Monthly Archives: July 2007

July 20, 2007 · 8:12 am

Bleeding Kansas: Taxation Without Representation

Once again Missouri has figured out a way to stick it to Kansas. And once again, Missouri will lose if Kansas chooses to retaliate.

Reported in today’s Kansas City Star (go out an buy a copy)…

The first shot was fired by Missouri when Gov. Matt Blunt signed a bill this month providing an income tax break for Missourians who receive Social Security. It contained a little-discussed provision eliminating a deduction for real estate taxes paid outside Missouri.

That’s a $190 ding for the typical Johnson County resident who works in Missouri.

When someone asked Governor Matt Blunt of Missouri about the tax that screws Kansans his response was again reported in the Star as…

Blunt said he was the governor of Missouri and his focus was on reducing taxes for Missouri residents.

As someone who has to pay some Missouri taxes, this is just stupid. Why? Because when Kansas inevitably responds, here are the numbers

Based on commuting patterns, Johnson County’s Economic Research Institute estimates that more than 71,000 residents from eight nearby Missouri counties work in Johnson County. And at least 53,000 Johnson Countians work in those Missouri counties.

So by getting taxes from 53,000 JoCo residents the Governor will cost 71,000 of his residents higher taxes. Will Missouri ever learn? This is why there is so little cooperation between the “rich” Johnson County and the “incompetent” Kansas City/Missouri governments.

Nobody asked, and it has nothing to do with real estate investing… No wait, it has everything to do with real estate and real estate investing. More taxes cause higher expenses. Higher expenses cause higher rents and fees. Figure it out. Just my $.02 on the subject.

For you out of town readers Kansas City, Jackson County and the State of Missouri are always trying to figure out how to screw Johnson County, Kansas. When they did a study and found out the majority of ticket buyers to the Chiefs and Royals were Johnson Countians they added a per seat tax. Then they “locked out” Kansas ticket buyers for the perennially sold out Chiefs until all the Jackson County residents who wanted tickets had tickets. (Not that Jackson County can support the Chiefs all by themselves.)

Then there is the City payroll tax. The bi-state tax and the never ending attempt to get Johnson County to further subsidize Kansas City, Missouri. I’m all for civic cooperation, realizing we all have a stake in this metropolitan area. It would help is stupid policies like these weren’t instituted. It just builds further resentment.

Property Collector or Real Estate Investor

Yesterday I was having a conversation with a younger person who considers herself to be a real estate investor. During the conversation I was bringing up “old-fashioned” notions (I’m 42, I’ve been called a lot of things…just not old-fashioned.) like a cash reserve, putting some money into the deal and making sure the math works within your criteria before purchasing a home.

This younger person is extended beyond belief, has a portfolio of houses that don’t fit together and are strung out all over the city and seem to be in no relationship to one another in any category including;

price range.
condition.
quality of tenant.
location.
style of house.

Now, don’t jump all over me. I realize there is a word out there called diversification. But there is also an “old-fashioned” theory out there called having a plan. Purposeful Planning is what my friend Jeff Brown calls it.

I’m not going to dive into this too deeply. I could make this a four part post. But I am going to say, that in my mind at least, there is a huge difference between being a real estate investor or being a property collector. Real estate investing takes planning, purpose, education, guidance and hard work. All of those combinations put together create all those conversations that start with “Boy, you sure were smart all those years ago to buy those properties. I wasn’t that lucky…”

With property collecting, you will need some luck involved. Some people make it through with this philosophy. Some “investors” don’t even realize they are property collectors.

Stop right now,review your portfolio of income property. Does it look like it happened on purpose? Then keep it up. Is it a mish-mash? Then let’s talk.

2 Comments

Filed under Real Estate Investing

July 18, 2007 · 7:25 am

Isn’t This Interesting?

At our office listings are down a little bit but sales are way up. What does that mean? This market has been a little confusing. But generally, here in Kansas City, the real estate market is still moving right along for those that price their homes properly.

That is especially true of the Olathe market. Heck, I’m listing a home in Olathe on Friday and a careful study of that neighborhood shows there is only a 60 day supply. That’s a lot different than what you are seeing on the cable news programs.

Remember, you live in the Kansas City area. They don’t report your news. That’s not conspiracy theory. Just facts.

Kansas City’s New Sprint Center

This morning at the weekly Kansas City Breakfast Club meeting we had a guest speaker by the name of David Pulford. David is the Director of Operations for Kansas City’s new Sprint Center, the key component to the new Power & Light District.

Being both informative and fun, here were a few of the nuggets David shared with us…

There are 2,204 windows (that’s a lot of cleaning!).
There are 11,000 parking places in close proximity to the Sprint Center, or so he says…
The Sprint Center opens October 13, 2007.
There are 36 events planned between October 13th and December 31, 2007.
The Sprint Center will be open for public tours from October 10-12th.
Man hours to build the Center are approaching 1,000,000.
For basketball, the Sprint Center will seat about 18,000.

Now, because David is sworn to secrecy upon penalty of death he could not share with us all the events that are currently scheduled. He did say that information should be made public in the next week or two. David also brought up that Disney’s High School Musical would be coming as an ice production. (Sounds like a nightmare to me…though my 9 year old would love it.)

Regarding a permanent tenant David promised we would have both the NBA and NHL locked in by January.

Okay, the previous sentence is patently false. I just wanted to upset David. Although I’m sure he is working hard to do his part to make it happen.

On a personal note, and as a college basketball junkie, I am happy the Sprint Center is coming. The more Big XII basketball we can get here the better my life will be. Oh, and “Rock Chalk.”

1 Comment

Filed under Kansas City, Kansas City entertainment, Kansas City Sports

July 16, 2007 · 2:04 pm

REALTORS & Pilots: No One Needs Them Till Something Goes Wrong

For the related story to this compelling video, click here.

Many of you know I like to compare my real estate business with my flying hobby. And all of this talk about whether REALTORS are really necessary, are they paid too much, whose money is the commission remind me of pilots.

And by that I mean this. Pilots earn their way up the pay scale ladder like anyone. And when they get to the top area they are making $150,000 or more in some cases. And people love to say “are they worth it?”

After all, the computers practically fly the thing. And I want my tickets cheaper. Can we cut his salary a little and save money? Well, I guess you could. And then the really experienced guys might find other options.

How much would you have paid that pilot that landed that Jet Blue plane? Would you have been negotiating his salary as you flew around LA for 3 hours burning off fuel so he could put that bird on the ground? Did you see how straight he kept that thing going down the runway? Did you notice no one was killed? How much should that pilot make for his services? After all, most of the time there is no emergency, right?

Seldom, and I mean seldom, am I involved in three real estate transactions in a row and not have to get into some sort of troubled waters and get things cleared up. It could be;

title problems.
loan problems.
appraisal problems.
inspection problems.
other agent problems.
flood plain problems.
insurance problems.

Do I need to list all of the possibilities. When you pay a competent real estate agent you are paying for their education, their licensing fees, their overhead, their insurance. You are also paying for their experience, their knowledge, the professionalism.

Think about that plane the next time you are wanting to discount your agent’s commission. If you want me to cut my rates by 40% I may only be inclined to solve 60% of your problems. It’s just human nature, right?

2 Comments

Filed under Misc. Real Estate

July 16, 2007 · 7:30 am

Real Estate Investor Commitments

So, Chris. What are the commitments a real estate investor has to make to be successful?

That’s a great question I received not too very long ago. And it’s a complex answer. But I’m going to try to boil it down to a 4 topic blog post. Obviously, you’ll need more counseling with your chosen real estate professional.

Time

Almost all of the Buy & Hold real estate investors that I know have other professions. The investors that own 1-3 rental properties tend to help find them, manage them and are involved in the day to day operations.

But that’s tough to do when you get to 5+ income properties. Your “day job” is generally pretty involved to generate an income that allows you to own income property. And dealing with 5-10 tenants on an ongoing basis can begin to consume all of your spare time.

So then it’s time to bring in a good property manager. But you’ll still need a little time to work with him/her.

Money

I’ve seen the infomercials and heard most of the “gurus”. However, you are still going to need to make a financial commitment if you are going to own rental property. What happens if the tenant doesn’t pay for a month? Or it’s vacant? Or the roof needs replacing?

And don’t forget to keep a minimum of 3 months mortgage payments per property in reserve. The day will come when you will be glad you did.

Patience

Patience? Yes, patience. Patience to find the right property. Patience to find the right money. Patience to find the right property manager. Patience to find the right tenant. Hot heads don’t do well with Buy & Hold real estate investing.

Though you might try out for A&E’s latest series of frauds, er, flip shows.

Time

Chris, you already mentioned time. I know. I know. But I’m now talking about time to let your investment grow and mature. The sweet spot here in Kansas City for investment properties is right about 5-8 years. After 5-8 years The 4 Benefits have peaked and will now start a slow slide down on returns.

Don’t try to shortcut the 5-8 years. In most cases it’s the time you’ll need to maximize your investments so that you can then turn them and start over again.