Category Archives: Kansas City Real Estate

The Kansas City rental market is pretty good right now. And that is good news for the real estate investor. Vacancies seem to be filling pretty quickly right now. So that means less time spent worrying about how many mortgage payments you will have to make without and income coming in.

A good rule of thumb for me, and what I would advise for my clients, is keeping a minimum cash reserve in your operating account of three month’s worth of mortgage payments for each property you use as income property. Does that sound like a lot? What if you want to use that cash to buy another can’t miss property?

Proceed with caution. Ever had a vacancy? It really isn’t that bad for one month, even two. But I had one client about a year and a half ago who owns 13 rental units. During one 4 month stretch they had 8, 7, 4 and 3 vacancies. It was a freak occurrence for them. Nothing like 8 of the 13 units being vacant had ever happened to them before. But it did. That is a huge cash drain. Had they not had the cash reserves it may have sunk them.

In fact, they scoff at my 3 month rule. For them it is 6 months. And that is fine with me. What isn’t fine with me is people who want to buy income property with 100% loans and finance the closing costs. With no cash reserves. That is a recipe for disaster. And I would rather they build up some cash before we proceed.

About two weeks back I was interviewing a potential Buyer client. He had found me through one of my blogs and said that he had liked what he had seen about my real estate investing philosophies here in the Kansas City area. I was flattered. But I was also growing leery of his motivation.

His motivation to actually buy a property, that is. It seemed that he had read the books I recommend along with half a dozen others. He had been to workshops and seminars that I’ve never even heard of. He was member of both investment clubs here in Kansas City. Had an LLC. Had an accountant. A lawyer was all lined up. So to was a property manager. Mortgage guys had been interviewed. There was even someone he was considering hiring as a mentor.

And all this had only taken him three years.

Now, I am big on setting goals before you get started. Knowing your criteria for a good income property is a must before I’ll go out and show you any homes. Pre-qualification/pre-approval a necessity. But come on. Do you really need the whole “team” together before you get started on your first property?

I am not pooh-poohing preparedness. Far from it. But this is a classic case of paralysis by analysis. Always preparing and never acting. Sooner or later don’t you have to buy a property to be a real estate investor here in Kansas City…or anywhere for that matter?

It was my advice to this would be real estate tycoon that he really focus on purchasing his first income property in the next few weeks or months if he wanted to get his business off the ground. I would help him to evaluate neighborhoods, properties and incomes. But he needed to actually commit to that before I would go to a great deal of trouble. After all, when you hire me to be your Buyer’s Agent, you are hiring a professional real estate agent who can navigate you through the benefits and mis-steps of owning rental properties. This is what I do. Here are references you are welcome to check.

We had a great conversation. It lasted about 45 minutes. He left very enthused and looking forward to emailing me his criteria and pre-qualification letter. He was really ready, this time, to buy an investment property.

I’m still waiting for the email.

If you are the customer of which I’m speaking and you read this and you think I’m speaking of you, you may be right. Don’t think for a moment I am minimizing your efforts or your dreams. On the contrary I want you to act on them. I hope to hear from you, or from anyone else reading this blog who fits that mold, very soon.

One last comment on this topic. Johnson County has appreciated about 3.85% (average) over the last three years. That $200,000 duplex he could have bought in 2004 would now be worth $224,000. Is this a good decision?

It seems the real estate industry has caused some problems for itself with it’s non-stop touting of real estate investing, er speculating, these last few years.

Real estate speculating, on the other hand, is buying property banking on the fact that it will appreciate high enough and quickly enough that it will exceed your poor decision making. (Sorry, do I sound negative?) This is what was going on when people were purchasing condos off the plan, selling them 3 months later, and in turn those people would sell them 3 months later and so on until there was no way left for people to be able to justify the expense of personal living or the returns it would make as a Buy & Hold property.