Monthly Archives: October 2007

Yesterday while combing through the MLS I found a real treat! I emailed the listing to my investor client base that actively invests in real estate here in the Kansas City area. To give you a clue as to how good the investment looks I have 11 potential buyers for 3 properties. Ooops.

That’s a good thing for me, I guess. But I need to see if I can dig any more of these up to keep the others happy.

If you want to be added to my “mail-to” list just email me. Just so you know, I work on a first response, first served basis. It’s the only way I know to be fair.

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Keep in mind the time of year. As you drive home this evening be careful! I don’t want you driving over a little ghost or goblin. So slow down and enjoy the ride.

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One thing I try to remind everyone at Halloween is how real estate signs seem to magically move from one part of a city to the other. So if your house is for sale, do your REALTOR a favor and put the sign in the garage for the night.

I’m not an attorney or CPA but I was trying to explain passive loss to someone who is the other day concerning his real estate investments here in Kansas City. So I did a Google search and came up with this web page regarding the Passive Loss rule as it pertains to real estate investing.

Despite what the title of the page says you do not have to be a REALTOR to be a real estate professional. Enjoy.

Kansas City real estate investing is alive and well. And counter to the rest of the real estate market things are beginning to really heat up for the active real estate investor. In fact, I actually have more ready, willing and able buyers than I do properties I feel great about recommending.

But I believe that is changing. The properties side of the equation, anyway. You see as the high inventories begin to creep into the holiday season many sellers are beginning to get a little more flexible as far as their expectations are concerned. I’m seeing in the desperation of their agents.

“Motivated seller.”

“Make offer!”

“Owner may finance.”

These are all signs that the real estate agent and seller are feeling the pressure. (By the way, isn’t it odd that the National Association of REALTORS is running it’s a great time to sell commercials here in the Kansas City market? Really?) And when people feel pressure from within they tend to bend where they wouldn’t bend before.

The basics of real estate investing have never been more important than they are right now. I read a headline on Yahoo! that Countrywide Home Loans has announced a loss last quarter of $1.2 Billion. I read in the Kansas City Star that some analyst are expecting this real estate correction to last into 2009.

But the real estate market here in Kansas City has come to a standstill, overall. Yes, there are definitely some areas of town where appreciation is still happening. Population growth and housing demand don’t stop just because the credit crunch hits. But there are also many parts of town where days on market is soaring and prices are softening.

When I calculate returns for my real estate investment property here in Kansas City I am usually worried more about what my equity return is than any other issue concerning returns.

• Your down payment.
• Any difference between what it’s worth and what you paid for it.

A couple of years later (say the 5-8 year window I talk about for trading in/up your real estate investments here in Kansas City) you equity will be:

• The difference between what you sell it for minus what you owe (including your down payment).

So keep in mind you’ve had principal reduction going on (unless you went with an interest only loan, which could have been a good strategy depending on your situation) in conjunction with appreciation to raise that equity.

Here in Kansas City when you first purchase an investment property I would encourage you to make sure you are getting at least an 18%-22% return on your equity investment. But as you can probably figure out 6 years later that equity investment return will probably have been reduced by as much as 7%-10%.

Why? Because your accelerated depreciation has been exhausted on most facets of the personal property in the rental property and the percentage of net equity to value has steadily dropped, therefore lowering your leverage.

Knowing how you measure what a successful real estate investment property is provides you with the fist step in knowing whether or not that particular house is the right house for you and your investment property portfolio.