July 8, 2014 · 7:24 am

Turn-Key Real Estate Investments in Kansas City

Because I work with a lot of professionals in other fields, I find the desire for turn-key real estate investments in Kansas City to be pretty high.  Creating an income property portfolio with as little day to day involvement is what I do for people. After all, not only do I help real estate investors find a home that is a good fit for the their current and future goals, I have a team of property manager that take care of the home for the owners.

Now, full disclosure.  Owning income property is not a license to print money!  You should expect good returns on your REI.  But let’s be honest.  Anyone that is promising 15%, 20% or even higher ROI is probably either bad at math, dishonest, ignorant or putting you in to homes you will not be proud to find out you own and in fact will put you in the “slum lord” category.  I am NOT saying that there isn’t a segment of owning low price/higher yield rental properties that doesn’t make sense.  I have an active client that has just such a strategy.

But the investor that I speak of is single, young and spends most of his free hours from work managing his own properties.  With lower priced rentals that’s about the only way to make them work.  They take a lot of day to day involvement.  And the stories I could tell of his travels!!!  (I should do a whole blog series of stories he tells.)

If you are a higher earning working professional looking for an investment vehicle that hedges against inflation, generates modest cash flow and has the full 4 Benefits of Real Estate Investing working for you then I would consider Kansas City as a destination for at least part of your investment portfolio.  Kansas City is in the middle of the country both geographically and economically.  We can discuss that another time.

And I’m here in Kansas City.  I can help you plan your future.  I can help you choose the right houses.  And I can help manage those houses to maximize both current cash flow and future equity.

Give me a call today.  913-568-1579

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June 16, 2014 · 12:35 pm

This Math Will Make You Broke

This math will make you broke if you are a real estate investor.  I received this math in an email from a local real estate investor who has turned agent and property manager, too.  I won’t call him out by name, but this is the type of real estate math that makes rental property owners think they are going to get one thing but end up getting another.  Take a look;

The Numbers:
Rent – $750
Mgmt – $75
Taxes – $75
Ins – $40
Net Income – $560/mo x 12 = $6,720/yr
ROI = 10% ($6,720 NOI / $65,000 Purchase)

Doing the math I calculate about 25% of the Gross Operating Income being set aside for expenses.   I more believe the math would look something like this, especially in the neighborhood I know the house to be in…

Rent 750
Mngmt 75  (that’s if there are no lease out fees, we charge $67/mo plus 75% of first month’s rent .  Many property managers charge a lease out fee, as well.)
Taxes 75 (estimated at 900/yr)
Ins   65 (remember, this is now a rental property)
Vacancy – 37 (and that’s at a 5% vacancy, in this neighborhood figure closer to 10%)
Repairs – 50 (anything less than 600/yr is not realistic)

And what about a sinking fund for major appliances and a roof?  What about a future make ready when the tenant leaves?  What about….?  I’m not even going to get in to the purchase price for the neighborhood in question.

At a very quick glance I’ve reduced the Net Operating Income from $6,720/yr to $5,376/yr.  That  is a significant reduction of the expected NOI, which will greatly impact however you choose to correctly figure your return on investment.

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June 7, 2014 · 7:37 am

Investment Property Leads To Property Management

Investment property leads to property management like sex leads to babies.  Both of the formers are a lot of fun.  Both of the latters take a lot of work, patience and the will to never give up on the situation until it’s just gone too far.

Look, buying and analyzing investment property (or rental property, if you will) are both kind of sexy.  It’ s fun to be attracted to new property and imagine how your life could be a little different.  Better even.  If only you had this new relationship (buying another house) you would be happy.

But after the deal is done (closing, not sex) you find out you’ve just become attached to a very needy partner.  And this partner has partners (tenants) that you didn’t even really think about too much when you were in the attraction stage.  And yet these partners that come with the new relationship are one of the most important cogs in whether or not this relationship will be successful…or not.

Property management, whether done yourself or farmed out to a professional property manager, is a lot of work. You have to feed your new relationship (find good tenants) and then you have to nurture it (take care of tenants) but eventually, your relationship hits the teen age years.

Replace “I hate you!” or “You don’t understand.” that your 15 year old daughter was yelling at you last week with “My son has asthma and there is black mold in the basement!” and “I will have the rent to you next week because…”

Rental property, like kids, is very rewarding.  But do not go in to this thinking it’s all blue skies and pretty flowers.  There has to be rain and there has to be manure for you and your investment property business to grow.  Trust me.

KC property management

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May 27, 2014 · 1:16 pm

Real Estate Investment Loans

Real estate investors need to understand that the rules today for borrowing money to mortgage your rental properties is different than it was a few short years ago.  Here are some basics that you fully need to understand;

  • Today the loan process is a full colonoscopy.  I have lenders that find it difficult to find a way to loan money to an investor that can actually pay cash for the home.  While this has been this way since the crash of ’08, it has gotten no better.  You will need to have all your finances in order in order to get a mortgage loan on a non-owner occupied property.
  • 99.999% of the time the lender is not going to loan you money in the name of your trust, “S” Corp or LLC.  These entities are set up to protect you from liability.  And that means from the lender.  You, your personal home and income and etc, are going to have to be responsible for your next rental property if you are going through a lender.  Just accept that.
  • You need to work with a real estate agent that can anticipate what lenders will be asking for.  They want leases, get them to them early.  Make sure the leases are complete.  Make sure you transfer certain assets on the settlement statement (the lender may fight you on this so attack it early) and be sure that personal property is nowhere on the contract.

There are many moving parts to a successful real estate investment property transaction.  Educate yourself before you go in to your next one, prepare for the worst, hope for the best and just get the lender what he needs. Sooner or later the property will be in your possession and you can forget about all the little troubles you had to endure to get there.

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April 22, 2014 · 8:17 am

PREIMA Got Money? Need Money?

Just as a head’s up, if you are a reader and you will be attending PREIMA’s Got Money? Need Money? event here in Kansas City next week, be sure to say “hello” as I will be there on Tuesday and I will be speaking on the Failure Fest Panel.

Should be a lot of fun. Real estate investors and money people from all over the country will be there.  Maybe we’ll see you there, too.

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March 31, 2014 · 1:01 pm

Real Estate Investing Classes

I haven’t been posting much. But teaching about real estate investing is keeping me very busy these days.  Currently, I’m putting together a video series discussing the do’s and don’ts of real estate investing.  It has turned out to be quite a project.  Some of the topics we have been covering are;

  • What is your criteria?
  • Rates of Return
  • How to calculate rates of return.
  • Income & Expenses
  • Property Management
  • Buy & Hold Real Estate Investing

It’s my hope to get these all released by the end of May. We may start dripping some in the near future to get some feedback.  I’d love to know what you think.

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March 18, 2014 · 1:36 pm

Housing Sales Up – So Is Loan Nonsense

The great news is that housing for investment purposes is still strolling along at many price points.  But I want to point out that the mistakes learned in our last real estate recession are still affecting our loan parameters today.  And that’s generally a good thing.

But seriously, if you are buying $944,000 worth of real estate and you are putting down 55% of the value AND paying all the closing costs out of pocket, how is it possible to be a credit risk?

The scenario above has 5 duplexes with, of course, 10 units.  9 of the 10 are rented.  The other one could easily be rented before closing. No sweat.  Cap rate?  Debt coverage ratio?  All within the parameters that the mortgage banker has set.

And yet, someone has decided, arbitrarily mind you, that they can only write four loans, not five.  So now we have to go find another lender.  Ok, fine.  But really, who loses here?

I realize this may sound like I’m griping for griping’s sake.  But at what point do people start examining each situation instead of coming up with rules to hide behind?  Not just in the lending business. But in everything we are involved in.

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