This girl went to the same high school I did. She was abducted the other night and it has turned into national news. If you see her, please contact the authorities of Overland Park, Kansas.
You can find out all you need to know at FindKelsey.com.
Find Kelsey of Overland Park, Kansas
Filed under Uncategorized
Lording the Land: Doubters Inc. (or: Should you Incorporate?)
Lording the Land: Doubters Inc. (or: Should you Incorporate?)
Take your time to go over and read this explanation on LLC vs sole proprietorship. I seem to stand alone on my conviction to have not formed an LLC for me and my property. At least I know there is someone else out there that thinks along the same lines as I do.
I found this blogger through the Carnival of Real Estate Investing on Equity Scout. Take a look.
Young People of America: Invest In Real Estate
Young people are learning to invest in real estate. Young people today seem to be learning a lot faster than my generation. True, I’m only 42. So it’s not like I’m a geezer, yet. But when I am working with these 24, 25, 26 & 27 year old clients I feel like a proud papa.
– – –See this photo? Even with the movement towards financial security, this is about the right ratio of “people in the crowd” actually making the move towards owning income property. – – –
This won’t be a long blog post. It is really just a post to say how proud I am to help these kids get started. Rather than spend all their money on trips and single family homes that are too big for them at this time I’m seeing twenty-somethings purchase a duplex, rent out half and live in the other side.
The plan is nearly always the same: Live in one side and rent the other for about 2-3 years. Then, move on to the single family home (or another duplex) as an owner-occupant and keep the duplex as an investment property.
A few will be satisfied with that. And that is fine. Think about it. If they don’t do anything else, if they don’t buy another rental property. If they don’t 1031 exchange. If they don’t lease option, etc. When they are in their 50’s they’ll have a piece of property that is 100% paid for, cash flowing tremendously and can sell it to help fund their retirement.
Editor’s note: The above strategy is not recommended as a good long term strategy. But even that strategy is 1,000% better than what most people will do.
And another terrific thing is these young adults are still investing in their 401K’s and/or their IRAs. And even better, a few are taking on other income properties, as well.
So there is definite hope for the generation that follows mine. Self-reliance and entrepreneurship are alive and well in America. And that is a good thing.
Filed under Personal Real Estate Opinions, Real Estate Investing
Friday Meanderings
Here are some blog posts worth reading:
Investors vs. Speculators::Which One are You?
1031 Tax Deferred Exchanges-200% Rule
So You’ve Decided To Buy A Property With A Friend…
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I ran into this guy the other day at the post office. If you like to Bar-b-q you are going to want to check out this site. And you know we Kansas Citians love to BBQ. American Barbecue Systems.
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Isn’t it amazing how many different ways there are to say Bar-b-q. Let us list some:
- BBQ
- bar-b-q
- barbecue
I guess it’s appropriate since there are so many ways to BBQ. Memphis thinks thinks they are the best. (And they are good.) Carolina thinks they are the best. (I don’t care for vinegar and cabbage on my sandwich, thank you.) Texas…well Texas has a Texas sized ego about everything. But here in Kansas City, we have a little of each of those. We’re the Constantinople of BBQ.
And remember, grilling isn’t BBQ. It’s grilling. BBQ is low and slow.
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I’ve got a line on some pre-construction fourplexes out in Manhattan, KS if anyone wants any information.
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I’m noticing the rental market get stronger and stronger. My prediction from about 18 months ago is coming to fruition as lending standards are tightening and foreclosed homeowners are moving back into the rental market. Add to that slowing building and we should be nearing the bottom of the real estate cycle, here in Kansas City at any rate, in the next 12-24 months. Then things should slowly start to edge back up.
But we’re not too bad now, relative to the rest of the country. At least our appreciation is 2%-3% instead of depreciation!
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My son leaves for the South Pacific for 21 days on Tuesday. I’m so envious of his trip.
Commercial Loans: Residential Income Property Investing
Q: Why would you need a commercial loan when you are purchasing a residential income property? It just doesn’t seem to make sense.
A: Because the underwriting guidelines say that any residential property with 5 or more living units will require a commercial loan. That’s why.
Take this 5 unit apartment pictured to the left here. Because it is over 4 residential units underwriting guidelines will not allow a residential mortgage. That goes for any investment property 5 units and above.
You may now be asking yourself what are the main differences between a “regular” mortgage and a commercial loan. Well, I’m not going to hit every point but I’m going to highlight some of the biggies.
- Residential investment property loans may allow you to put only 5%, 10% or 15% down. It is very unusual for that to happen with a commercial loan. In fact, 20% is almost a mandatory minimum with 25% being even better.
- You can decide how profitable a residential mortgage purchase needs to be but if a bank is getting involved with a commercial loan they are looking more at the qualifications of the apartment being purchased than they are looking at you. The commercial banks have minimum standards for what cap rates should be for commercial loans they are underwriting.
- Regular mortgage loans can be amortized over 15, 20 or 30 years. Commercial loans are almost always a 20 year am, maximum. Although I have seen a movement towards 25 years on some more expensive apartment complexes.
- Your closing costs will be exponentially higher. Points are usually higher. Appraisals will definitely be higher.
- Experience matters when qualifying for a commercial loan.
Right off the top you can see that you had better not be considering any residential income property that has more than 4 units until you have the cash, credit, experience and banker to do so.
That’s another great reason to begin your real estate investing career with easily manageable, easily affordable single family homes, duplexes and fourplexes. After you’ve been through a 1031 exchange cycle, or two, then you’ll have the cash available to go after the commercial properties.
Fun Fact: I’ve got a 26 year old right now who owns 7 investment properties. He’s on the fast track towards being a multi-millionaire who owns commercial properties by the time he’s 40-42 years old. Now that’s a way to build a retirement worth having.
Filed under Financing Options, Real Estate Investing
Big Bubba’s BBQ of Olathe, Kansas
Located on the east side of Olathe, Kansas is a BBQ that I really, really like called Big Bubba’s Bar-b-q. Now let me just say right off the bat that the BBQ is 1000% better than the website. The website looks bad. But the bar-b-q is oh so good.
My family and I ate there last night and over ordered so that we can eat more tonight! One of the things about Big B’s is that they don’t add sauce to their meat. It’s a big deal to them. So don’t ask them to unless you want a dirty look. But there is sauce on the table. They aren’t the best ribs in town but the brisket is to die for. Beans are very good. And the turkey is about as delicious as you’ll get anywhere in the world.
Give it a try. You’ll be glad you did.
Filed under Kansas City BBQ
Do You Have A Sinking Fund For Your Investments?
Sinking Fund: noun – fund accumulated and set aside by a corporation or government agency for the purpose of periodically redeeming bonds, debentures, and preferred stocks. The fund is accumulated from earnings, and payments into the fund may be based on either a fixed percentage of the outstanding debt or a fixed percentage of profits. Sinking funds are administered separately from…
Source: Encyclopedia BritannicaI use the term Sinking Fund a little bit differently. But the end results are the same.
If I am your agent during a transaction I will look for things that are going to cost you money down the road. Example: Sure, it’s a great duplex with healthy cash flow, a new furnace and air, good structural soundness and a good many updates.
But did you notice that roof?
Your insurance agent, your inspector and I all agree that the roof has a shelf life of somewhere between 5-8 years left before it will need replacing. What do we think that is going to cost? Let’s say for our example to replace that roof today would run right about $5,500. That’s a complete tear-off and replacement. So let’s just say that will easily be $6,000 grand in 6 years.
So here’s what you do. $6,000 divided by 72 months is $83.33 per month. Now figure out how much of that monthly fee you want your property to pay for. All of it? Okay, take the cash flow you figured you were getting and subtract the $83.33 per month from it. Does the property still look good to you?
The point of this exercise is to get you to understand that unless you wish to be a slum lord and bleed the property dry (making sure you won’t get top dollar when it is time to sell) you are going to have maintenance along the way that you need to account for.
And for me, well, I would rather have my rental homes pay for themselves. Rather than me writing a $6,000 check from my personal funds. Know what I mean?
Filed under Real Estate Investing
BBQ Capital | Kansas City Real Estate Investing 