Category Archives: Olathe

June 11, 2008 · 8:41 am

Olathe, Kansas: Spotlight On Why I Like This Real Estate Market

Olathe Kansas Olathe, Kansas has been mentioned by me time and time again as a real estate market that I am enamored with. Sure, I live here. But there is much more to it. For real estate investors and Joe & Mary Homebuyer alike Olathe offers the opportunity for solid appreciation even in these tougher times. If it’s alright with you I’m going to take a minute and show you (and link you) to what I’m talking about.

Top 15 City in America
As recently as 2006 when CNNMoney ranked the Top 100 Cities in America, Olathe finished #13. Neighboring Overland Park finished #6. Olathe currently has a population hovering around 114,500 (up 2,400 since 2006) and a Median Family Income right around $79,100.

Olathe Housing Stats
The Kansas City Star’s zip code appreciation map shows the two predominant Olathe zip codes with appreciation over the last year. 66061 came in at 4.3% while 66062 came in at 7.6%. And as you can see by clicking on the image for Olathe Housing Stats for the last six months that we are still selling homes at a pretty good pace. I showed here on our Olathe Real Estate blog that inventory for single family homes is at about a four months. Technically, still a Seller’s Market even though people got spoiled by the markets of past years where you would sell a house in 45 days or less, sometimes.

Olathe Job Growth
Olathe is really doing well in the Job Growth category, as well. I’ve written here before how Ft. Dodge Animal Health has moved in. Along with Farmer’s Insurance. A multitude of call centers are relocating to Olathe, too. US Bank has a large tech center here in Olathe now. And we haven’t even mentioned that the world headquarters of Garmin is located right here in Olathe.

Jobs seem to be coming to Olathe every month. To keep up with the growth of jobs in and around Olathe I would encourage you to visit the Olathe Chamber of Commerce’s Breaking Newspage. I think you’ll find the website by the Olathe Chamber to be very easy to navigate and one of the most informative Chamber sites I’ve ever visited.

Olathe’s Quality of Life
Want to know the reason I live in Olathe? The Olathe School District. Period. As a father of four (two with special needs) I needed a school district that could work with my children. We interviewed the three predominant school districts in Johnson County, Kansas and felt strongly Olathe was where we could be best served. Because in addition to the two special needs kids we have one that is on an Advanced Placement path. And as we enter his high school years he is going to get to take advantage of the Olathe School District’s 21st Century Program. He’ll be taking part in Olathe Northwest High School’s e-Communications Program. We can hardly wait. Olathe Homes

In addition, Olathe is easy to navigate. Has quite a few parks for your enjoyment including Heritage Park, the Indian Creek Trailway and Frontier Park where the City hosts a series of free concerts every year. I’m usually in attendance.

Olathe’s Potential For Real Estate Investment
Olathe is not a “cash flow” city. At least in my mind. It will usually take you about 20% down to break-even on a duplex here or about 25%-30% to break-even on a single family house. But having said that, there are few areas around Kansas City…or the Midwest for that matter…that you are going to get better long term, steady growth.

So for my investors I will usually recommend they have only part of their portfolio parked in Olathe. If you own five investment properties I might recommend two be in Olathe and the other three be in cities where you will be able to leverage your money more in the 90% LTV range. Because just like it’s nice to diversify your investment holdings it’s nice to diversify your real estate investments.

A for instance would be of a “pocket listing” I have. It’s a duplex with 2 bedrooms and 2 baths per side. Rents are a steady $750 with vacancies nearly non-existent. So you have a Gross Scheduled Income of $18,000. Asking price is $191,000. Your Gross Rent Multiplier is 10.61. Not too shabby.

Closing Thoughts on Olathe
I hope you have enjoyed our little tour of Olathe. If you are thinking of moving to Olathe take some real time to follow the links and explore our city. Give myself or our team a call or contact us if you need help selecting housing that is suitable for you and your family.

If you are a real estate investor be sure to ask for specific examples if you are looking to add a rental property or two to your investment portfolio.

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Filed under Kansas City neighborhoods, Olathe

April 2, 2008 · 8:17 am

More Free Concerts In Olathe

Free Concerts Olathe

For those who live in Olathe I would invite you out to one of these concerts. They are great. See a full review of the Olathe free concerts here.

Real Life Olathe Investment Property Story: Part II

Equity Growth in Olathe Real Estate On Monday I did a post titled Real Life Olathe Investment Property Story: Part I. It will be helpful for you to go back and read that. But what we found was that through using the Buy & Hold Forever theory of real estate investing that you could turn an initial investment of $21,200 into about $102,149 in about 11 years.

Not too shabby.

But what if, as it appears the original owner of said duplex might have done, the real estate investor had sold those properties in the winter of 2001 and rolled the proceeds over into other Olathe duplexes that would have been for sale at the time?

Well, I’m glad you asked. It’s important to note that now I move into the hypothetical because I do not know this real estate investor from Olathe nor do I know what he did or didn’t do. But if he had been my client I would have probably recommend what follows.

Let’s say he sold the duplex, as he did, one side at a time. Seeing that the duplex was liquidated by 12/2001 I know that his net proceeds at closing would have been right about $76,500 after sales costs, including probable buyer closing costs paid by seller.

Now, remember that $21,200 of that was part of the original investment capital used to purchase the duplex. But what I would have recommended was staying in Olathe, since I see growth here for quite sometime to come. In 2001, the investor could have put 15% down on a rental duplex priced $160,000 and it would, from there, completely pay for itself each year.

15% down on $160,000 would be $24,000. (We’ll multiply all this by 3 when we get to the end.) So;

Purchase Price       $160,000
2008 Sales Price    $197,500
Sales Costs              $  13,825
Net Appreciation $23,675

Now let’s figure he financed on a 30 year amortized loan at 7.0% interest.

Loan balance at origination $136,000
Loan balance at sale $125,891
Net Principal Reduction $10,109

Now keep in mind that all of this is x’s 3! So let’s figure this out. Appreciation to today’s sales prices plus principal reduction after sales costs of all 4 units (the original duplex and now these three duplexes) plus the down payments totaling about $75,000 nets us a new equity position of about $174,000.

Did you read that right? Yes, I said $174,000.

Now, with your original $21,200 you could have done a lot of things. Including making a nice little profit by using the Buy & Hold Forever strategy. $102,000 or so if I remember correctly. But by keeping your money leveraged on Olathe real estate you have turned that $21,200 into $174,000.

Now tell me what your annual return is!

Again, we haven’t calculated miscellaneous and property upkeep expenses. But as I mentioned above, at 15% down those properties should have maintained themselves. And we have also NOT calculated Depreciation or Cash Flow Before Taxes.

Of course I would always recommend you calculate these numbers yourself. These appreciation rates I have used are actual, not hypothetical. And they include whatever “correction” you think Olathe may or may not have gone through.

Retirement Worth Having Nest Egg Real estate investing in Olathe, Kansas City or wherever is not for everyone. Some would rather park their money in a money market account or mutual fund or something of the like. But for the life of me I cannot figure out why you wouldn’t want at least one or two rental properties working for you. Can you?

It looks to me like real estate investing can be a little like finding the goose that laid the golden egg. Now that will help you to fund that Retirement Worth Having.

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Filed under Olathe, Real Estate Investing, Retirement Worth Having

February 5, 2008 · 8:47 am

600 More Jobs For Olathe, Kansas

Yesterday I promised to continue my story about a real life example duplex property here in Olathe, Kansas. And I still will, even though Jeff Brown said “don’t bother.” But turns out today should be pretty busy so I thought I would just bring you this really good news for Olathe concerning further job growth.

It was announced yesterday the Farmer’s Insurance would be adding an additional 600 jobs to the new office park located out at 119th and Ridgeview Road. This comes just months after U.S. Bank announced it was adding a technical center that would add 80+ higher paying jobs. And Garmin is continuing it’s ever onward expansion here in Olathe, as well.

As we all know, job growth creates housing demand. While Olathe has really weathered the real estate down turn very well this can only add to the demand which will lead to a quicker turn-around. Or at the very least help to maintain our modest appreciation.

The Olathe leadership that continues to make this community so livable is doing a great job. They have my hearty “congratulations.”

Real Life Olathe Investment Property Story: Part I

abacus Buckle down and get your calculators out because today and tomorrow I will tell the story of what is and what could have been. All of this based on a real life example from an actual Olathe, Kansas investment property located about 22 miles southwest of downtown Kansas City.

Our Investment Property: The investment property we are going to use as an example was a duplex purchased in whole in March of 1997. Built in 1988, this 2 bedroom, 2 bath duplex is located in a nice middle class neighborhood in very much a growth oriented part of Kansas City. So my guess is that appreciation here was a little stronger than it would have been in many areas of KC, though not as strong as it would have been if it had been located east of I-35. So we have a fair income property to use.

Some of the numbers include a purchase price in 1997 of $106,000. It was bought after several months on the market so we know there wasn’t a bidding war for the property. Today the property has been “split” meaning that the buyer of this property in 1997 was a fairly intelligent investor and knew that he could sell the pieces for more than the whole.

It appears as though the 1997 buyer sold the first half in April of 2000 for $83,950 and the second half in December of 2001 for $85,950. For reasons of edification, the county appraised value of each today is $96,400. Though I believe you would sell each for $105,000.

I am very familiar with this un-named neighborhood because I also own a property within it’s HOA. So all the numbers I’m using I’m very familiar with. As Hollywood would say, “based on a true story.”

Boss Oy. Chris. You really can take a lot of time setting up situations. Couldn’t you just tell us what you have to tell us and be done with it. I have 5 other blogs I read and I only have just so much time before my boss asks me to do something…again!

Er, sorry.

What if the buyer in 1997 had the same theory of thought that so many real estate investors have that it’s better to buy a good property and hold on to it forever because each year you get closer to having the mortgage paid off and you’ll then have cash flow for life?

Well today we are going to tackle that question. Tomorrow, we’ll see where the 1997 buyer actually went. And then we’ll discuss a hypothetical on what would have happened if he had done what I recommended to him to do.

Note to all Hillary Clinton voters out there: I’m using “HIM” because that’s what my teachers (women) taught me was proper English. I fully recognize that the investor could have been a woman every bit as savvy as any man. 🙂

The Math On Our Olathe Investment Property
To be clear, we are calculating today’s worth if the investor had held on to this income property until today.

Purchase Price      $106,000
Sales Price             $210,000
Sales Costs           $   14,700
Net Appreciation $ 89,300

Original financing (let’s just say he never refinanced) was 20% down ($21,200), closing costs paid by seller (an educated guess) and 7.5% interest (probably a little high) and fully amortized over 30 years.

Loan balance at origination $84,800
Loan balance after 11 years $71,951
Principal Reduction $12,849

So let me see if I have this right. With an initial investment of $21,200 the real estate investor in question now has equity in the property of $102,149. Get your calculators out and tell me what the annual yield is. I think you’ll find it somewhere just north of 16%. Regardless, the gain in equity is nearly 4 times the initial investment…in only 11 years.

Whoa. Whoa. Whoa. Chris, once again you are forgetting a few things. What about maintenance? Like the fact that it needed new carpeting or that the walls needed painting and other such items. You simply cannot discount those factors.

Oh, I agree 100%. But how to figure those in? I only have so much space, and as you said, you only have so much time before your boss comes back. Because if you are going to make me start figuring all of those items I’m also going to have to figure in Cash Flow Before Taxes as well as what Depreciation would have done to your tax situation for all of those years. (FYI: Depreciation = Smile On Your Face)

Without actually seeing the investor’s tax sheets for the past 11 years I simply cannot be accurate down to $1,000. But I can ask you to look at those numbers. Do you like what you see? It can be better. Join us tomorrow and we’ll look at another scenario based on the 1997 purchase of this Olathe duplex.

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Filed under Olathe, Real Estate Investing

October 10, 2007 · 7:06 am

More Growth News For Olathe, Kansas

Looks like I’m doing a week long series on how real estate, and therefore real estate investing, is affected by the influx or outflow of jobs in a given region. Since I live in Olathe, I’ve been focusing on Olathe and southern Johnson County, Kansas. (Which includes Overland Park and Leawood and maybe some of Lenexa.)

***

From today’s Business section of the Kansas City Star comes an article by Kevin Collison that states U.S. Bank is building a 100,000 square-foot facility that will house technical equipment to support this bank’s nationwide operations. The western Olathe site was chosen from 93 possible sites and was chosen for reasons including “competitive utility costs and availability of labor.”

While the contractor building the site will be from Minneapolis they are expected to use as much as 70% local subs . This new business in Olathe should bring at least 80 long term jobs.

***

From today’s Olathe Neighborhood News section of the Kansas City Star there is an article written by Sarah Benson that talks about the continued growth of the Olathe School District.

Here are some choice sentences;

The district is growing at an unprecedented rate.

The district (Olathe) gained 842 students this year, bringing it’s enrollment to 26,385.

Quoting Superintendent Pat All: “We’ve had straight-line growth for 41 years.”

And my favorite paragraph of the article: Olathe’s growth isn’t just because of new subdivisions. All said that student population in older, established neighborhoods is up, too. That’s because of young families with small children are finding affordable housing in older neighborhoods.

As a real estate agent who lives in works in Olathe that last paragraph goes along with what I’m seeing. Do date the older neighborhoods aren’t decaying. In fact, many buyers are buying low and fixing up to build their equity and live closer to where they choose.

As Olathe steams towards the projected goal of 300,000 people by 2050 we are going to see a lot of changes. It will be important to keep our schools healthy as well as our job growth. Olathe, like Overland Park, can be a strong city in it’s own rights. Not just living off of the jobs provided by Kansas City.

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Filed under Kansas City, Olathe

October 8, 2007 · 8:11 am

Real Estate Values & Expansion

A basic tenet of real estate theory is that anywhere there is job growth real estate will be more in demand. As there is more demand, there is pressure for prices to rise. Less demand usually follows jobs fleeing an area. The people will follow leaving a downward pressure on housing.

How does this relate to real estate investing in Olathe, Kansas? Just thought you would like to know that Olathe’s Garmin, Inc, the world headquarters of the GPS leader, is expanding again just a few years after completing their new headquarters.

Also, Olathe still predicts a near doubling in population over the next twenty years. A commercial agent I know says light industry and warehouse space is going quickly.

Just thought I would share.

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Filed under Olathe