The Basics of Real Estate Investing in Kansas City
It seems it’s been a while since I discussed, or re-discussed more-rather, the basics of real estate investing in Kansas City. Maybe it’s because the market has been so darned fluid this last year. But a funny thing has happened on the way to the Great Kansas City Real Estate Collapse. It just never happened.
Now to be sure, as I write this, our market is still very fluid and quite weird. On the one hand the market is red-hot. My clients have been out-bid on 5 of the last 7 offers we’ve written. Now these are all properties at the $135,000 price point or below. And the lower you go the hotter the market. And when markets heat up, real estate investor usually make bad decisions.
The point of ALL real estate investing, it seems to me, is to have more at the end than you did at the beginning. And that “more” needs to be more than you could have gotten in other investment vehicles. Why? Because owning rental property, even when you use a property manager, is much more labor intensive than owning stocks/bonds/mutual funds. Your capital isn’t as liquid. Your ongoing need for reinvestment more possible and real.
When I speak of invesing in real estate I’m thinking of the following;
- Buy & Live – A great way to start especially with limited capital. You buy a home to live in that would also be suitable for rental later down the road. you live there a year or two and then buy another home. You keep this home and rent it out. Now you have two homes, one a rental, and both on owner-occupied mortgages and their corresponding down payments. If you are in your twenties, this is a fabulous way to start.
- Buy & Hold…appropriately – Buy a house that will be a rental property. If you have a good solid income, 20% to 25% to put down ( a necessary in this currently lending environment) and enough reserves so that I can sleep at night this is the way to go. When I say Hold I don’t necessarily mean for the rest of your life. In KC I think 5-8 years is about the sweet spot. That’s taken on a case by case basis. Then you turn that property in for one or two other properties to start the cycle over again.
- Buy, Rehab & Rent – This can be very lucrative if you have two things; 1) Cash to make the down payment, cash for reserves and cash for repairs (construction loans are few and far between right now) and 2) Time on your hands. Someone has to supervise the rehab. True, you can farm it out but then profits are slashed further and you really have to find the rare property that meets the financial requirements. But through this method you can end up with the most sweat-equity.
Through the years I’ve written about the 4 Benefits To Real Estate Investing and if you go over to the Categories section of this blog you can search and click on that subject to bring up literally years of posts and comments on the subjects. Over the next week I promise to re-visit how to pencil a house to see if the numbers work. Keeping in mind the “numbers working” is a subjective value that can change from investor to investor.
For those of you who are considering house flipping as real estate investment I suggest you walk on over to BawldGuy’s Treadmill post. There you can read his excellent dissertation on the subject and my comments, as well. You do need to be forewarned that you may not like what you read. And anyone that considers house flipping in Kansas City had really better know what they are doing. Our numbers in KC are much tougher than other regions because of the lack of explosive appreciation that is possible in other places.
Kansas City real estate investing is for those that can live with and/or like a “slow and steady wins the race” philosophy. I’ve never advocated that an out-of-state real estate investor should have all of his/her portfolio here. But I do very much believe that a portion of your real estate investment holdings should be here. You’ll see why if you poke around this blog.
Will You Be My Friend? Facebook & Twitter
Writing a blog about Kansas City real estate and investing keeps me busy. Selling real estate in Kansas City keeps me busier. Because of the amount of business I receive through this very blog, referrals and previous customers I don’t really do any other advertising. Other realtors I know find this to be simply unbelievable. But it’s true.
If you are a Facebook user you can follow this blog by going to this link. To be my friend in Facebook simply search Chris Lengquist.
Twitter is another matter all-together. I have been struggling with Twitter for months now. People I like and respect tell me it’s a great tool. I just haven’t been able to emerse myself in it. On the one hand I think it’s really cool. On the other hand, not so much. But let’s be clear, if it’s a tool that will help me to better get the word out to help my clients and would be clients then I need to embrace it. And would do so willingly. To find me on Twitter you’ll need to search for me as kcinvestments. Don’t know why I picked that but I did.
Twitter is mostly a business tool for me. At least that’s how I see it developing. Facebook is a place where I mix my business and personal life. I’d love to hear what some of you think about all of this. I will say that I’ve been real estate blogging since January of 2006. That makes me an old man at this by blogging standards. I’ve just been so much slower to wrap my arms around the Facebook and Twittering. Is it even manly to say you “tweet?”
By the way, anyone see that Kansas City Royals comeback in the 9th last night? Wow!
Filed under Misc. Real Estate, Personal Real Estate Opinions
George Brett on OUR Kansas City Royals & The Media
Turns out I’m not the only one grouchy with so called “icons” here in the Kansas City area.
Filed under Kansas City Sports
Lazy Real Estate Agents
Twice in the last 10 days I’ve had clients lose bids on houses without ever having the opportunity to know that there were competing bids on those houses. Twice. Have real estate agents forgotten how to work for their clients? Or are these agents simply selfish and lazy? What about the courtesy to other agents that brought them an offer.
One agent is a very well known Re/MAX agent here in town. On behalf of my client I submitted an offer on Friday afternoon and even called to let her know the offer was on the way. No response. On Monday about 11:00 I called and asked if she had received my offer since there was no response. Both times the I had to speak to voice mail because apparently answering the phone is not a high priority.
At 5:30 last evening I get a call (my first call from her, mind you) telling me my client’s offer was the losing offer. I asked her how many competing bids she had and why hadn’t I been informed that there were competing bids? She said two others and that my bid wouldn’t have won anyway. When pressed, I found out one other bid was a lowball and the one we lost to didn’t even come in until Sunday night. I again asked why we weren’t asked to give a highest and best and she said the other offer was cash so she was sure the offer of my client would be rejected.
Well, at least I feel more comfortable that she is now negotiating on behalf of her client.
Folks, I doubt seriously if my client’s offer was even really looked at by the seller. A very similar thing happened the week before with a Realty Executives agent. No announcement that there were multiple bids, just that we had lost.
Let me ask you: If you were a seller and could get into a multi-bid situation wherein you could quite probably get more out of the one buyer because of the second buyer, especially in a REO situation, wouldn’t you do it?
You know why the sellers don’t get our bids, too? Because I’ll bet you the agents are submitting just the top bid they collect. The listing agents of most REO listings are taking a commission cut to get the listings. They are not going to want to have to work that hard, just to keep the commissions coming in. 2% of $120,000 is enough. Why spend a couple more hours getting $125,000 when it only means another $60-$75 to the listing agent after office expenses.
I tell my kids one of the worst things I can call you is “Lazy.” Well, guess what…
Filed under Kansas City Real Estate
Rental Property Swarmed By Bees!
So yesterday I get a call from a tenant that is something I’ve never heard before. And if you own and/or manage rental property, you know that is quite an accomplishment. Seems the tree out in front of the house is covered in bees! I asked “How many.”
“Millions!”
Ah, did she say millions? This is a great tenant that was calling. Rent almost always arrives BEFORE the first. She’s not really prone to exaggeration. And she thought she meant literally millions. That could be a problem.
I asked what kind of bees and she was thinking honey bees. I called my exterminator guy and he said he could get to them and kill them. Though with the honey bee shortage of the past years I didn’t think that was a good idea. While I was still mulling what to do about this I got another call from the tenant.
“I found a bee keeper that wants them.”
Perfect! I don’t have to be Josef Mengele to the honey bees, the bee keeper gets more inventory, and the honey bee population of the Midwest isn’t crushed by yet one more hive.
Good tenants are hard to find. I think this one is going to get a $25 gas card from QuickTrip as her reward.
Filed under News Of The Weird, Property Management
Can Kansas City & St. Louis Really Get Along?
In a rare act of cooperation a St. Louis based real estate agent and I (a Kansas City based real estate agent) are working together. Matt has referred to me a gentleman looking to buy a house in the Kansas City area because his son will be going to dental school up at the University of Missouri Kansas City for the next three years. Regular readers here of BBQ Capital: Kansas City Real Estate & Investing know that this is one of my favorite ways to own an investment property.
Anyhow, the gentleman is coming in tonight so that we can look at a couple two or three possible houses for sale for him to choose from. I’m hoping he’ll see the wisdom of the Red Bridge area for his particular needs. But back to the purpose of this post. Can Kansas City & St. Louis really get along? Let’s look back at some of the ways the two cities have had issues.
- When money is needed for stadiums Jefferson City gives St. Louis partial funding (some of that Kansas City area taxpayer money) and Kansas City is rejected and has to raise all their funding from it’s citizens.
- When money is needed to keep the bus systems running in both cities St. Louis gets several million while Kansas City is told there is no more money.
- St. Louis gets a really cool arch built by the federal government. Kansas City, well, no arch.
So as you can see St. Louis usually gets the better of things and native Kansas City Missourians have what you might call deep seeded reservations about the city to the east. Of course, me being from Kansas, I think it’s all really pretty funny. So in the end, that’s probably why Matt and I can get along.
But oh, did I forget to mention the 1985 World Series? Kansas City got the better of that one, didn’t we. Even came back from 3 games to one. Ha!
Filed under City Comparisons
BBQ Capital | Kansas City Real Estate Investing 