Category Archives: Kansas City Real Estate

July 5, 2011 · 6:17 pm

Owning and Operating Investment Property in Kansas City

Owning and operating investment property in Kansas City really isn’t all that difficult. What I do isn’t rocket science. It’s just applying tried and true real estate investment principles along with a generous helping of knowing how Kansas Citians buy, rent and sell houses.

You don’t have to be from the KC area to own rental property here. Regardless of where you are from there are differing ways you can own income property.

Buy Turn Key Rental Property
You can buy rental property that is turn key which is a popular choice amongst the busy, working professional. We simply find you a property that is already rent-ready….maybe even with tenants in it…that will get you the returns you are looking for.

Buy Rehab and Rent Property
Just like it sounds. We look for bank foreclosures or otherwise undervalued homes and then fix them up. If we do our job you will be sitting on a sweet equity position that I like to call “harvestable equity.” Meaning that if the neighborhood is going for $90,000 to $100,000 you should have bought and rehabbed and have an “all in” investment of no more than $65,000. Think it can’t be done? I do it every week. Usually better than those numbers.

Harvestable Equity
This is different than “flipping.” You remember how popular flipping was, right? I was never really much on board. Sure, there were a few properties here in KC that worked. But there were many more that sucked people in and then they couldn’t sell at a decent profit. The numbers I’m talking about get pretty thin when you deduct sales fees…especially if using a realtor. No, I’m talking about waiting to “harvest” the equity until the market turns around. (Next year? 3 years? Twenty?) The equity is there and it’s real. Then you bide your time renting the income property that is generating a healthy cash flow before taxes and in the mean time go ahead and take the depreciation Trust me, this all adds up to a very nice rate of retun. I can map it for you if you like.

To Manage or Not to Manage?
Property management can be expensive when you are running thin margins. If you are running great margins then why not? If you are a busy professional investing in real estate to secure a retirement worth having, you probably want professional property management. If you are someone buying cash flow real estate to replace job income you probably want to manage the rent houses on your own to maximize your returns and get closer to your dream of quitting your job. This won’t be easy mind you…but can be done over years of accumulation.

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Filed under Investment Property, Kansas City Real Estate

June 28, 2011 · 4:40 pm

Growing, Expanding and Working out the Details

As the real estate business continues to morph and change to keep up with the current realities I thought I would bring you up to speed on where I (we) are at. And I also want to take a moment to apologize to a few of you who I wasn’t able to get back with these past 60 days because of all that has been going on.

I have been training Melissa Nickerson to come on board to help me stay compliant with all the various real estate requirements that demanded of licensed agents here in Missouri and Kansas. She is working on getting licensed very soon and will be able to help out with any would-be real estate investors because I am and will continue to share with her my knowledge of real estate investing here in Kansas City. Two of me has got to be better than one. 🙂

Melissa is also helping me to launch our property management business. Yes. I’m finally committing 100% to managing investment property for real estate investors looking for professional management. The website isn’t all it could be, yet. But heck. We’ve been busy working. I’ll share more about that in the near future. I have a couple of young and excited agents ready to help me there.

As most of my readers know I specialize in working with real estate investors looking for professional help. Now we will also be able to offer property management services to our listing, buying and counseling services.

And I would also like to remind people that we help people buy and sell “regular” real estate, too. In fact, a real estate investor client was kind enough to recommend me to his folks and we close next Friday on a home over in Raymore, MO.

Thank you all for reading and supporting what I do for a living. I hope you will like some of the changes headed this way.

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Filed under Kansas City Real Estate, Property Management, Real Estate Investing

June 24, 2011 · 8:19 am

Really….I’m not making this up!

HUD – HUD has decided that anyone closing on one of their homes must be present at the closing or send someone in their stead with power of attorney. When I asked why I was told to avoid fraud. Anyone can get a signature and/or a notary. So I asked how to get the Power of Attorney. They are sending a form that the buyer just needs to sign in front of a notary and then fax in. WTF? Isn’t that the same thing?

MoKan Title – If you bank at Bank of America (And we all know my feeling on their contribution to our current situation.) and you ask for a cashier’s check they give you a check that says Official Check. MoKan Title of Kansas City has decided this still isn’t a cashier’s check. For the past 10 days they’ve been trying to get the bank to notarize a letter saying they won’t stop funds and/or otherwise not pay on the check to be sure that the funds are good. Closing the property will be delayed because of this letter, mind you. If they would have just deposited the “Official Check” it would have cleared by now!!!!

Real Estate Agents Love Paperwork – We have agents out there that live for Amendments and Addendums. The contract has a place for the legal description of a property. Is that good enough for some agents? No! They require an additional Legal Description Addendum? Why? The contract also states that should a buyer not complete inspections within the 10 days allowed then they waive their right to inspections. Is that sufficient? No! They want an Inspection Notice saying the exact same thing.

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Filed under Kansas City Real Estate, Misc. Real Estate, News Of The Weird

June 13, 2011 · 10:39 am

A Winning Team

I like to point out what is wrong with real estate today. But I am also very aware with what is right. And one of the things that is right, for me anyway, is being a part of a winning team. I just received this broadcast email from our Olathe Keller Williams Realty’s Team Leader:

I just want to take a moment to congratulate you on your production for the month of May and to say “great job!”

The recent Board stats show that market sales are down 28% this May over May of 2010. However, our market center sales are up 3%. That means our associates are beating the competition by 31%!!

That’s pretty impressive, really.

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Filed under Kansas City Real Estate

February 17, 2011 · 6:49 pm

High Maintenance or Low? Decide Carefully

I went out with some experienced Kansas City real estate investors today. And it’s always an eye-opening experience when I do. First, I learn from my clients as much as they learn from me. Second, sometimes I’m shocked at what people are thinking.

For instance, we saw 5 houses today. Four of the houses for sale were all pretty similar and would make great rental property. They were all ranches (three had basements) and were all fairly simple to maintain. The 5th house was by far the cutest. It had that Grandma’s house feel to it. Easy resell, which is certainly worth quite a bit.

But the roof had at least 3 layers. The outside was stucco. And the walls were plaster. And the basement was rock.

No biggie. There are lots of houses like that in the Kansas City area, and probably your area, too. But the plaster walls and rock basement and many layers of roof mean a lot of maintenance issues as the years will roll by.

When you are looking at buying investment real estate do you keep maintenance in mind?

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Filed under Kansas City Real Estate, Real Estate Investing

January 21, 2011 · 3:59 pm

Bank Foreclosures: Where We Are, Where We Are Headed

Today I took some time to listen to a podcast of Gary Keller of Keller Williams Realty interviewing Rick Sharga of RealtyTrac. Rick was talking about bank foreclosures and the like and where we are and where we will be heading. RealtyTrac follows distressed property throughout the United States. Here are some bullet points of what he had to say that caught my interest;

An all time high of 3.2 million homes will receive some sort of foreclosure notice this year, up from 2.8M last year.
1.2M homes will be bank repossessed this year.
There are 5,000,000 homes seriously distressed in America right now! That’s 5M homes in distress but not currently in foreclosure.
We should hit the peak of our foreclosure mess sometime in early 2012.
Doing the math, he says that in 2013 there will still be approx 1,000,000 homes distressed and in inventory that will need to be absorbed.
There is $1,000,000,000 of vanished equity! That should take about another 3 years to be absorbed by homeowners, taxpayers and banks.

For those real estate investors out there with cash and/or credit the time is NOW! But you have time. Don’t panic. Take your time and find the right properties.

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Filed under Kansas City Real Estate, Real Estate Investing

November 10, 2010 · 1:27 pm

Why Real Estate Investing Makes More Sense Than Ever

Real estate investing still makes sense. In fact, even in today’s troubled waters investing in income property still kicks the hiney of most other investment vehicles. And it should. After all, it’s more labor intensive (even with a professional property manager) and it’s not very liquid. It could take months or years to sell, depending where you are, and to avoid locking in losses you may have to hold longer than you originally expected.

The Kansas City real estate investing market is still margins above other areas of the country. We do not have the huge depression. Our unemployment is still lower than most of the country. And our real estate values haven’t declined anywhere near other markets. We’re not perfect. Go to the areas of town I’ve never recommended and you’ll find plenty of examples of bad stories. But let’s take a look at a real live rental property currently for sale.

Rental Duplex Example
There is a duplex here in suburban Kansas City that is for sale. What they are asking and what they will get is of course, negotiable. But I figure this duplex will sell for about $111,000 and with closing costs and very minor repairs thrown in you’re probably all in at $115,000.

Nice rental neighborhood. Safe and desirable school district. Two beds, one bath each side. Rents on one side are $525 (long term tenant) and vacant on the other. Three bedrooms in the same neighborhood rent for between $825 and $950. So the real rents here should be about $625 to $650.

Let’s subtract our vacancy (6.0%) and other expenses adding up to about 32.7% of annual rents (includes property management, taxes, misc., utilities, etc.) and you’re left with about $9,200 of Net Operating Income. Subtract your debt service (20% down at 6 1/8%) and you have an annual cash flow before taxes of $2,720.

Throw in Principal Reduction (always my fav) and add back in tax consequences after reducing your NOI with interest and depreciation and you have a net first year benefit of about $3,571.

What is $3,571?

That’s a 13.6% return on your cash invested.

That’s an 8.0 Cap Rate.

That’s Cash on Cash at about 10.4%

Where else are you earning 10.4% on your money after expenses?

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