BBQ Capital | Kansas City Real Estate Investing | Real estate investing and property management in Kansas City.

April 18, 2007 · 11:45 am

Skepticism and Real Estate Investing

It seems the real estate industry has caused some problems for itself with it’s non-stop touting of real estate investing, er speculating, these last few years.

First, you need to know what real estate investing is. It is the acquisition of property based on sound financial analysis with a target return in mind. Usually I recommend a cumulative return (from the 4 Benefits found in the right side bar) of somewhere in the 22%-26% range. If you have a sound criteria and the property does not fit, don’t buy.

Real estate speculating, on the other hand, is buying property banking on the fact that it will

appreciate high enough and quickly enough that it will exceed your poor decision making. (Sorry, do I sound negative?) This is what was going on when people were purchasing condos off the plan, selling them 3 months later, and in turn those people would sell them 3 months later and so on until there was no way left for people to be able to justify the expense of personal living or the returns it would make as a Buy & Hold property.

I bring all this up because a blogger here in Kansas City linked to one of my blogs and turned the title into a negative. I left his link there. And it should be said that I read the blogger on occasion. And I’m really not even mad at him. To an extent, his perception of real estate investing is based on what the TLC and Home & Garden channels, the National Association of REALTORS and a whole lot of real estate “gurus” and agents have been saying and doing.

By way of his comments section I have invited him to debate the issue. There is an education process that needs to take place across Kansas City and this country about what real estate investing is all about, when it’s appropriate and when it’s not. I welcome the debate with any of my readers. (As long as it’s based on merit, not emotion.) Heck, Kansas City has been considered a “city of concern” by the FBI because of all the fraudulent real estate transactions that have taken place here. Even by city councilwomen and men running for congress.

This blog is set up to be a real estate discussion. And your input is always appreciated. Hope to hear from you.

2 Comments

Filed under Kansas City Real Estate, Real Estate Investing

April 17, 2007 · 8:33 pm

Virginia Tech Is In My Thoughts & Prayers

Please keep the victims and families of these kids in your thoughts and prayers. God Bless.

I Have $35,000 for Rental Property – Now What?

Coming to me with $35,000 to start your real estate investment career is terrific. Let’s just see what we can do with that money.

How about we take it and split it in two? We’ll buy a couple of Waldo area homes, put 10% down, run mortgage payments (with escrows) of about $725 and we’ll get rents of about $775. Not great cash flow. In fact, pretty dead even. So why do I want to to that?

Currently your $35,000 is sitting in an IRA or CD or stock. Let’s give you the benefit of the doubt and say you are earning 8% on the money. That is a $2,800 gain for the year. Heck, I’ll take it if you don’t want it.

But now let’s look at that same $35,000 in the above scenario. Remember, there are 4 Benefits to investing in real estate (see side bar) and we are only going to talk about the appreciation factor here. Not Cash Flow Before Taxes because it’s minimal to nothing here. Not Principal Reduction even though that can really add up. Not Depreciation…trust me you’ll love me at tax time. We’re only going to discuss the Appreciation benefit.

With that $35,000 you should have leveraged yourself into about $200,000-$225,000 worth of real estate. So let us take the smaller number of $200,000. Historically, Kansas City real estate appreciates at about 5% a year. But I believe we’ll have another flatish year at 2%-3%. Again, let’s use the lower number of 2%. $200,000 x 2% means a $4,000 increase.

“Well Chris. That’s only $1,200 better than the return I was getting in the stock market.”

You are right. And couldn’t be more wrong. Remember, we are only calculating ONE of the 4 Benefits of owning residential investment property. Remember, we didn’t fully leverage your capital. And remember, we are in a flat year of real estate growth. What happens if it really takes off, again? (And quit talking to me about dips in the west and east. We didn’t get the growth they were getting so why do you think you’ll get those dips…ALL REAL ESTATE IS LOCAL!

Your thoughts?

Editor’s Note/May 26, 2008: According to the Office of Federal Housing Enterprise Oversight the Kansas City area had 2.7% appreciation in Kansas and 1.7% in Missouri. What did I say above?

3 Comments

Filed under 4 Benefits of Real Estate Investing, Real Estate Investing

April 15, 2007 · 2:25 pm

Four Duplexes in Kansas City Area For Sale – All Good Choices

Right now I’m pretty excited about the market here in the Greater Kansas City area, at least where investment property is concerned. Over the course of the last 4 days I have found 4 duplexes that rate “Buy” in my opinion. Two happen to be in Blue Springs, the other two are in Olathe.

The really nice thing about these four income properties is that they are all over the map as far as growth and cash flow are concerned. The smallest on in Blue Springs would have excellent cash flow with as little as 10% down on about a $120,000 purchase. Good to great growth can be had on the $240,000 duplex in Olathe and it will hold it’s own with 20% down.

Should you have some cash languishing in a non-performing stock or gaining modest interest in your 401(k), we really need to talk. Retirement is just around the corner…or could be.

1 Comment

Filed under Investment Property, Kansas City Real Estate

April 13, 2007 · 11:06 am

Working With A Coach While Investing In Real Estate – Just Run The Play

Coaching. You’ve heard the word. The first thing that comes to most people’s minds is a sports coach. Someone who leads, trains and calls the plays.

That’s what I do.

Yes, I’m a real estate agent. And yes, residential investment property is my specialty. Truth be told I look at myself as an investment counselor. You tell me what return goals you have in mind, how much credit and cash you have to bring to the table and I’ll be able to tell you what your expectations should be. Where in town you should invest. What property manager to hire. What type of tenant you will attract. And what your returns both in cash flow and appreciation will/should be.

Remember that when you are hiring me you are hiring a professional that knows his business. I can provide references to check out. Transaction history to review. But ultimately, you have to be recruited to my team. You have to trust what I teach you. You have to run the plays I call. How successful is the basketball player who constantly questions the coach he’s playing for?

When choosing your coach keep this in mind. It should be the goal of any coach to succeed. To win. To accomplish the goals that are set out. It should also be the coach’s job to train and motivate. To someday see his “players” do better than he did. To go on capable of doing so without him. That is true success for the coach. And everyboy wins.

Keeping An Eye Out For Great Investment Properties

Keeping an eye out for sharp investment properties takes discipline, experience and a keen knowledge of what today’s renters are looking for.

Make no mistake about it. When you own rental property and you have a vacancy you are competing against all of the other vacancies out there. Your prospective tenants know this and are looking for a lot of the same attributes for their home as a home buyer would be looking for theirs.

Today I had the chance to get out and see 11 properties. Obviously, I was most impressed with the properties my buyer was impressed with. We liked the same things. Clean, freshly painted walls, newer roofs, structural integrity, proximity to conveniences and work zones, free flowing floor plans and well maintained and groomed exteriors.

And you know what? The homes that fit the above criteria were priced remarkably similar to the houses that didn’t meet any or all of those standards.

Some home investors are in a position that they are looking for “distressed” properties that they can improve and have some built in equity. But many of my buyers are working professionals with busy lives. They are looking for turn key properties that are not going to have a lot of future maintenance issues.

After finding and identifying the proper home candidates the next thing to do is sit down and figure out going rent rates for each unit and their corresponding expenses. From that point, it is very easy for me to package a home up for the right buyer.

Not every buyer wants or needs the same thing. Not every house will fit every buyer. My job is knowing the differences and where to apply them.

Demystifying Real Estate Investing – Learn From The Right People and Keep It Simple

Tonight I had the pleasure to speak before 120+ people at the MAREI monthly meeting. I was received warmly and I had a great time. There were many different real estate investing philosophies in that room and I’m sure many differing opinions as to whether I knew what I was talking about…or not.

And isn’t that funny? I realize that my particular brand of investing for my future (and guiding you to do the same) isn’t for everybody. In that room there were people taking notes. And there were people nodding off. Here is my hope, however, for each and every person I have the honor to discuss real estate with: That you have a retirement goal that you are working towards and that you have the guts to step out and make it happen.

Knowledge is something that is ongoing. I never stop searching for those wiser than me in my particular discipline regarding investing in real estate. But in concert with knowledge is something called Action. One without the other is simply wasting your time…and probably your money.

Anyway, I need to move on. It just gets me all worked up. 🙂

Here is a link to an interview by Liz Strauss of a gentleman that I speak of often here on BBQ Capital. If you want to get your thinking straight about long term real estate investing then I would hope you would take the time to read it.

1 Comment

Filed under Real Estate Investing