BBQ Capital | Kansas City Real Estate Investing

One of the great strategies when negotiating real estate of any kind, especially investment real estate, is to know what the highest price you will pay will be BEFORE you begin the negotiation process.

Here in Kansas City, a good rental property will be many things. But one of the most import things it will need to be is profitable. Profitable rental property is not an accident. It is by design.

Before I let any of my clients begin bidding on a home I encourage them to know where their Stop Line is before beginning They can share that number with me if they want. But I’d rather they didn’t. I’d rather they keep trying to get the best deal possible until they get to that line and then just tell me, “that’s it. No more.”

I’ll understand. Honest. When you are figuring your numbers for your investment property you need to know where it is profitable. Why go above that number?

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.