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Let’ s do some simple math.

$100,000 of stocks appreciating at 6% will yield you $106,000 at the end of the year. Of course you have to have $100,000 invested to accomplish this. (Yes, I know you can get fancy, but that is the basics.)

$100,000 invested in real estate can give you $500,000 worth of real estate holdings. How? 20% down on 5 homes with a market value of $100,000 each equals $100,000 invested with a worth of $500,000. If each home appreciates 5% your $100,000 investment yields you $25,000 worth of appreciation.

Or how about you find properties that will cash flow with only 10% down. Now at 10% down on $100,000 properties each appreciating at 5% you have 10 properties for a total of $50,000 appreciation in one year! Are you getting the message?

Yes. The gains are tied up in the house and you would have to liquidate the holdings to have access to it. Or would you? You could refinance. Or sell a share of the house.

And, we haven’t even spoken of the other 3 benefits of owning investment real estate. What are they?

1. Cash flow before taxes.
2. Loan paydown by somebody else.
3. Depreciation.

Where do you want to invest for your retirement?

This is a shout out to any builders out there that would like to run some numbers and models on whether or not it would be feasible to build some traditional, infill housing. New Urbanism is something that has intrigued me for years and I would be extremely proud to be a part of such a project. A builder in Minneapolis is actually doing the kind of building that I believe Kansas City would benefit from. Take a look at the two links provided in this paragraph and come back and let me know if you or anyone else you know would have any interest.

As you may have seen in my bio I used to reside in Suburban Maryland/Washington, DC. A community was built within 5 miles of my home that is still outstanding today. Kentlands is the name of the neighborhood and it was built in Georgetown style with all the modern conveniences that spoil us. It is the perfect mix and match of housing for such a large project.

Building a Kentlands here in Kansas City may not be feasible because of the lack of popularity of townhouse living here in the heartland. But smaller, denser housing with eye appeal would fly off the market. I’m convinced of it.

I read daily of the impending housing bubble burst on the coasts. But what about here in the heartland? Are we in danger of our homes becoming less valuable than they are? Or can we count on the continued steady upward climb?

Like everyone else, the following comments are just my opinion. But let’s break a few things down;

1. My phone is still ringing like crazy. It is true that a lot of the calls are marginal credit risk buyers. But somehow the market has not yet exhausted all of these buyers. And when these buyers buy, or new buyers that are just entering the home ownership market buy, they allow the other levels to move up or down, depending on their desires.

2. It is also true that while my phone is still ringing the inventory is still expanding. And let me just say that some sellers seem to have an inflated view of their property’s worth. Is it bad counsel by a REALTOR or their own expectations? Hard to say. But as we step deeper and deeper into a buyer’s market it is more important than ever to do your homework and price your house right!

3. Investors make up as much as 24% of the overall residential market. What will they do in 2006? My guess is most will hold and many more will continue to buy as the market gets softer and more opportunities are to be found. But if they quit buying and start dumping homes on the market, look out! (This is the greatest fear on the coasts.) In KC, I just don’t see any reason that I would advise my clients to do that.

4. Foreclosures are rising. Slowly but surely. All this easy financing has created a homeownership class of people just getting by. If their rates jump on their ARMs, or if little Susie gets hospitalized they may lose their home. Any neighborhood can withstand a foreclosure or two. But any more than that and it could seriously affect your home’s value. The Charlotte Observer has done an excellent series on this subject.

One of the great things about living hear in the Kansas City area is it’s economic predictability. Seldom do we get great jumps in growth. And seldom do we crash hard. I own investment property and see no reason to sell. The market’s value seems to be right on track here. And I’m staying in.

One of my clients wrote a response to one of my postings. His comments were longer than the 300 words allowed under comments so he emailed me the doc and I’m posting it here for you to read.

It should be said that he makes money in real estate far differently than I do. He does follow NODs and looks for opportunities in all sorts of places. But the point is he works. And he works hard and with a plan. He knows his criteria and if I call him with something outside that criteria, regardless of how sweet it is, he will simply pass.

Anyway, here are his comments;

First of all, Chris is absolutely right on! For those of you that are just getting to know Chris…LISTEN UP. Also, there is no way to get rich quick. Getting rich is easy, but very boring. You must have a sound fiscal education. You can however shorten the learning curve by taking the time to learn every day. I attend several seminars yearly, some of which cost thousands of dollars. Your education is the most important part of your life. You either need to be the expert, or hire one. I do both. As far as finding prospects…There are a million ways. You must first set your current cash flow needs, then your long term goals. The late night gurus(the right ones) absolutely know what they are talking about. I know many investors who employ these strategies. I even employ a few. For me…Life is about family, and freedom. I work very hard to generate large profits. I do however work when I want. Learn as much as you can from Chris, and others and you can write your own ticket.

Three books I highly recommend reading. A little something in each of these.

1. The Millionaire Real Estate Investor by Gary Keller
2. Building Wealth One House At A Time by John Schaub
3. Successful Real Estate Investing by Robert Shemin

I was out over the weekend looking at possible investment properties with a client. Some of the properties had been on the market quite a while. Now I will readily admit that the market is becoming more and more a Buyer’s market and houses are taking a little more time to sell than even a year ago. But the condition and price of your house still, and always will, have a lot to do with how fast your property sells.

Let me make this as clear as possible. If you want top dollar when you sell your house your house had better be in top condition. If it’s not you need to hope you are in a hot Seller’s market (not in Kansas City at this time) or that your Buyer is from out of town and will not compare your property (highly unlikely) to any of the other properties for sale.

There is nothing wrong with selling a property that is not in top condition. But your REALTOR cannot work miracles for you. If every house in your neighborhood is in good condition and every house has sold between $200,000 and $210,000, that is great. And if your house needs quite a bit of work and is located in that neighborhood you can still sell it. But Buyers (and their agents) are generally not stupid. If your place needs $15,000 to bring it up to date most people are not going to offer more than $180,000 – $185,000. It just makes sense.

Be realistic about your pricing. It’s the best thing you can do to sell your house. Don’t under price it. But be realistic.

Also, I spoke of buying based on comparable sales. Let me just say here that is the worst way to purchase investment property. You need to purchase investment property based on the income that property can produce. Not what Joe down the street paid for his. That’s a whole other subject that you can write me about or I’ll address in the future.

Completely updated Kansas City home across from the park and backing to green space. Beautiful wood floors. Ceramic tile in the bathrooms. Basement rec room. 3 good sized bedrooms. 2 bathrooms. Large kitchen. A must see. Offered at $119,500.