From our friends over at CNNMoney is this link to a retirement calculator.
Real estate investing can help you to achieve your Retirement Worth Having. But how much money is that going to take to mix in with your personal plans?
Saturday, June 30, 2007
From our friends over at CNNMoney is this link to a retirement calculator.
Friday, June 29, 2007
Congratulations go out to Julian Wright out of Kansas University. The two-year Jayhawk out of Chicago becomes another Kansas millionaire.
Of course, the NCAA in it's infinite wisdom will count Julian against Kansas' graduation rates. After all, in their eyes it would be better for him to get his diploma so that he can earn $43,000/yr rather than the guaranteed $1,449,300 he'll make this year, the guaranteed $1,558,000 he'll make the next season and the contracted additional $3M plus he'll be eligible for in years three and four.
Yes, I know this has nothing to do with Kansas City real estate or real estate investing and there is the possibility Missouri fans will hate me...but I do love my Kansas Jayhawks.
I've been reading these two blogs for a while. And I'd like to make sure that you are aware of them. Add them to your RSS like hopefully you've added mine.Lenderama
I've been invited to contribute to this blog concerning the interests of the mortgage professionals out there.
In Wednesday's post I wrote about how inspections and repairs can lead you down roads you didn't know you were going to go down. The same can be true when the repairs aren't done to the workman like quality that they should be.
I just want to give a special shout out to A-Team Construction and specifically Stan Withers who bailed me out on such short notice.
On the re-inspect some of the repair items were not done or not done in a quality fashion. And this with less than 48 hours to go. Without the help of Stan we would not be closing on the home an hour and eleven minutes from now.
You can reach A-Team Construction at 816.835.2248. They do basement and kitchen remodels, design and build, and commercial tenant finishes.
How is that for a free ad in return for great, last minute service?
Wednesday, June 27, 2007
I am fully aware that there are readers of this blog that believe selling real estate is no big deal. And in the hotter market earlier this decade and on the right transaction, you were right.
But I've always said this: "I don't get paid for selling a place so much as I get paid for getting it closed."
Right now I'm in the middle of a transaction that has been one thing after the other on the repairs. What started out as a simple repair has uncovered safety issues, code violations and antiquated equipment for which the parts could only be found in one place.
Of course, locating the parts was no easy task and the shipping of them to make the closing deadline is as expensive as the parts themselves. In the grand scheme of your life, the few extra hundred dollars the repairs are costing are small in comparison. But when you first learn you are going to have to spend those dollars emotions can boil to the top.
Real estate agents can bring experience and trained negotiating skills. They can know when to negotiate and when not to. (Yes, there is a time not to.) Real estate agents bring knowledge of markets and market trends.
And one of the most important things and agent can do is bring his experience as a filter. A liaison if you will. Turning a "$%^& NO" into a "here's what I think we can do about this." An agent can be the calm in the storm. The clear thinker.
Think about that.
Tuesday, June 26, 2007
From today's Kansas City Star: KC faces housing surplus
An ongoing conversation in the field of real estate investing is the working relationship between the real estate agent and the rehab investor. Or flipper as some of you would say. Christopher Smith of Equity Scout wrote an article titled Realtors and Investors :: Are you speaking the same language?
Monday, June 25, 2007
This post has nothing to do with real estate or investing. In fact, it has nothing to do with Kansas City. Rather, it's simply to point out that once in a while evil lawyers can be defeated with their own nonsense.
Posted by Chris Lengquist at 3:14 PM
Today I would like to fully introduce you to a real estate investor client of mine even though modesty on his part has restricted me giving you his full name. I have worked for Al S. for a little longer than a year now.
When you read his answers to these real estate investing questions please notice that his whole economic picture today is more comfortable than most people's. And he didn't own hundreds of income properties. In fact, he owned fewer than ten rental homes.
Q: How long have you been investing in real estate? 50 years.
Q: What made you purchase your first house? Upon being discharged from Air Force after the Korean War I got married and used the GI Bill to buy a duplex and lived in one side. The tenant advised me that I should not buy the place because it was a dump and not worth the price they were asking. Well, he bought the dump for me with his rent payments and I moved up to a nicer dump while he remained living there paying rent for many more years.
Q: Did you know what you were doing or did you just jump in? Owning rental income property runs in my family. My dad supplemented his seasonal job with income from rental property income. My brother and sister also became involved in rental properties. Both of them have been more aggressive investors than I. My sister owned a city block of rentals in New York and my brother owned several nice Westchester New York properties. Both have since divested their holdings to spend more time traveling.I am also in the process of doing the same.
Q: What has been your biggest headache over the years? Not buying more properties. Like the saying goes "Get lots when your young".
Q: Were there months you were worried you would not have enough money? Fortunately by picking good properties and selecting good tenants the cash flow was usually enough to cover expenses. There was one occasion when a property I purchase with owner financing at 7% had a 5 year balloon payment due. Refinancing rates had climbed to 19 % at the time the balloon payment was due. The rental income would not support such an interest rate so my offer was to let the former owner take the property back. He thought that he would prefer to continue collecting 7% for another 5 years as better deal for both of us. When the next balloon date arrived, interest rates returned to a reasonable level allowing me to refinance through a bank.
Q: Name your biggest reward over the years of your investing. Good cash flow; good appreciation; good tax shelter to save income taxes on my day job ; plus providing a goods service to good people in need of a good place to live.
Q: Did you realize what your income properties would be worth some day? There was always the fear that property values might drop as well as the wish that they would go up, up and away. Just like any other risk-reward adventure there is excitement in taking the risk. Real Estate has been one of my better investments from both a financial as well as a feeling of personal accomplishment. My other investments, such as stocks, have had some financial results but lacked the personal feeling of accomplishment because the results were the actions of others. Owning,managing and controlling an entire investment, like a real estate investment, is an entrepreneurial adventure.
Q: You chose to just liquidate your properties. Why did you decide to not utilize the IRC 1031 tax deferred exchange? 1031 exchanges are a good tool to use to make full utilization of sales proceeds by delaying the tax consequences to a later date. But like the saying goes "you can pay Uncle Sam now or pay uncle Sam later, but you will pay Uncle Sam." I chose to pay Uncle Sam now and taking what was left over to enjoy traveling and eating good meals while I am young enough to do so.
Saturday, June 23, 2007
While scanning for real estate investment property that make sense I came across two duplexes in Blue Springs, Missouri that are for sale. They have to be sold as a package.
I have a client with a duplex right down the street so I am very familiar. Love the neighborhood. Attracts good tenants and has good vacancy rates.
Contact me to find out more about these two income properties.
Friday, June 22, 2007
According to this link from Yahoo! I really am smarter than everybody else. Er, check that. At least smarter than my siblings. Er, well, I'm the smartest in my own mind... :)
Posted by Chris Lengquist at 7:37 PM
I received this email from KCRAR. That's Kansas City Regional Association of REALTORS. I am in full agreement that we do not want, nor do we need rental licensing in Kansas City, MO for investment property owners and/or their rental properties.
Real estate investing can be a humbling business. Stray to far from sound economic guidelines and sooner or later, it seems, you will pay the price. Then what do you do?
Thursday, June 21, 2007
I have to say I'm a little confused. I keep hearing on the television and some other real estate agents that the housing market is slowing down. Why am I getting busier? Oh, I'm not complaining. No, no, no. I'm just saying that it seems to getting busier, at least for me.
A fellow agent of mine let me know she has a developer out in Shawnee that is going to be releasing 95 (I think that was the number) build able lots this weekend. If you are a builder or investor interested in such a project, let me know.
If you are looking for homes that can be purchased at 50% of ARV, please no more calls. I have enough people on my list unhappy with me as it is. Folks, these properties don't grow on trees. Now if you are looking for Rehab & Hold properties or rental homes or longer term investment properties...opportunities abound. Buy & Hold real estate investing is where to go, now. The short term gains are tougher to find.
Wednesday, June 20, 2007
Hey folks. There must be 200 BBQ's in Kansas City. Or Bar-b-q's. Or Barbeques. See how confusing it can be.
Anyway, here is a map to my favorites. Now, if you aren't on the map all you need to do is send me a gift certificate for $25 to come try yours! :) Just kidding. It's my goal in life to get to as many as I can before I die. Of course, eating all that barbeque might make that come sooner than later.
But what a way to go. Anyway, these are places I frequent. Obviously, living in Olathe, the maps is skewed towards where I'm at. Anyway, ENJOY!
Yesterday over at my other blog on ActiveRain I authored a post titled How Are Your Current Real Estate Investments Going? To get background for this post it might be wise and go and read that post.
- You are no longer maximizing your leverage
- If you are properly bifurcating your depreciation you have already exhausted your personal property portion (with the exception of new personal property added)
Leverage was discussed there. We'll talk about your depreciation here.
Bifurcate is just a $10 word for cost segregation. There are actually 4 ways you can segregate your depreciation on your investment property;
- Land (which of course doesn't depreciate)
- Personal Property (over 5 years)
- Land Improvements (over 15 years)
- Building (over 27.5 years)
Why is that a big deal? Because if you have broken out your costs you will probably find that personal property depreciation accounts for between 40% - 50% of your yearly depreciation total. At least at first.
Now as you change carpet, appliances, lighting fixtures and the like you can start a new 5 year schedule on those items. But about 1/2 of your beginning depreciation number is now gone. It's not coming back.
In addition, you are also 25% of the way through your building depreciation. That investment property that used to give you overall returns of 22%-24% is now generating overall returns of 13%-15%. And it will continue to slide down from there. No matter how much your cash flow continues to build. (Well, there might be exceptions that I haven't seen.)
It could be that you just don't want to change houses or there are sentimental reasons you don't want to exchange or you are just happy with the money you have. But if you are still in the growth phase and you are looking to maximize that Retirement Worth Having, you may wish to consider sitting down with knowledgeable investment real estate agent or tax planner and figure out what to do next.
This has nothing to do with real estate. But it's just as important. Bill Self of the Kansas Jayhawks just secured his first big time recruit for the 2008-2009 season. We're losing 5 seniors in 2008 as well as a couple (probably) players to the NBA. 2008-2009 will be young, young squad. But stocked with blue chippers? I hope so.
Tuesday, June 19, 2007
Saturday, June 16, 2007
This was found on MSN. I'm in a hurry and will read it later in it's entirety. But the overview looked like something of interest for this real estate investing blog.
Why should you hire a property manager?
Friday, June 15, 2007
Yesterday evening Jeff Brown over at Bawldguy wrote a post titled Your First Real Estate Investment - Often The Most Critical. As always, it is an excellent resource for the real estate investor.
Midwest Airlines is being taken over by Air-Tran. As a Kansas Citian, this isn't good news. Midwest has been a good civic partner for Kansas City. Air-Tran? Can you say Southwest Airlines without any of the status?
The foreclosure market is at historic levels, on the high side. And look which states are causing the problem. We have quite a few here, but we are in much better shape in the Greater Kansas City area.
Thursday, June 14, 2007
Kansas City's Rhythm & Ribs is happening this weekend. If you like the Blues, Jazz and BBQ, you might want to think about visiting Kansas City's historic 18th & Vine district. Pat Matheny, George Benson & Al Jarreau. Need I say more? See you there.
Just so you'll keep up to date: It's only 120 more days until Midnight Madness. What's Midnight Madness? It's when the NCAA allows college basketball teams to begin practicing. Ahh. Soon my beloved Jayhawks will be taking the floor again!
Wednesday, June 13, 2007
- $175,000 duplex in play here
- 20% down payment ($35,000)
- Financing based on $140,000
- 6.95% interest, amortized over thirty years
- 5% appreciation (on average)
- Rents are $1,500/mo. (not escalating)
- Expenses are $6,920/yr and include property management, taxes, insurance, a healthy reserve fund and 5% vacancy
With the conventional financing for our sample rental duplex the monthly debt service will be $926.73. Or $11,121 per year. Plugging in our numbers from above we know that our formula goes something like:
11,121 Debt Service
( 41) yr Cash Flow Before Taxes.
So the property is paying for itself. And that's great! California real estate investors would kill for these numbers. Same is true in Florida and Washington and New York.
So when we measure only the first 2 Benefit we have a gain $10,071.
Interest Only Financing
With interest only financing for our sample duplex the monthly debt service will be $810.83/mo. Or $9,730/yr. Using the exact same formula from above (we'll start from the NOI) will look something like this:
9,723 Debt Service
1,357 Cash Flow Before Taxes
So now this property is generating a fairly substantial monthly cash flow. At the end of the 6 year holding period the house will still be worth the same as our conventional financing house. Let us take the 6 years CFBT and we'll show $8,142. We cannot add to that any principal reduction so the entire benefit from the first 2 Benefits only is $8,142.
If you were to take those same monies that you put down for a 80% ltv on your interest only loan and bought two houses with 90% ltv on interest only loans I bet you would find a completely different story.
Now that you know how to do it. Why don't you work out the numbers and let me know what you found.
Tuesday, June 12, 2007
This post if for home owners and investment property owners alike. You need to be keenly aware of how your home is perceived by others when it is on the market. I'm going to give a couple of stories to illustrate my point.
Every once in a while change out a light fixture or two. Paint a room. Change the kitchen cabinet pulls to reflect today's tastes. These sound like little things. But consciously or unconsciously, buyers recognize the care.
Posted by Chris Lengquist at 7:53 AM
Monday, June 11, 2007
I love working with residential investment property. But to keep myself fresh I also really enjoy working with young home buyers. Especially, first time home buyers.
This weekend I had the opportunity to work with a young couple that was referred to me. The excitement in their eyes and nervousness in their signature is something that always takes me back to my first house.
To the real estate agents out there, don't forget about this market segment. It reminds you of the pure joy of our business. To young home buyers out there, get started. People do everyday. It's scary. But it's doable. And if you manage your finances properly, you will find it tough to lose.
Posted by Chris Lengquist at 3:12 PM
Saturday, June 09, 2007
What? A rational article from the "media" about real estate values? Congratulations to Yahoo! for using their heads.
Kansas City isn't going through a negative growth period. In fact, many areas of Kansas City still have very fair to reasonable growth. A couple areas are doing very nicely, thank you. The sky isn't falling. Real estate was never as good or as easy as the media were making it out to be a couple of years ago.
Friday, June 08, 2007
Would you believe me if I told you there was a place on this planet Earth, right here in the United States, where the 1% Rule was still in play when considering residential real estate investing?
There is. And those of you that know me well know where it might be. I'm working on plans to help my real estate investor clients to know when and where to put their hard earned investment capital.
For those of you unfamiliar with the 1% Rule it goes something like this. Buy your income property or rental houses or investment homes (whatever you call them) where the rent is 1% of the sales price. In other words, if the home costs $100,000 then the rents would be $1,000 per month.
A fantasy you say? If I lived in California or Washington, DC or New York or Florida and owned income property there I would be skeptical, as well. But there are such places here in the Heartland.
Kansas City is a great place to invest in income housing. No question about it. But there are a couple of other jewels out there where growth is STILL happening and rents are strong. More on this as things come closer to finalization.
Posted by Chris Lengquist at 7:57 AM
Thursday, June 07, 2007
I try not to pimp my listings too badly on this blog. But this one I like so much I want it out there.
In the heart of Overland Park this duplex features 2 bedrooms and 1 bath on each side. (One of the baths completely remodeled and updated. Looks great!) Hardwood floors run throughout. Some are bare and look good and some is carpeted.
Rent on one side is from a long term tenant at $700/mo. Rent on the vacant side is asking $780/mo. He's had good traffic there but rejected a couple applicants. Owner wants to rent the storage space in shared garage for a period of 1 year for an additional $75/mo.
Expenses include taxes at about $1,769/yr and insurance at $586.41/yr. (I would expect that the insurance will go up significantly since he's owned it quite a while.) There are no HOA's and the owner has taken care of the lawn himself.
This brick duplex is one of four that share a courtyard. Previous knowledge allows me to let you know that the other 3 all have owner occupants living in one side. So you know the upkeep is there. I sold the one catercorner to this one last summer for $166,900 even though it didn't have an updated bath or fresh, professional interior painting.
Give me a call, email or pony express letter if you would like more information on this Overland Park, Kansas duplex that is for sale.
Here are my opinions on the current Kansas City investment market for real estate:
Buy & Holds - This market is in great shape. There are several values out there right now and many, many homes priced at a realistic market value based on their community. I'm high on duplexes and fourplexes and lukewarm on single family homes. Several apartments for sale right now have grabbed my attention, as well. I'm forecasting a 5-7 year hold period for maximum use of depreciation, appreciation and then an IRC 1031 exchange.
Rehab Properties/Flipping - This market scares me at this time. Sure, there are some good properties out there. I just haven't seen them. Many foreclosures right now are aborted rehab situations. Not enough appreciation and housing demand to make this a lucrative enterprise at this time.
Buy, Rehab & Hold - I'm very high on this strategy. Very high. There are many a house for sale right now that are value priced but not lean enough to do buy, rehab, and sell. But if you can buy, rehab and have $12,000 of equity before you hire a property manager and put a renter in, why not?
Rental Market - In many parts of the city the rental market is extremely strong. Only a few pockets of weakness that I have seen. Most of the property managers I speak to have the same opinion. Gone are the days of long vacancies and rental incentives to get people in. Unless you are a pioneer on the outskirts of town. Then you are probably running high vacancy rates and banking on end-game appreciation. I'm not thrilled with that idea as housing growth (building) has greatly slowed.
Lease Option Market - I do very few of these. But three different real estate investors I know have successfully entered into lease option agreements with their "tenants" within the last 45 days. So there are people out there looking.
Personal Note: I read yesterday in USA Today that many real estate investors are leaving real estate and going back into stocks. Finally in the article, they distinguished between the Buy & Hold investor and the real estate speculator. They also based all of real estate's benefits on appreciation only.
Don't forget there are 4 Benefits to real estate investing:
- Cash Flow Before Taxes
- Principal Reduction
Wednesday, June 06, 2007
Kansas City, geographically, is a huge area. Huge. Don't believe me? Check this out:
Kansas City Metropolitan Area*
- Population 1,967,405
- 27th largest metro (by population)
- Area covered 5,406 square miles
Los Angeles Metropolitan Area*
- Population 12,943,547
- 2nd largest metro (by population)
- Area covered 4,850 square miles
Wow! What a difference. Los Angeles has 6.5 times the amount of people and less land to put them in!
So What Does All This Mean To You?
It means, quite simply, that you need an expert when you are buying or selling a home in the Kansas City area. I live in Olathe and I see signs from agents who live in the Northland (north of the Missouri River) listing homes here. Why? Are they experts in Olathe? I see Olathe agents listing homes in Blue Springs. That is 34 miles away! How much of an expert can you be?
I do drive around all day because I'm comparing investment numbers to investment numbers. So to me and my clients it really doesn't matter where I find them good values. Investors are looking for return on their investments. Not convenience of shopping centers and etc. (Yes, I know that counts, but not as much as ROI.)
Occasionally, I will list regular single family homes. But it better be in an area that I am intimately familiar with. Otherwise, you should be looking for another agent that will be a good marketer for your situation.
I Can Refer You To Good LOCAL Agents
Because I get all around town working with income property I meet a lot of different real estate agents with a lot of different companies. If you are looking to buy or sell a home over in Lee's Summit feel free to give me a call. I can refer you to a good house agent over there. Same is true for the Northland and Wyandotte County.
As the real estat market continues to shake out and the part time real estate agents fall away it will be more and more important for the consumer to choose their agent carefully.
*Statistical information found on Wikipedia
This girl went to the same high school I did. She was abducted the other night and it has turned into national news. If you see her, please contact the authorities of Overland Park, Kansas.
You can find out all you need to know at FindKelsey.com.
Posted by Chris Lengquist at 9:08 AM
Monday, June 04, 2007
Lording the Land: Doubters Inc. (or: Should you Incorporate?)
Take your time to go over and read this explanation on LLC vs sole proprietorship. I seem to stand alone on my conviction to have not formed an LLC for me and my property. At least I know there is someone else out there that thinks along the same lines as I do.
I found this blogger through the Carnival of Real Estate Investing on Equity Scout. Take a look.
Young people are learning to invest in real estate. Young people today seem to be learning a lot faster than my generation. True, I'm only 42. So it's not like I'm a geezer, yet. But when I am working with these 24, 25, 26 & 27 year old clients I feel like a proud papa.
Friday, June 01, 2007
Here are some blog posts worth reading:
Investors vs. Speculators::Which One are You?
1031 Tax Deferred Exchanges-200% Rule
So You've Decided To Buy A Property With A Friend...
I ran into this guy the other day at the post office. If you like to Bar-b-q you are going to want to check out this site. And you know we Kansas Citians love to BBQ. American Barbecue Systems.
Isn't it amazing how many different ways there are to say Bar-b-q. Let us list some:
I guess it's appropriate since there are so many ways to BBQ. Memphis thinks thinks they are the best. (And they are good.) Carolina thinks they are the best. (I don't care for vinegar and cabbage on my sandwich, thank you.) Texas...well Texas has a Texas sized ego about everything. But here in Kansas City, we have a little of each of those. We're the Constantinople of BBQ.
And remember, grilling isn't BBQ. It's grilling. BBQ is low and slow.
I've got a line on some pre-construction fourplexes out in Manhattan, KS if anyone wants any information.
I'm noticing the rental market get stronger and stronger. My prediction from about 18 months ago is coming to fruition as lending standards are tightening and foreclosed homeowners are moving back into the rental market. Add to that slowing building and we should be nearing the bottom of the real estate cycle, here in Kansas City at any rate, in the next 12-24 months. Then things should slowly start to edge back up.
But we're not too bad now, relative to the rest of the country. At least our appreciation is 2%-3% instead of depreciation!
My son leaves for the South Pacific for 21 days on Tuesday. I'm so envious of his trip.