Category Archives: Real Estate Investing

If you are a real estate investor looking for below market rental properties you need to realize that Cash is King, but Time is the Motivator.

Yesterday I was reading Jim Crawford’s post titled In the Current Real Estate Market Cash is King Negotiating the Sale of a Home With A Cash Buyer. I found the post to be well written, on topic and especially helpful to the real estate investor looking to expand his or her portfolio.

But I do want to hone his argument to a finer point. While Cash is King most sellers receive cash (or equivalent) at the closing table. So it’s not the cash that will motivate the seller to sell below his asking price. Rather, it’s probably the time and ease the cash buyer brings.

Cash buyers can close next Tuesday. Time. It’s the motivator.

A “borrowing” buyer can get cash equivalent but it’s going to take a couple to a few weeks and is subject to underwriting standards. To someone under stress or really motivated to move on, time will equal an undisclosed amount of cash. And the less the time, the greater the time to cash equivalency will be.

Are you following me here? Saving a seller one more mortgage payment is easily worth that payment. Probably a premium above that, too. Helping a seller to get out of town to join her husband with the kids will be worth “X”. Relieving a cash strapped single mother of three working two jobs to make ends meet, and relieving her of that burden this week, is worth something to that overworked mother.

It doesn’t matter the motivation of the seller so long as you tap into it. I think you’ll find that in many cases it boils down to timing. How that timing relates to their situation is what you have to find out…and use to your advantage since you have cash. After all, you are a real estate investor, aren’t you?

When I was in my early twenties I read a book that helped define how I would live my life. Loving college basketball the way I do I had always admired Coach John Wooden’s accomplishments on the hardwood. So I decided to read his book They Call Me Coach.

If you haven’t read it I strongly suggest that you stop right here and click the link and buy the book. You won’t be disappointed.

The reason I bring this up is that I believe that John Wooden succeeded where other coaches haven’t for a variety of reasons;

• He had good moral fiber.
• He stryved to be excellent.
• Character was as important as talent.

He didn’t just teach the kids how to play basketball he taught them how to live life. He went beyond coaching and became personal mentors to more than just a few of his players. And in doing so he created a dynasty that might never be repeated in college basketball.

Chris. This is all very nice. But I don’t come to BBQCapital to read about college basketball or Coach Wooden. I come to read about real estate investing. Or more specifically Kansas City real estate investing. Besides, didn’t he coach at UCLA? I thought you were a Jayhawk fan.

Don’t you see how they are related? (And I am a Jayhawk through and through. But I still respect success and the effort it requires…unless it’s Missouri.)

Tonight I was reading the September 2007 edition of REALTOR magazine. One of the articles was a rather lengthy one about why more real estate agents should be courting real estate investors as their clients.

Darn! It’s supposed to be a secret! (Though I’m not too worried.)

One of the great quotes in the article was from Chad Dixon, ABR, CRS and designated broker with Hearth & Haven in Chandler, AZ.

“I’ve found quite a few clients who mistrust real estate practitioners. These clients are looking for someone to help them build wealth, not just sell them something.”

In the words of my friend Jeff Brown, “duh.”

Chris. This is getting on my nerves. What has this got to do with me? What does Coach Wooden have to do with me? Why are you wasting my time?

I’m not wasting your time. You can click away at any moment. This article has already been too long for anyone that is not a serious real estate investor. But those that know this blog know I’ll tie it together sooner or later. So…

The Big Finish

The question I want to ask you, know matter where in the country you are, is, “are you working with a real estate agent that sells houses or a real estate agent that is a real estate investment advisor?”

There is a huge difference. Every city has qualified real estate investment advisers. Probably almost a dozen in any given metro. But are you interviewing properly to find them?

Any agent wants to sell houses. But if I were you I’d be looking carefully at the qualifications of the person helping you in your attempts to build wealth. What is their understanding of the measurements of real estate investing? Can they calculate returns? Or give you a basic understanding of tax planning? Or refer you to professionals that can make sure you are on the straight and narrow with these very large assets?

Many an agent is extremely good at what they do. They can stage a home, market a home and successfully walk their clients from listing to closing with barely a hiccup. But when it comes to investments they aren’t really sure of the right path at the right time. (Same is true when asking an investment advisor agent about staging your luxury home. What would he know?)

Coach Wooden was the best of his time. IF a kid were good enough to get on his radar he should have thrown himself at Coach. He would help him with the basics of basketball like any coach. But he would also teach him the magic, the mental toughness, the character it would take to succeed in the game. And in life.

Who is your coach when it comes to real estate investing? Are you allowing him in? Are you keeping him abreast of your every move in your quest to become great?

When you stray away from the coach and the team and the system, bad things can happen. I don’t want to upset one of my investors but this is what happened to him. He made a move he didn’t want to tell me about for reasons I’m still not clear on. I’ve never held him back from purchasing a property he found on his own. (But when he needs an agent he better use me!) This investor took a left turn and invested $20,000 into an investment situation in a manner that I would never have allowed him to take. At least not without certain guarantees and tools to protect his interest.

Now I see him losing most if not all of the $20K. That’s real money. And I feel badly for him. Fortunately, he’s the kind of investor that will learn from the mistake and press forward. And now I think he sees the need for a team, a coach, a counselor. That’s what Coach Wooden was. That’s what I want to be.

In today’s Kansas City Star Business Weekly section Chris Lester writes on the subjects of rising foreclosures, too many subprime loans and historical home ownership trends. It’s worth the read if you want to look it up on KansasCity.com. Or do something really radical and buy a copy!

Ah, who am I kidding? On my whole street I think only about 5 of us still take the newspaper. But that’s another subject for another time.

Chris does make the point that historical home ownership in this country had, for decades, run between 63-66 percent of all households. During the recent real estate boom where money was cheap and easy that percentage climbed up to 69.2%. Then Chris writes (paraphrasing here) that we should look at the 66% mark for home ownership much like we look at the 4%-5% mark for unemployment. About maxed out.

And I think it’s a great observation.

So what does this mean to the real estate investor?

Well, if we are at about 68.5% home ownership and heading back to around 66%, then there are a lot of people who need to rent houses and there are going to be a lot of houses available to put them in. Chris suggest that maybe apartments is a way to go. But I would argue that…to some degree. Houses and duplexes, in my mind, are always a better way to go.

I think what hurt most of these people who are going through the pain and suffering of foreclosures wasn’t so much the house payment. It was the expectation of home ownership. They were used to renting. If they were late to the landlord, and late on a consistent basis, they would just move and maybe or maybe not get sued later.

When they had problem as a tenant they would call a landlord and it was his responsibility to get it fixed…and pay for it. Now when Mr. & Mrs. Subprime had the furnace go out there was no one to turn to.

Any bump in the road on income turned into a crisis. Any repair a choice between fixing the house and eating. $4,500 to paint the exterior of your home to protect it’s value and integrity seem like a mountain when you are living paycheck to paycheck.

Some of these people should never have taken on home ownership. Or they should have purchased more modest housing. Now the blame game is going on.

As a REALTOR I can tell you that I sat across the table from people and told them they should not buy this house. But they had a pre-approval letter and the will to do so. Backing from mom or dad helped, as well. So what was I supposed to do as their agent? I counseled them. I encouraged them to move down their expectations. But am I to refuse helping them? Please.

I sleep at night just fine because over my 5+ year career I don’t know of any homes or home buyers that have gone into foreclosure. But even if one had I would still feel okay because I told them what I thought at the time.

But I stray from my main point. (As usual.) The point is that the rental market across the country and here in the Kansas City area is strengthening. It has been for about the last year. I can remember “free months” and “no security deposits” not too long ago. Those stopped and now rents are actually creeping up. While house prices are modestly increasing, stagnant or dropping ever so slightly here in our metro.

That smells like a real estate investing opportunity to me.

I’m telling you folks, the real estate investing lessons you get on this blog (some ego, right?) and on Jeff Brown’s BawldGuy Talking blog are unbelievable.

Hey! Where was my blog? A google screen kept coming up saying “server error” for the last couple hours. My blogging time! I would complain strenuously but I don’t pay anything for this blog site. But I can still whine about it, right?