Out of state owner says SELL this Kansas City, Kansas duplex. The owner’s priorities have changed over the years and now he is moving on. That means he’s held on to this duplex for sale too long and just wants to move on. His loss is your gain. Each side rents at $695. One side is currently occupied and the other side is getting some minor renovation done before new tenants are placed. It’s had a good occupancy history and has been professionally managed.
Attention Real Estate Investors: As of 7.2.2009 the owner has dropped the price to $87,500. He wants to move on. Now how would the numbers look?
Do the math. You buy at $95,000. Each side is bringing in $695 you are at $16,680/yr. Follow? Look below.
Estimated Expenses
$1,668 Property management
$1,400 Vacancy
$ 500 Utilities
$2,300 Taxes
$1,500 Repairs/maintenance
$ 900 Insurance
$ 500 Misc
Total Expenses equal $8,768
Net Operating Income is appox $7,912
Your mortgage payments add up to $505.63/mo. (That’s 20% down leaving a mortgage of $76,000 at 7.0% interest since it’s an investment property loan.)
NOI – Debt Service = Cash Flow
$7,912 – $6,068 = $1,844 /yr cash flow
Your Principal Reduction = $715 (approx 1st year)
Your Tax Benes = (NOI – interest – depreciation) $85 (approx 1st year)
Total 1st year benefits (approx) = $2,644
Cash invested (down payment, closing costs, etc) = $22,300 (approx)
First year return as a percentage = 11.9%
Now what would the numbers be if you managed the property yourself?
All numbers are of course estimates and this is not a guarantee of performance. Just trying to use all the numbers I know.
Filed under Investment Property, Kansas City Real Estate
While perusing my Pocket Express by Handmark the other day I came across Scott Burns’ article concering the future of our economy titled High Debt Means Deflation, Not Inflation. It’s worth the time to jump on over and read.
Interestingly enough it seems to be a growing train of thought as not too long ago I read something of a similar vain in I think the Wall Street Journal. (Can’t remember as I read all the time.) I just remember the author talking about how we are basically resetting our economy. A re-boot if you will. That good times won’t come back simply just because Bush and Obama want it to and pour literally trillions and trillions of dollars into a bucket wherein they hope a stimulus will be born.
The most interesting item from the Burns article:
“When you have major debt events, it changes our behavior for a long time. We’ve had a record decline in wealth. But the income effects are far larger. Payrolls have seen the largest drop since 1948. We’re at a six-decade low in factory utilization. The output gap (the difference between what we could produce and what we are actually producing) is the largest in history.”
That means rising demand, if it occurs, won’t cause rising prices.
Filed under Social Issues
You know, here in Kansas City the real estate market is not as bad as everywhere else, thank you God. But still, I’m a little amazed at what I’m running into of late. Keep in mind I have been selling real estate since May of 2002. Never before have I run into so many sellers re-arranging the showing times I call for or asking me to call them when we’re done…giving the impression that it’s annoying and inconvenient for me to even bring buyers to look at their home.
And their weak real estate agents are on board with this? Yes, because some of them are the ones calling me.
Listen, selling your house sucks. Leaving when people want to see it IS inconvenient and it can be annoying. Just another reason to price your house where it should sell to begin with that way you don’t spend four, five or eight months leaving your home to let someone else look at it.
But by all means, keep making the buyers feel uncomfortable to visit your home. Keep asking top dollar when your house isn’t in the condition as the one for sale that sold down the street. Keep offering small two hour windows per day that buyers are “allowed” to view your home. (Loved the days on market on that one…322. Surprised?)
Filed under Kansas City Real Estate
I’m going to take my wife down to Austin, TX for a few days beginning tomorrow morning. No big exciting real estate deals though we will be meeting for lunch with Benn and Lani of AgentGenius. And I will be getting some docs signed by a client who currently lives in Austin but is closing on a house in Kansas City here in about three weeks. So I may not post for more than a couple days.
Watch the BawldGuy
Jeff Brown over at BawldGuy.com has promised to talk about figuring expenses. He did a teaser last evening that I commented on. Can’t wait to see what he comes up with. If you are a real estate investor you will definitely need to see what Jeff has to say. Jeff may root for the wrong baseball team. But he knows his numbers.
Calculate Your Principal Reduction
I’ve said many, many times before that my favorite of the 4 Benefits of Real Estate Investing is Principal Reduction. If you own rental property you need to know what this benefit is to you this year. It will cheer you up knowing that someone else is helping you to pay down your loan. Trust me. Just get out your amortization chart and figure out how much of each payment is going towards principal reduction. It’s free money! Or at least I like to think of it that way. 🙂
Smoke Some Ribs
Here’s what I like to do. Get some K&M Barbeque dry rub from the Kansas City BBQ Store and rub a healthy dose into a slab of ribs. Set up your grill/smoker to about 225-250 degrees of indirect heat with plenty of hickory chips or cherry chips for flavoring. Smoke for about 2 hours. Then pull the ribs, wrap in foil and continue to cook at 325-350 degrees for the next 3 hours…or so. You’ll have to check them to be sure they’re done. Usually by this time I’ve quit paying attention to the time and I’ve had a couple beers while shooting the breeze with friends and family or listening to the baseball game. When you can bend the slab in half while the meat begins to pull from the bone you’re done! Slather on your favorite bbq sauce ( I like to go with Zarada’s, Gates or whatever I’m experimenting with at the time) and smoke an additional 10-15 minutes or so uncovered. Now, it’s time to eat.
I hear a lot of misinformation about the $8,000 First-Time Home Buyer Tax Credit. A lot. There are a couple things I’d like to clear up. First, a first time home buyer is not necessarily a first time home buyer. If you have not owned a home in the last three years then you may qualify as a first time home buyer. Weird, I know. But remember your federal government is involved.
Second, there are many limitations. Simply the best website I can find on the First-Time Home Buyer Tax Credit answers most/all of your questions on the FAQ’s page. I’m not going to sit here and bang out a regurgitated webpage when they do it so nicely. Click the link.
Third, a Tax Credit is real money folks. Listen, I’m not your tax advisor nor am I a trained CPA. But if you owe $4,957 in federal taxes in 2009 and you buy a house and you qualify, not only will you get back all of your $4,957 in taxes but you’ll get an additional $3,043. If that’s not redistributing wealth I simply do not know what is. But heck, if you qualify for it you simply must take it. I would.
Visit the link above. Then give me a call at 913.568.1579 to help you find a house. Then close by December 1, 2009. Then do your taxes next year. It’s as simple as that.
Filed under Kansas City Real Estate, Misc. Real Estate
I promised last week to hit some of the very basics of real estate investing here in Kansas City…or anywhere, for that matter. And while spending a little time on this real estate investing blog over the weekend I noticed that my messages really don’t change. Good market. Didn’t change. Bad market? Didn’t change. Basics are the basics.
On January 29, 2007 I wrote a post titled Net Operating Income – Formula For Success. It’s a short, sweet post about figuring your Net Operating Income. Almost every way imaginable to figuring out whether or not an investment property will make you money or make you lose money is based on a realistic NOI. What is the real income? What are the real (and sometimes un-thought of) expenses to the ownership and operation of the said rental property?
Before we do anything we just need to know what the Net Operating Income of the proposed rental property is going to be. Got it?
Income – expenses = NOI
Income includes rent, parking space rent, coin-operated laundry money, etc. Expenses include lawn maintenance, vacancies, utilities, etc. But expenses does not include debt service. Debt service is something different and will vary from investor to investor making a house affordable for one but not affordable for another. We’ll talk more about that this week.
Filed under Real Estate Investing
BBQ Capital | Kansas City Real Estate Investing 