Monthly Archives: February 2007

Investment Real Estate In Kansas City: Don’t Stop

Chicken Little loved to say the sky was falling. And if you read all of the newspapers you will see that they like to do the same when speaking of real estate. The media loves all the fodder regarding stagnant growth, reverse growth, minimal growth, large inventories, etc. But, and you need to listen here, it really doesn’t make too much of a difference if you own investment property, especially here in the Kansas City area, and you own it for the long haul.

If you’ve read my blog for any length of time you know I’m not a big proponent of Buy & Sell strategies. Buy & Hold income property is a whole other subject. Inman News is a great portal to keep up on real estate news. And today I read an article on Inman that reported that the home-price index fell 0.7% in the fourth quarter while rising 0.4% compared to the same period of time the previous year. A mixed signal but relatively flat, none-the-less.

However, (read the article) it goes on to speak of growth since 2000. Detroit is the worst city on the index with a rise of 19.51% since 2000 and Miami had the highest rise at 180.87%!

We can assume that Detroit will not face the correction that Miami will. (We don’t know, but it’s an educated guess.) And neither will Kansas City. But lets say Kansas City appreciated somewhere along the lines of Denver at 37% and Dallas at 23%. (I’ll use the 25% number since I believe we aren’t Denver but a little nicer than Dallas…oh, I can see the angry emails now.)

Example: Paid $150,000 for duplex in 2000. Appreciated 25% over the 6 years and now has a market value of $187,500. For the sake of argument, we can say that it really appreciated 27% but over the last year dropped 1%. Doesn’t really matter. The point is your equity grew on appreciation alone by $37,500. Your remaining principal is now $111,230 (or so assuming you put 20% down at 7.0% back in February of 2000) so your tenants paid your loan down an additional $8,770 on your investment property. That’s total equity growth of $46,270.

Therefore, your initial $30,000 cash investment is now worth $76,270. A 254% increase. Are you getting that? You had 25% appreciation on the property but because of leverage you had a 254% increase in your money. How are your stocks/bonds doing?

And I have not even mentioned Cash Flow Before Taxes or Depreciation. Two more of the 4 benefits when owning investment real estate.

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Filed under 4 Benefits of Real Estate Investing, Kansas City Real Estate, Misc. Real Estate

New To Real Estate Investing? Look Out For Expenses!

I’ve covered the topic of NOI (Net Operating Income) before and if you are new to real estate investing you may wish to go back and read those posts. But the key to knowing your NOI is knowing the actual expenses. Here are some obvious expenses to look out for;

  • insurance
  • property management
  • leasing costs
  • grounds upkeep (lawn, snow removal)
  • maintenance costs
  • vacancy

Here are some expenses you may not readily think of but you’ll need to account for.

  • hidden maintenace costs future/sinking fund (ie, the roof passes inspections but only has a life of 5-7 years left.)
  • non-performing tenants (rent rolls show $795/mo but you find out after closing they are 30-60 days behind)
  • HOA (numbers look great until you throw in that $375/qtr. HOA fee that cares for exterior maintenance but everyone on the block has peeling paint and wood rot)
  • utilities (who is responsible for these?)
  • rental licensing fee (Wyandotte County has a fee for rental properties and Kansas City, MO is considering one)

Just a few extra things to think about when purchasing income property. Remember, the key is to have a property that makes you money and not an investment house that costs you your vacation each year.

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The "Ego Wall" When Negotiating Real Estate

I just finished reading a great post over on UrbanDigs regarding his particular strategy concerning negotiating to help his clients receive the lowest price possible when purchasing their property. It’s a good read and has sound thinking behind it. Worth your time.

My only concern is that I have found over the years that there is an imaginary Ego Wall that exists and you do not want to get crushed by it.

What am I talking about? Well, it has been my experience that there is a point at which a seller will negotiate in good faith and a point at which he will be insulted, challenged (or any other word you would like to throw in) to the point that he will be less malleable towards making the lowest deal possible to get the transaction done.

And just like Noah (as a buyer’s agent) doesn’t know how a seller will react or where he will go on his counter offer (if he even offers one once he’s been put off) I seldom know either when working for the seller. As Noah correctly points out almost every seller comes with their own unique set of circumstances and goals.

So while I understand, support and have used the low ball strategy I also caution my clients that when you low ball it still must be reasonable. Because it is my belief that once you make the seller an enemy you may have cost yourself money.

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New Urbanism, Smart Growth, Whatever: Just Do It

Before I get started let me just say this. I am not an environmental radical. I do recycle. I drive a small car. I’m for smart growth. I’m for anything that lessens our dependence on oil. However, I also live in our real, modern America and I have a minivan to drive around my family of six, and that vehicle currently uses oil. I live in the capital of suburban sprawl right here in Olathe, Kansas and I’ve been known to leave lights on for days at a time.

New Urbanism and Smart Growth do need more attention. Especially here in the heartland where land is so plentiful and cheap that we tend to squander our natural resources without much thought. Clean up this blighted area and recycle the land with new homes, schools and businesses? Nah, just tract out another 100 acres down by Spring Hill and start building!

There are economic, sociological and governmental forces here at play that are too large for just one guy to make a difference. (And talk about a dysfunctional city family here in the metro…KC doesn’t like Overland Park, Olathe doesn’t like Lenexa, everyone fights with everyone over business…) But I would at least like to bring it to the attention of some of you out there.

On this post you will find several links to sites that I think are worth your time to check out. Building & Philosophy sites, a National Geographic site, community sites like Kentlands in Gaithersburg, Maryland, Cherry Hill Village in Michigan and Orenco Station in Oregon to name but a few. (Imagine Zona Rosa with housing right around it so that people could safely walk to the shops and dining without having to drive!) There are even many blog sites concerning urban policy and growth.

I see hope for this train of thought here in the Greater Kansas City area. After all, the condo/loft boom in downtown and the River Market areas are a direct result of people young and old wanting to live in a community that they are actually a part of. To walk to work and dining and entertainment. To not have to negotiate I-35 each and every day.

I have even seen a few builders here in the KC metro put together some neo-traditional housing neighborhoods. Yes, they lack the overall efficiency of a true smart growth neighborhood and are often built out on empty acres miles from shopping and business centers but they are a baby step in the right direction.

True, we are Kansas City and we have different lifestyle traditions than the people on either coast. No matter how nice, spacious and well put together an all brick, three level town house is people here are probably never going to be crazy about living in one. But maybe we can mix a few in along with some well designed single family homes and surround these around a business center? Maybe we can move forward on the Light Rail for Kansas City down to Waldo. (This subject is sure to bring about a comment or two!)

I don’t pretend to have all the answers to our growth problems here in the United States. Many with my political point of view believe we have no growth or environmental problems. But I think that it is short sighted of us to not look towards the kind of city and neighborhoods we are leaving for our children. To continually strive to make a better city than what was given to us and to have affordable housing, clean air, jobs and first class educational facilities is what I believe most of us want . We just have to come to agreement on how this is to be done.

So long as the discussion is civil, I welcome your emails and comments. Reasonable people can debate issues and look for places of promise even when the disagree on many points.

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Filed under Kansas City neighborhoods, Kansas City Real Estate, Social Issues

Kansas City Real Estate: A Spring Thaw

Let’s face it. It’s been a pretty tough selling season since late November. First there was Thanksgiving followed by the Christmas season. (Yes, houses do sell during this time of year but a greatly reduced pace.) Then came about 1 month plus of snow on the ground and 4-20 degree temperatures.

This week I have noticed more traffic on my homes than I have seen in a while. The weather has broke and people are once again thinking about making a move when it comes to buying their next home and possibly selling their current one.

For sellers this is welcome news.

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March Madness is Coming!

Oh, baby! I can feel it. March Madness is just around the corner. With 3 games left the Kansas Jayhawks are tied for first in the league and have a chance at their 50th conference championship. Folks, Blair Kerkoff of the Kansas City Star did a great job talking about what an accomplishment that is.

Anyway, for those that know me well you know I’m nuts about Jayhawk basketball. Here are just a few of their successes;
  • 2 Helms National Championships
  • 2 NCAA National Championships
  • 12 Final Fours
  • 49 Conference Championships
  • 14 Members of Naismith Basketball Hall of Fame
  • 54 All American selections
  • Third all time in wins

Oh, and by the way…they are the only school to have 4 basketball arenas around the country to be named after their alumni.

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Keller Williams Realty + Trulia + Google Base = Sold Listings

One thing I base my real estate business on is that the more places you can get your listings posted on the higher chance of success there will be of securing a qualified buyer. And beyond that, if I can be the person the clients contact when they find the home online the better off it will be for all involved in that no one will know more about the listing than me.

Anyway, I’m very excited that Keller Williams has signed a partnership agreement of some sort with Trulia and Google Base. Just today I tried to find my listings on Trulia and found all of them. It’s extremely accurate and up to date. Furthermore, when the client clicks the listing for more information it takes them directly to my website! From there they can continue their search or bounce around my website to find out more about my unique services.

Anyway, I think it’s great. Give the links a try and see where they take you. And let me know your take on the issue.

Chris Lengquist
Keller Williams Realty
Diamond Partners, Inc.
Olathe, KS

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