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

September 19, 2007 · 9:02 pm

How Does The Fed Dropping Rates Help The Real Estate Investor?

I was going to be cute or obnoxious here and say that the Fed dropping rates a half point doesn’t really have too much bearing on the long term real estate investor. But that simply would not be true, would it?

But my point would be made, all the same.

There are at least a dozen bloggers smarter than me on the subject of the Fed and it’s relationships to the overall economy. I’m just a Kansas Jayhawk who works with real estate investment property day in and day out.

Interest rates go up. Interest rates go down. Unemployment rates go up. Unemployment rates go down. Vacancies go up. Vacancies go down.

The point? That owning real estate investment property is not a short term deal. (Yes. Yes. I know flipping is. But I’m not talking about that.) It’s finding the RIGHT property that will meet your criteria today. Cash flow before taxes. Expected appreciation. Expected vacancies and rent rates, etc.

Here in Kansas City I really do not see any reason to worry. If you are buying for that 5-7 year trade-in window why get too worried about the daily fluctuations of interest rates? No. I’m not advocating careless disregard. But if you keep waiting for them to drop further you may miss a rental property that was worth thousands more.

Conversely, if you rush to buy an income property because you are terrified rates will go back up at the next meeting you may buy a rental property that would have been better left to someone else.

Follow these headlines carefully. But keep you eyes focused clearly on the goal. Then follow your plan.

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Filed under Personal Real Estate Opinions

September 19, 2007 · 11:47 am

Running A Test Here: Nothing To Do With Investing

Copyritin’ Policy– RE Revealed has a style of its own and while most people will be able to tell that you’ve stolen material, others are dense so you mayget away with it for a minute or two. Any text from RE Revealed regurgitated elsewhere is considered a copyright violation and is subject to the guillotine. In seriousness, all material on RE Revealed is considered exclusive intellectual property of each author and any publication of content originating from RE Revealed without expressed written consent from RERevealed.com is forbidden and any reuse will be found. Brief quotations with a trackback to RERevealed.com making the source of the quote clear is permitted. Long story short- we have Violator Sniffing Dogs all over the Interweb and we will find you, expose you and likely sue you for copyright violation. Just move on, pirate!

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September 19, 2007 · 8:17 am

Net Operating Income aka NOI

Yesterday I posted a short article titled Do You Like To Play Russian Roulette? And I joked that you don’t want to do a financial analysis of your potential investment properties if you like to live life on the edge.

Of course, I was joking. (Though some didn’t seem to think it was funny based on an email I received.) You do need to do a financial analysis of EVERY property you are considering for your investment portfolio. Every one of them.

Net Operating Income can be the key number when working your financial analysis for these rental houses. How do you determine Net Operating Income (NOI)?

Annual Rent
–
Vacancies
=
Gross Operating Income
–
Expenses
=
Net Operating Income

Pretty simple formula, huh? Wait. How do you know what numbers to plug in? It’s critical you know the actual rent values of that rental property AND that neighborhood. It’s critical you can determine the vacancy rate. It’s critical that you know each and every expense.

What expenses should be included? Anything that costs you money to run that home. Insurance, real estate taxes, repairs, HOA dues, management, utilities, advertising, supplies, mileage, signs, miscellaneous. Get the picture?

Once you have all of those numbers (ever heard of a Schedule E?) then you can get down to putting pencil to paper.

Have fun.

2 Comments

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

September 18, 2007 · 7:14 am

Do You Like To Play Russian Roulette?

“The rent covers my PITI so I bought it.”

“They had just reduced the property $15,000 so we snatched it up. I mean, that’s a deal, right?”

“Can’t miss. All it needs is carpet and paint.”

Do you like to play Russian Roulette? Then maybe real estate investing is for you. Using the above mentioned “can’t miss” strategies is an excellent way to simulate playing Russian Roulette.

Spin the chamber, pull the trigger and see if it worked out!

There’s really nothing to gain because you already had your life. Oh, sure. There is a thrill to be had. But this is a classic case of High Risk, Low Reward.

If you are of the gambling persuasion I would urge you NOT to run a financial analysis on your next real estate investment purchase. Live life on the edge. Go ahead. Pull the trigger.

3 Comments

Filed under Real Estate Investing

September 17, 2007 · 7:26 am

What Is A Real Estate Investor?

After having read the Kansas City Star’s feature in the business section this weekend on real estate investors I have a statement I’d like to make:

Not all real estate investors are in the rehab business.

Overall, I thought the Star’s feature was fair and somewhat balanced. It told of the underside of rehabbing and it gave consumers other avenues they may wish to explore without having to sell their house at 60% of ARV.

But it rubs me the wrong way when it’s stated unceasingly that real estate investors rehab. Not all do. In fact, maybe less than 5% of my client base does. Not that I don’t get calls every day asking me to help a rehabber. I just don’t choose to chase those rabbit trails. I leave that to my trusty basset hound.

I understand the media’s fascination with rehabbing. It’s tangible. It’s easy to see the differences between start and finish and it is a relatively easy profession to get into…at least more so than doctoring and lawyering. It’s just not sexy or practical to follow the passive real estate investor from age 32 to 60 watching him/her exchange properties every 6-8 years and living a modest lifestyle.

But guess where I’ve found out where the real, long term money is?

Spotlight On Professional Housing Investors

Today’s Kansas City Star Business Section has a caption at the top regarding what is coming in Sunday’s MoneyWise section:

The nation’s rising tide of mortgage delinquencies and foreclosures has put a spotlight on professional housing investors.

That’s the entire lead in. I’ll be curious to see where they go with this. It that an implication or are they hinting at opportunity? Seems to me most of the foreclosures having to do with real estate investments that I have seen have been amateurish mistakes. Amateurish mistakes made by self-proclaimed “professionals.”

Thoughts Heading Into The Weekend

As I get busier my focus gets narrower when it comes to Kansas City real estate investing. I am spending a week or two putting together a list of my core values. Cliche I know. But telling, never-the-less. So look for that coming soon.

To me, it’s important that you know who I am, what I stand for and what you can expect from me. And therefore, what I should expect from you. The more simpatico we are going into a working relationship the more successful your transaction will be.

***

I had a listing I had seen before emailed to me with a 16.2% overnight reduction in price. I’m showing it here in about half an hour. Let me remind you of what I’ve been saying…

This winter will be easy pickings for the real estate investor who;

Has at least 10% cash on hand.
Has a good to great credit score. (680+)
Is ready to act now.
Can be tolerant of a couple months vacancy over the winter, if necessary.

***

Nothing to do with real estate investing, but my 12 year old son who has never played football before is now starting at left guard and coaches are telling me how fantastic his practices are. This kid needs to be great at something. Perhaps this is it?

***

I am re-reading Building Wealth One House At A Time by John Schaub. I am still really impressed with it.

***

You can never have too many good contractors to turn to. Seems like they flake out after a period of time. Keep a reserve.

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