.

As the summer marches on, let’s hope we can at least find the border pieces of whatever this puzzle is about.

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Laminated Card - Real Estate License for Agent ProfessionalSometimes new investors see obtaining their real estate license as the key to achieving success as a duplex and rental property investor.

Many think simply having a real estate license will not only allow them to pocket the commission an agent would have earned, but also, give them an inside track on all of the “good deals”.

The trouble is, most of those mysterious, best deals only agents allegedly have access to? They come from hours, days, weeks, months and years of networking, talking with prospective sellers, and in general, making real estate a full time career.

Realtors can’t buy every property we find. And for many of us in today’s difficult lending environment for self-employed people of all professions, financing isn’t even possible.

So what do we do when we stumble across a good deal we’d buy ourselves if we had the money? Pass it along to our best clients.

And for many of us, that’s our investors. In other words, it’s my loyal clients who get the first calls when I stumble upon a great deal; not investors who are part time agents looking to “save the commission” on my hard work.

If you’re thinking of getting started investing in real estate, it pays far more in opportunity to align yourself with a full time Realtor than you’ll ever save in commission.

Minneapolis Duplex Sellers Cause Fireworks

said on July 16th, 2013 categorized under: Twin Cities Real Est

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Colorful firework in a night skyMinneapolis and St Paul duplex sellers set off fireworks during the week of the fourth of July, when a whopping 48 of them put their properties on the market.

Of these, 81.3 percent are being sold by people with equity in their investment properties.

To put in perspective how magnificent this truly is, compare it with the measly 13 new listings made available during the same week one year ago, when just 35 percent of the 20 new sellers would not have to include a conversation with a bank or asset manager in order to make the decision to sell.

There were 30 property sellers who accepted offers on their existing listings over the holiday. Strangely, while a majority were traditional sellers (56.7 percent), this number is lower than the market share we have recently become accustomed to seeing. Nonetheless, it’s well above the 35 percent of last year’s 20 sellers who left closing with cash.

Bizarrely, last year’s average sold price for the week was $202,107, which was higher than this year’s average final list price of $192,347.

The single family home sector saw increased listing activity, with the number of new listings for the week 14.3 percent higher than the same week last year. However, pending sales were still up, albeit by just 5.7 percent. Inventory is still 16.4 percent lower than one year ago.

Sellers, however, should still be encouraged by the explosive Median Sales Price for June, which was up 17.5 percent to $210,000 for the month.

Let’s hope there are enough fireworks left for the rest of the month.

said on July 15th, 2013 categorized under: What Does That Mean?

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Work zone sign on template board, worker womanIf you’re thinking of converting your Minneapolis or St Paul duplex to a triplex, or adding bedrooms to your existing investment property, what city department do you call?

Zoning? Building permits? Or, if you’re in a city that requires one, rental licensing?

This morning I had a duplex investor call with exactly that question. He was considering adding two bedrooms to his 1950’s built side by side duplex, and after speaking with many departments in the city, was more confused than ever.

And the fact is, the answer is pretty simple insofar as who he needs to talk to. The question is– is he changing the use, condition, or residents of the property?

First, the zoning of a property is restricted according to the kind of properties a city has decided should be in a given area. In other words, the use.

A fast food restaurant, for example, may not be appropriate in the middle of a residential block. And the way a local government creates those unifying standards is by creating mapped zones for different land uses. Zoning may also regulate things like the size of building you can put on a lot on and how tall it can be.

Zoning may also limit the number of units allowed on a given piece of land. This issue is quite common in Minneapolis, where a duplex owner may be required to bring the entire property up to current building code and standards when changing it from a duplex to, say,  a triplex, and regardless of the fact it was first constructed over 100 years ago.

Building permits and codes involve new or changes in construction to a property. The local government has created a set of rules in terms of public safety, health and general welfare. Those standards, however rigid or lax, are what must be adhered to during construction.

Rental permits or licenses involve the health, safety and welfare of tenants. Those may be similar to what’s required of a regular, single family home, like the presence of smoke and carbon monoxide detectors within 10 feet of any bedroom. Or, they may be quite different, like restricting the number of unrelated people who can legally live in the same unit.

Yes, there are times when some of the departments overlap, and others when their standards are quite different. Just remember to ask yourself: use, condition or residents?

Minneapolis Duplex Sales Inspire Questions

said on July 9th, 2013 categorized under: Twin Cities Real Est

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minneapolis duplex sales inspire questionsHey, I don’t make up the data on Minneapolis and St Paul duplex sales, I only interpret it. And today? Well, I’m befuddled.

During the week ending June 30, 2013, there were 28 duplex, triplex and fourplex owners who received and accepted purchase agreements. Of these, 71.4 percent were equity sellers, who’s final average list price was $156,401.

Here’s where it gets weird. Last year during the same week, there were 21 duplex sellers who accepted offers. And, exactly 71.4 percent of them had equity in their properties.

One would think, with such relative similarity in the data, last year’s average sales price, and this year’s would be comparable. And yet, last year’s average sales price of $186,096, far eclipses the average for the week this year.

Weirder still is just 50 percent of the 26 new listings were brought to the market last year were being offered by traditional sellers. A whopping 82.9 percent of this year’s 41 new listings are not underwater.

Then again, that may be the answer to the drop in average sales price. There were 26 new listings during the week last year. There were 41 this year. That’s a 57.6 percent increase. But certainly, 15 more new listings do not make a market.

The single family home market didn’t seem to share in the market peculiarities. New listings were up 22.8 percent, pending sales up 22.4 percent and inventory remained down 16.8 percent from last year.

For the month of June, the Twin Cities Median Sales Price increased 17.5 percent to $210,000. Days on Market dropped to just 75, and sellers received 97.5 percent of their Original List Price during the month.

I guess we’ll see what the next few weeks bring to determine whether there’s a pattern we should either be alarmed or excited about.

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Predicting duplex salesSometimes there isn’t much to read in the tea leaves of the Minneapolis and St Paul market.

For example, the week ending June 22, 2013, there were 17 Twin Cities duplexes, triplexes and fourplexes owners who received and accepted offers on the properties they were selling.  Of these, 58.8 percent have equity in their properties, which were last in the market at an average list price of $207,800.

During the same week in 2012, 21 small investment property owners accepted offers. Of these, 52.4 percent had equity; a smaller market share than this year, but not by much. The average sold price, however, was significantly lower, ending at $175,474.

There were 29 new listings for the week, with a huge 79.3 percent of them being sold by traditional sellers. Last year saw 26 new listings, with a still substantial 73.1 percent of them being equity sellers, whose average sale price was $175,474.04.

In the single family home market, the number of New Listings rose 28.9 percent, while Pending Sales were also up 14.1 percent. In all, inventory decreased 18.2 percent. There are now just 15,195 properties for buyers to chose from on the MLS.

Any fortune telling on the future of the market would be crazy with no real changing patterns from June to June. We’ll have to be patient, and let the future take care of itself.