Sorry about the lack of a really great post today. I’ve been out showing all day and dealing with a closing that just never ends. (And people think real estate agents are paid to sell houses. We’re paid to get them closed!)
Anyway, hope to see you are MAREI tonight! Stop by and say “hi” if you are a regular BBQ Capital reader. Judging by my stat counter, there are quite a few of you.
Filed under Uncategorized
Just a few thoughts on this cold Monday morning;
Filed under Kansas City, Kansas City Sports, Social Issues
People love to complicate things. Especially the gurus. After all, they do have two hours to fill when they are trying to convince you to purchase their book and tape systems. Knowing your investment property has profit potential is very important. Measuring it against every other property within a 20 mile radius, isn’t.
You hear about cap rates and gross rent multipliers and internal rates of return and the list goes on. But figuring your total rate of return doesn’t have to be rocket science.
Figure your 4 Benefits and their total revenue and divide that by the amount of cash you have invested. There is your return. Then you can compare property to property.
Or, you can do what I hear so many of you do. Put down as little as you can on the purchase and trust that the rents will cover the house payment along with escrows. If that works then buy it! (Not necessarily the strategy I recommend. But it beats not doing anything at all. So long as it works out…)
No. That headline is not hype or a sales gimmick. But it could read Overland Park, Kansas City, Leawood, or Rockville, Maryland. The facts are the facts. If you price your home correctly, it will sell.
There is absolutely nothing wrong with the current real estate market in and around Olathe, Kansas. It’s true that we are not experiencing 8%-10% growth right now. It is true that we have more sellers than buyers right now. And it is true that the mortgage money has gotten a little more difficult to get right now. But, hey, do you remember the late ’70’s and mid ’80’s? That, my friends was a tough, tough real estate market.
The Truth About Selling A Home In Olathe Right Now
The Truth About Buying A Home In Olathe Right Now
Folks, many people think and say we are in a bad or down market. The truth is, historically, when there is a 6 month supply of houses on the market for sale we call that “in balance”.
It’s just that so many people
Interest rates are still great! Ask anyone 44 or over about 17%, 19% or even 20% home mortgages. And yet, people still moved and still bought homes and still sold homes.
Filed under Kansas City neighborhoods
Identifying The Problem
The real estate bubble on both coasts has deflated. You have property worth about 95% of what it was just a few short months ago. You’re looking in the mirror and asking yourself how you are going to cover the spread between what your investment property is costing you and what the actual rents are. You’ve just realized, or maybe you knew all along, that you weren’t a real estate investor. You were a real estate speculator. Now you have to change gears and come up with a formula to hold on.
It will take hard work on your part. Maybe some creative financing and a little bit of luck. Lease option purchases, owner carry-backs and value added services may be needed for you to cover the negative cash flow spread you have created for yourself. Possibly even <gulp> a realization that you will need to liquidate some of your personal belongings to make good on your word.
But here is the deal about real estate investing. (Because that is what you are now: a real estate investor. You have properties that won’t sell for what you have in them so now you have to hold them, manage them and bide your time until the market catches up or exceeds your debts so that you can liquidate or exchange them.) At no point in American history has real estate failed to exceed previous high values at some point in the scale. It may take 2 months or 2 years or 10 years. But eventually the market will rebound. The buyer’s earnings will catch up and demand will exceed supply. Real estate is cyclical. And you need to remember that when things are tough.
Get rich quick is what got you into this mess. Self discipline and sound real estate investing fundamentals are what is needed now to get you out.
And lest you believe that this phenomenon was limited to California, Florida and Washington, DC you need to realize that people here in the Heartland got caught up in some of the silly financing that came from out west. 103% investment loans, zero down on negative am loans and the like. Again, if you find yourself with property not worth what you owe you are going to have to get down and get serious about learning the fundamental principles of owning and managing rental properties.
Working Your Way Out
The first thing you are going to need to do is block some time out of your week to learn about real life real estate investing. You need to know how to figure Gross Rent Multipliers and Cap Rates and Total Returns. You need to completely understand the 4 Benefits of Owning Investment Real Estate. You need to study your property in relation to it’s setting. What are the competing rent rates? Vacancies? Is your property vacant? If so, what will it take to get it to rent for top dollar? If occupied, how much longer is the lease term? Would they be interested in increasing the monthly rate in return for an option and/or credit to purchase?
You need to start reading from informed investors who have been through the market cycles before. You may need counseling from a professional real estate agent that works with investment property. (I heard a quote the other day that made me laugh out loud….”why would you turn your hard earned capital over to an agent handing out refrigerator magnets?”)
Does your spouse work? If not you may need to speak to a professional tax consultant about the passive loss rule that can help to offset some, much or even all of your losses.
You need to get serious about your predicament and figure out a means to get through these times. I recommend reading Building Wealth One House At A Time by John Schaub. I recommend not listening to anyone that does not either own or work with investment property. I recommend not watching late night television and spending your money on investment systems that simply do not work in the real world. (If I had a dime for every time a new investor wanted me to take some absolutely ridiculous offer to my seller I could retire right now.)
Avoiding The Problem In The Future
Now that you’ve been through a good portion of the real estate cycle you may be more wary and wise about real estate in the future. Rather than purchasing a home with marginal (at best) numbers you will hold on to your hard earned investment capital until you find a property that better meets your criteria. You’ll go ahead and learn about 1031 tax deferred exchanges now instead of waiting till the last moment so you will know how to hang onto your equity when the time comes.
You will hunker down and really learn the fundamentals of profitable real estate investing.
Should you have any specific questions or comments I would love to hear from you.
Filed under Real Estate Investing
Olathe, Kansas
Population 112,000
Median Family Income $78,630
Median Home Price $220,883
Median Rent $529
Median Age 30.5
Job Growth 20.01%
22% Renters
Olathe, Kansas is a great place for your real estate investing capital. First, it is a city on the grow. By 2050 one recent projection put our population right at 320,000. There is good disposable income here, an excellent school district and plenty of shopping and dining.
A recent perusal of Hot Pads showed that there are currently 9 single family homes for rent here in Olathe. (We all know there are more but most people do not know how to market their rental properties.) But these 9 should give us a pretty clear indicator of the trends of Olathe. The 9 homes have a combined value of $1,719,000. (per Johnson County, Kansas courthouse tax records) The asked rental values of these homes is $14,465 per month. This translates to a 8.41 Gross Rent Multiplier.
Olathe, Kansas is a major suburb of Kansas City and offers endless choices when looking to invest in rental property real estate. Olathe also has an ample supply of duplexes. So whatever your criteria when looking to invest your hard earned capital you should at least look at Olathe, Kansas. If you are from out of state I can point you towards some very good property managers.
Feel free to call or email me to find out more about single family homes for your real estate investment portfolio.
The numbers from above were gleaned from Hot Pads and CNN/Money.
It has been a while since I’ve done a Barbeque review so I’m going to take a few moments here to do one. Now, in the interest of full disclosure, I worked at Zarda’s from about 1980-1983. Started as a bus boy and when I left after my senior year in high school I was a crew supervisor. (I knew you would be impressed!)
Filed under Kansas City BBQ
BBQ Capital | Kansas City Real Estate Investing 