Category Archives: Kansas City Real Estate

February 8, 2007 · 12:12 pm

What is Your Criteria for a Good Investment Property?

I believe real estate is the greatest vehicle out there for most people to create true wealth. But most people think it will happen without any long term planning. Or sacrifice. Or effort. Nothing could be further from the truth. And if you are going to have to put in time, effort, money and thought to this venture shouldn’t you also have a clearly defined target in mind?

Determining your criteria should be #1 on your list of things to do when starting out (or re-starting out) on your real estate income property career. Are you a twenty/thirty something with a good, steady income and $20,000 or less to invest? Or are you a mid-forties/early fifties investor with high income, a good nest egg and other interests beyond your work and holdings? These two categories would probably have very different ideas of what would fit their criteria when owning a “successful” rental property.

Here are some things to consider;

  • Cash flow or appreciation or a mix of both
  • Below market value home that needs upfront repairs (and therefore a good chance of instant equity after money/time investment) or a turn key property with current tenants
  • Inner city, suburb or fringe city property
  • Maintenance provided property or one you can maintain yourself
  • Close to home or anywhere with a property manager

Of course, the loan vehicle you use could greatly sway the cash flow issue. Are you conservative and older or are you younger and have more time? If the latter, maybe an interest only or negative am loan would work to increase your holdings faster. If the former you’ll want to consider your time line for retirement and income goals at that time.

Rental properties can provide the Golden Parachute for the common man that we hear the corporate executives get. (Well, maybe not a $2,000,000 buyout with only 24 months of service…but along those lines.) To discuss this issue further I invite you to email me or leave a comment. Your input is appreciated.

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Filed under Investment Property, Kansas City Real Estate

February 7, 2007 · 8:46 am

Principal Reduction – The Sweetest Benefit of Investment Property

As we have discussed before, there are four main benefits when you own investment property that add up to one big benefit in the end…security for you and your family. Again, the Big 4 are Cash Flow Before Taxes, Principal Reduction, Depreciation and Appreciation.

But let us talk, just for this post, about Principal Reduction. Assuming you have purchased the right property (not the one mentioned here or here) your other three benefits are kicking in. But PR is my favorite. Not necessarily the biggest return…but my favorite. Why? BECAUSE SOMEBODY ELSE IS BUYING YOU A HOUSE IN YOUR NAME!!!

Think about this. Every month someone scribbles a check to you for rent. Inside of that check is your interest due, your extra cash, your expenses AND an amount that is designated towards your principal. Not a great amount at first, but pay down they do…for you! (Unless, of course, you’ve gone with a negative am loan…which I’m not too crazy about for our market here in Kansas City. I see cause for them on the coasts…but not here…in most cases…of course everything is a case by case basis…have I covered all my bases yet?)

Month after month, lease after lease these people (we’ll call them tenants) are going to work, earning money and helping you to purchase a house so that when you are older you can retire in comfort. Personally, I think it’s awfully nice of these tenants to do this and that is why I don’t mind the occasionally call from them about this or that.

What are your thoughts on the subject, Hobson?

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Filed under 4 Benefits of Real Estate Investing, Investment Property, Kansas City Real Estate

February 5, 2007 · 2:00 pm

Zillow, Craig’s List…The Internet & Real Estate

The single greatest change to real estate in the last 10 years is easily summed up in one word: Internet. Formerly, real estate agents had all of the knowledge when it came to homes, home values, what was or would become available. And they guarded this information! Heck, when I lived out in DC I had a real estate agent friend who used to get me thermal copy print-offs of certain houses and then threaten me to within an inch of my life if I told anybody that she had given it to me. It seemed it was a violation of, if not the MLS rules, the agent code.

Today with a visit to any REALTOR’s website John Q. Public can easily access tens of thousands of listings in his home area complete with basic information and multiple photos, satellite views and virtual tours. The public can easily compare prices between what is out there and make an informed decision about which houses to see WITHOUT having to rely on the real estate agent.

So to what value is the real estate agent today?

I’m glad you asked. Go to a site like Zillow. Check out the property values and asking prices? Are they relevant? Accurate? Complete? Craig’s List is becoming a growing player in real estate and I know many who use the site. How complete is it? For that matter, how honest are some of the sellers. These are great sites. But can they give you the intangibles as well as the raw numbers?

I’m all for sharing housing and sales information with anyone that wants it. Jackson County, Missouri last year started allowing anyone to go on to their website and see what closed sales were for any given area within their jurisdiction. (Much to the chagrin of many of the old time agents.) I think it’s great. But the professional real estate agent still belongs in the arena. After all, even if you are the most savvy buyer out there, you do all your research and prepare your own contracts you still will have less experience negotiating and “walking the contract through to close” than even some of the most inexperienced agents.

How many homes will the average buyer/seller live in through their adult life? Three? Five? Seven? Jeez, I participated in more transactions than that in my first six months of business…not including my own purchases before becoming an agent.

Do the Internet portals help you with school information? What about commercial development news or whether a neighborhood may be transitioning up or down? Yes, there is definitely a place for he professional agent today and in the future. Job function may be evolving, but the job is still in place. Today more than ever I’m really an agent for my community and area of expertise than a keeper of housing knowledge.

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Filed under Cool Sites, Kansas City Real Estate

February 5, 2007 · 11:36 am

Johnson County Rental Housing In Balance

On the front page of USA Today’s February 5, 2007 edition was a story titled Renters will dig deeper in 2007. The gist of the story was that with scarcity of housing in many parts of the country combined with the fact that rental home owners had to pay more for those units renters were going to see an increase in their rents this year beyond inflation. In fact, the article says that rents are 14% higher since 2004 while income has grown only 4%. Hmm, I smell a problem for many people.

And here in the suburbs of Kansas City we too have a situation in which I believe rents are beginning to firm up and, in many cases, beginning to ease up from where they have been for nearly three years. But overall, I believe we still have balance in the rental market.

How did we get here? For the past three to four years rents have been soft because the best prospective tenants were also the best prospective home buyers. With a mere $1,000 or $2,000 invested (not too much more than a security deposit) a previously good tenant could now be a homeowner. This placed a downward pressure on rents because more landlords were scrambling for an ever decreasing pool of qualified renters. Investors were still buying income property but they weren’t getting the rents they needed to make a good investment a great one. Cash flow suffered, in most cases.

However, now foreclosures are at record levels in the Greater Kansas City area. Lenders are beginning to look twice at some borrowers and with creeping interest rates many tenants are happily remaining tenants. Plus, with the boom we’ve had over the last five years anyone that wanted to move has probably done so. Which brings us to where we are today.

There are still some neighborhoods with an unusually high vacancy rate. I notice them most in the outlying areas of Kansas City like Grain Valley, Liberty and some parts of Wyandotte County. But here in Johnson County it is not unusual for me to drive through a “rental” neighborhood and see one For Rent sign for every 75-85 units. And that is a pretty darn good situation.

I think that there is still enough competition to keep rental rates from escalating more than 1%-3% this year. But overall, in most parts of the KC area and Johnson County, especially, I see a pretty good balance. Tenants have enough choices to make good decisions and Landlords are able be a little choosier than they have been in the past. Slashing rents and offering drastic incentives is probably a thing of the past. Raising rents 5%-10% seems out of the question…at least at this time.

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Filed under Kansas City neighborhoods, Kansas City Real Estate

February 3, 2007 · 6:12 pm

A Profit In His Own Town…

I’ve always heard that you have to get 100 miles from home before anyone will really listen to you as an expert. And I don’t know if I’m an expert, but I’m pretty darned knowledgeable about the Kansas City income property market. I say that not to brag but to tell a story as I get geared up for the Kansas v Texas A&M game this evening.

In town with me today and tomorrow is a gentleman from the Seattle area here to purchase a property…or maybe even two. He owns property in his home city and one here, currently. When I ask him if he is going to add to his Seattle holdings he says it’s doubtful because the “numbers there don’t pencil out.” He has some ties to Kansas City so he got in contact with me and came out to look around at what was currently on the market.

Showing him a few properties in Overland Park really helped him to understand how good we have it out here. It’s not necessary to put down 40%, or 50% or even worse 60% to get an investment property that will break even or produce a little Cash Flow Before Taxes. No, Overland Park provides good clean rental houses that “pencil out” with 20% down, or 25% down if you are looking to install a property manager. (And if you are looking at KC property from Seattle, Washington…I would advise that.)

Heck, if he didn’t like Overland Park and Olathe so much I might even take him over to certain parts of Wyandotte County, KS or Jackson County, MO where they cash flow with only 5%-10% down!

The amazing thing to me as a professional real estate agent is that I can talk till I’m blue in the face with a lot of “locals” and they are constantly worried about everything under the sun. Bring in an outsider and they get smiles on their faces.

Owning real estate for investment purposes is hard work. It takes financial stability, quick wits and a desire to improve your life on down the road. There will be inconvenient repairs and tenants that may drive you a little crazy. But when you are sitting on 6-8 properties on down the road with at least an 80% equity position you’ll be glad you took the time and made the effort to do so. Give Kansas City properties a chance. If outsiders can see it, shouldn’t you?

I’d love to hear your comments on this or why you think other areas might be better.

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Filed under Kansas City Real Estate

January 31, 2007 · 8:45 am

Kansas City MLS Numbers…In The Raw

From the Heartland MLS (serving Greater Kansas City and some outlying areas) I found the following;

All of MLS
Total units currently for sale: 26,708
Total units sold in previous 12 months: 39,585

Johnson County, KS area only
Total units currently for sale: 4,593
Total units sold in previous 12 months: 10,801

JoCo Multi-family homes only
Total units currently for sale: 48
Total units sold in previous 12 months: 83

What is your take on these numbers?

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Filed under Kansas City Real Estate

January 29, 2007 · 6:49 pm

Flip This House!

This well cared for home is being offered as a great opportunity for the first time investor! Located in an exclusive neighborhood with comparables coming in well over $30,000 this all brick, two bedroom one bath home (well, in the interest of full disclosure the bathroom is really more a hole in the floor since there is no active plumbing running to this home) will be offered on a first come first served basis. The initial asking price will only be $41,999. The land alone is worth more than that! After repair value rents should be well above $350 per month…if you can collect it.

Some landscaping, minor roof repair and re-pointing of the brick work will make this baby sparkle. To arrange for your private showing please allow 48 hours so that I can get a security company to escort us to this soon to be gated community.

NOTE: Not all potential flips are as obvious a bad choice as this one…you’ll need experience or a professional investment real estate agent to know the difference…

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Filed under Kansas City Real Estate, Real Estate Investing