Category Archives: Real Estate Investing

May 11, 2007 · 10:14 am

Should A Real Estate Investor Get Their Real Estate License?

I received a question by email the other day that I get asked about 6-8 times per year.

“Should I, as a real estate investor, get my real estate license?”

Let me just begin this post by saying that I am not a substitute for sound legal advice. (Does that make you think the answer could really matter?) When you get your real estate license there are certain legal obligations you have to fulfill. So before making a final decision feel free to contact your real estate attorney.

Advantages

Certainly, as a real estate agent you can get first crack at quite a few properties. Once you learn how the MLS system works you can set up searches that allow you to monitor for homes that fit your criteria.
People know you are “in the game.”
Access to Board approved real estate contracts.
You can save or earn a commission on deals that would otherwise go to the agent involved.

Disadvantages

As a state licensed real estate agent you are now held to a “higher” standard. You have laws to comply with and the Code of Ethics to follow.
You must notify any buyer and seller you are working with that you are a licensed real estate agent.
If it ever went this far, who do you think a jury would side with? The person who ended up selling their home at a deep discount or the licensed real estate agent who knew the true value of that home that was for sale?

Generally, I tend to recommend to people to NOT get their real estate license if they are going to be a full time real estate investor. I believe the liabilities and compliance issues outweigh the benefit of saving the occasional commission.

Having said all of that, there is absolutely nothing wrong with being a real estate agent who also owns investment property. For instance, the investment property I own is for my security and my benefit. It is not, at this time anyway, my primary source of income. It is my nest egg and wealth growing vehicle.

So ask yourself: What will my point of emphasis be if I get my license?

4 Comments

Filed under Misc. Real Estate, Real Estate Investing

May 3, 2007 · 2:52 pm

Unconnected Thoughts About the Kansas City Real Estate Market

It is not good to have a deceased person in your house when trying to sell. See here.

Still trying to figure out whether or not to use Negative Amortization loans for your real estate investing purposes? Here is one of the best explanations I’ve ever seen by Jeff Brown of Bawld Guy Talking.

Another golf day is being rained out here in “Sunny” Kansas City.

The Royals won last night! The Royals won last night!

Inventories are still up on homes for sale. But the nicest homes, priced right, are still moving quickly.

I’ve located new construction townhouses on the Missouri side. Price: $109,000. Rent: $925-$950. Any takers?

Knowing what to do and doing it are two different things.

I had lunch today with a young man just beginning his real estate career. He had expressed a little dismay that none of the “top producers” in his office would share their secrets with him. Kind of silly, really. Why not share? There are plenty of houses out there. What we need are agents that know which way is up. I was glad to give him a few basic tips. Hopefully he will take them to heart and kick some rear end here in Overland Park and Olathe.

If you are looking to test the market and see if your home will sell, don’t bother. Too much inventory. Stay off the market so that those who need to sell can.

I had another phone call from a gentleman who wants to sell a property in a questionable neighborhood. He was part of the whole buy low, fix it up, throw a Section 8 tenant in there and sell. Unfortunately, he is the one who bought. Guess who made the money?

1 Comment

Filed under Kansas City Real Estate, Real Estate Investing

May 2, 2007 · 12:15 pm

Life Worth Living, A Retirement Worth Having

Helping people to reach their economic goals is a very big part of what I do. As a residential real estate investment counselor I have had the chance to sit down with hundreds of individuals/couples and plan their financial future. The goal is almost uniformly a retirement worth having. What that means to different people can vary. And you will have your own take on what that means, as well.

But without trying to sound too “zen”, we cannot forget that before a retirement worth having we need a life worth living.

As you may well imagine, in my line of work I am approached constantly with get rich quick ideas and clients that want it all and want it now. Sometimes they come with excitement. All too often I see desperation in their eyes. And my heart goes out. I’ve stood in the shoes in which they are now standing.

Life worth having has to start today. It starts with the realization that investing in real estate is not the answer to your happiness. It IS a vehicle to your reward at the end of the road. But the journey with your family or friends (preferably, both) is where you begin the life worth living.

Our American culture likes to use money as a measuring stick for success. It’s easy to see (or make people think they see), but a very shallow measure of a man. For instance, if you have 4 duplexes with 8 tenants you have a lot of control of not only your life’s quality but theirs as well. Raising their rents while ignoring upkeep and repairs is no way to build your fortune. You may have more money at the end but to me you will not be the success you could have been.

Always know that when you read my columns about real estate investing that the whole shebang is centered around my moral code, my core beliefs and my spiritual life. I talk a lot about money on this blog. That is because we need it to live. And we need quite a bit of it. But on this blog, at least, always know that you are going to learn how to do it right. Or I’m not going to participate.

Because I’m doing my best to live a life worth living to be able to enjoy a retirement worth having.

1 Comment

Filed under Real Estate Investing

April 30, 2007 · 7:36 pm

Building a Real Estate Portfolio: Learn to Fly

I remember that day very clearly. I waited with anticipation, and apprehension for 3:00 pm to arrive. I was so excited that I arrived 10 minutes early even though I only lived 4 minutes away. The date was July 23, 2002. 68402 was the Cessna 152 I was about to fly for my Private Pilot’s license exam. Aside from my wedding day and the birth of my children, NOTHING exceeds the sense of accomplishment I felt that day.

“Congratulations. You are now a private pilot.”

Those words still ring in my ear. It was the culmination of a lot of work. The direct result of careful planning, much study, learned execution and faith in the flight instructor I had hired to guide me through the process.

My instructor was Felicia Barton. I’ve since lost track of her. But I’ll never forget her. “Airspeed. Center line.” “Airspeed. Center line.” “Emergency. Where will you land?” Those words of hers ring through my ears to this very day with every flight I take. Even while driving my MINI. I purposely live close to small airports and watch as many approaches/take-offs as I can. I mentally fly every single day.

Why am I writing about flying?

Because it is really no different than what the newer real estate investor goes through when they are getting started. You step out on faith and the first thing you decide is that you are going to do it.

The next thing that any prudent flight student will do is carefully choose their flight instructor. Your life will literally be in that person’s hands for years and years to come. After all, it is the training that will come back when you need it most. Or it wont. It just depends on whether you had a great flight instructor…and whether or not you were a great student.

Little successes will build on top of other small successes. When that plane lifted off the ground for the very first time under my control Felicia took the wheel as I followed along. She was talking to the tower, adjusting the throttle. Following directions. Turning to 270. Adjust mixture level. Head on a swivel to look for traffic. Trim needs adjusting.

My head was swimming. Would I ever learn to do all of this? And all at the same time?

You never stop learning to fly. You never stop learning about real estate investing. To me, with my life experiences, they are practically the same. Both allow freedom. Both require planning. Both allow the chance to soar. Both can cause ruin.

Choose your path carefully. Plan. But step out. The sense of accomplishment in knowing that I can fly is unbelievable. Knowing that I am taking steps to have wealth that will allow me to retire comfortably and that I can leave for my kids will be like that July day. “Congratulations. You are a millionaire.”

*** *** *** ***

I was reading a website today out of California. It’s called The Money Alert. There are a couple of articles worth reading.

An Even Exchange – An IRC 1031 exchange article
Are REITS Right for Your Portfolio? – A Real Estate Investment Trust article

The site looks informative and discusses all manners of investing, not just real estate. Take a look and see what you think.

2 Comments

Filed under 1031 Exchange, Real Estate Investing

April 28, 2007 · 3:11 pm

Kansas City Real Estate Investing: Keep Money In Reserve

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.

Real Estate Guru: Watch Your Wallet!

I had a great evening, real estate wise. The best part was working with an investor who has owned rental houses before but has never had to do any tenant selection on her own. So I’ve been walking her through advertising the income property and answering calls/emails and tonight we met together with a prospective tenant couple. She let me do all the talking, question answering/asking and such. She seemed to show tenants houses the same way I show houses to her…I let them look around and leave them alone. But she said she wasn’t suprised at how I went over in detail what I would expect from them as tenants and, in turn, what they could expect from her as a landlord.

We have a couple more prospective tenants to show the house to on Friday evening and she’ll be there to continue to learn. She wants to be her own property manager for a while to learn how it works from that angle.

I tell you all of this because I’ve been having a good time surfing around the web tonight and reading some very good real estate blogs. And on a few of them there are backhanded references to real estate gurus. (Deservedly so, IMO.)

If you are starting out in the real estate game you have three choices as I see them:

Read all you can and go out on your own. Figure things out as you go.

Hire an investment “mentor” and follow him down the path. (Someone who can actually show you what they are doing NOW…not 5 years ago.)

Work with a professional real estate agent that has a proven track record. My guess is, and this is only a guess, that each major city only has about 4-7 of these guys. Here in KC my figure is about 6 out of the 13,000 agents. Better interview carefully!

But whatever you do…Don’t buy the books, tapes and seminars of the real estate gurus! Why? Give me a call or email. We can discuss it.