Tuesday, July 31, 2007

How To Over-Spend On An Income Property

Last week I had a gentleman that belongs to the Kansas City Breakfast Club ask me if I could go to an auction in his place to see if he could purchase this home down the street from his business at a reasonable price.

The potential buyer had to be out of town for some family business and wanted to pick up the home pictured left. The home was being auctioned by Jeff Cates of Cates Auction.

Now in my mind, the home needed;

  • New windows.
  • Vinyl siding repairs.
  • Exterior drainage issues resolved.
  • New garage doors.
  • All flooring replaced.
  • A complete kitchen redo.
  • Two complete bathroom redos.
  • All new interior paint.
  • Probably termite treatments.
  • Exterior trim paint and wood rot repairs.

And there was a host of other small issues. When I arrived at the auction 20 minutes early I found it to be professionally staged. And the auction team was working the crowd trying to generate a good opening bid and discover the bid strategies of those attending. Hey, that's their job and to their credit they were doing a great job.


I didn't talk too much to the other potential bidders. I just moseyed around with my cell phone to my ear and listened to private conversations. The two bidders I could hear both had about the same strategy as what I had recommended. Buy this house in the mid-sixtys, MAX. The ARV was capped at about $105-$110,000 in a good market. This neighborhood is a bit static, however, so I figured a $100,000 ARV.

Oh the excitement builds as the auction draws near. And as the auctioneer begins his bidding song that we've all heard he starts at $100,000. "Who will give me $90,000? Start me at $90,000 for this fine home. Look at the comps people. Who will give me eighty, do I hear eighty? Eighty, eighty, eighty. Seventy-five, who will give me seventy-five?" (note: not verbatim...I did not record.)

"Thank you, sir. Seventy five do I hear eighty?"

What??? With that I noticed no fewer than about 4 bidders just turn and walk away. I should have, but I just had to know if anyone else would drive the price higher. Five minutes later, it was all over. The auctioneer congratulated the savvy real estate investor who had bid such a high price that no one else even bothered.

You know, this house was going to be a fix and rent for my client. I guess he could have gone to $70,000 and still had it be worth his troubles to do the work. But $75,000 plus a 10% buyer premium? No, thank you.

Did the gentleman not know his numbers? Or was he planning on fixing it all by himself? (He was 88 years old! So I doubt it.) Or did he get caught up in the excitement of an auction? I don't know. I didn't ask. All I know is I wouldn't let my clients buy at that price.

The auctioneers did their job. They sold the house quickly and for more than I would have recommended. Could I have put it on the market at $85,000 and gotten it sold? Maybe. There's always someone who doesn't do their numbers.

Don't let that somebody be you.

Monday, July 30, 2007

Lording the Land: Indicator of Success #3

Lording the Land: Indicator of Success #3

Click the link for a good read.

Why You Need A Real Estate Investing Specialist In Kansas City

My wife has Graves Disease. That's Hypothyroidism. Basically, her thyroid will kill her if not monitored. It's changed her personality and given her a whole host of symptoms to deal with.

What does this have to do with your choice of REALTOR when you are involved in real estate investing? It really doesn't. But it does provide another great teaching point.

***

A couple month's back my wife was really out of sorts and out of character. Her doctor didn't know what was going on and so I sent her to mine. To my doctor's credit she picked up right away that this was probably Graves Disease. She prescribed the right medicine and recommended a specialist.

We saw that specialist today. He really made us feel comfortable. And as I sat there listening to him speak I was prepared for everything. Marie and I had spent hours on the internet learning about Graves Disease. The good, the bad and the ugly.

What he said was NO SURPRISE to me at all. I had already read about it. Heck, I even knew before he said it what medicines he was going to prescribe and what the treatment plan would look like.

Then he said it. My doctor had prescribed the right medicine, but he was upping the dose 600%. I said six hundred percent!

Now, let's understand each other. I'm not mad at my doctor. She is a general practitioner who immediately recognized that what the problem was and immediately ran tests. As soon as her suspicions were confirmed she sent us to a specialist. That's her job. And she did it well.

Again, Chris, what does this have to do with real estate investing? Everything.

I'm not against you thinking you know as much as a real estate professional when it comes to buying or selling a home. I realize you've done it once or twice or six times. (Sometimes I have six closings in a month.) And I know you've read four books on owning and managing income property.

I'm also fully aware that you belong to two real estate investing clubs, have an uncle that owns two rental homes and attended a short sales seminar that was put on for only $395.

But damn it, when my wife's health and well being is at stake I'm going to the specialist. He did not say one thing I didn't research on the internet. Well, check that. If I had read on the internet and then prescribed my wife medicine I probably wouldn't have gotten the dosage right. And maybe I would have missed a symptom or two and had the wrong disease altogether.

What does he charge? Who cares? Can I find someone to do it cheaper? Who cares? Am I going to argue with him about everything?

Now, about your finances. Do you want to wing it from something you researched on the internet? Or do you think in the long run, at the very least, that you would be better off working with someone who specializes in the real estate field with a double major concerning real estate investments?

If you are outside of Kansas City just count this as the rantings of an evil REALTOR only bent on making a commission. But I beg you, if you are in Kansas City and interested in real estate investing, please seek my help. Don't gamble your future. I will cost you some money. Money well spent.

McGonigle's Market...And BBQ.

When in Kansas City and on Ward Parkway, you may want to stop at McGonigle's Market. Located at the intersection of 79th Street and Ward Parkway McGonigle's is a great place to pick up some bar-b-q for lunch.

The pit is located just outside the market and the brisket that I had was fantastic. And just south of the parking lot you will find picnic tables in which to enjoy the sandwich or ribs when the days are nice.

Inside the market you will find all sorts of prime meats and groceries. Give it a try. You won't be disappointed.



Rested, Relaxed & Back To Work With Kansas City Real Estate

Thank you to all my loyal readers and clients who allowed me a few days away! I was beginning to feel a little like Clark Griswold when he got to Wally World.

My fuse had grown short and I was beginning to dread phone calls, emails and blogs. You know, burn out. It's not just limited to the real estate profession. It can happen to anyone. Especially this Type A personality who doesn't know when to turn off his phone and leave the computer alone.

My brother-in-law was retiring from the United States Navy after 20 years of service. In today's times I figured that was quite an accomplishment. So we loaded up the van and left for four days down to Ft. Worth, Texas to their local Naval Air Station.

Congratulations, Gary. Job well done.

While we were there we had quite a bit of fun, too. My wife and other brother and sister in law went out to Ft. Worth's Stock Yards for a little nightlife. And while I enjoyed myself there my wife knew I was out of place. Cows are good for eating and cowboys are great in movies, but...

We wandered around after a couple beers there in the Stock Yards and someone told me to go down to the downtown district. What we found there was more to my liking. It's what Marie and I figure the Kansas City Power & Light District will be like when it's up and running.

***

One of the reasons I work so hard is pictured to the left. Nearly 10 years old and full of mischief and happiness. The whole family, extended and all, got to go to this real nice little water park. A good time was had by all! And I got more than a little sunburned!

It was fun not answering the phone and pretending to be a kid. Racing my wife down the water slides reminded me of another time.

Work hard...and never forget why.

***

The best part about the trip was learning that my business doesn't always need me there. My clients understood the need to get away for a few days. And Brent Sharp, a quality associate of mine, stepped into the gap and took care of a couple of issues for me while I was away. I liked learning that I'm not nearly as indispensable as I think I am. (That Type A thing, again.)

***



For those of you that have never seen the power and awesomeness of a Kansas thunderstorm, here's what the leading edge can look like. Keep in mind that this was nothing to worry about. Why, because the sky wasn't green and "bubbly." Any true Kansan and Oklahoman will tell you there is nothing to worry about, generally, until the sky turns green. Then, look out.

Anyway, thanks for the few days off. Now I'm ready to get back to work for you and your Kansas City real estate needs.

Thursday, July 26, 2007

What To Expect From Your REALTOR Regarding Your Real Estate Investments

Yesterday I wrote a post titled Understanding Your REALTOR's Role When Buying & Selling Real Estate. And for that post I concentrated mostly on the duties of your REALTOR when you are a regular house buyer/seller.


But what if you are an investor? What additional duties would you require from your real estate investing professional to help you stay out in front of the pack?
Here are a few things I think both you and your professional should be proficient at to help you maximize your investment.
Income and Expense Evaluations - This is critical. You will not have a full understanding of how much money you will make or lose on a property until you understand what is coming in and what will be going out. Everything in real estate investing revolves around the Net Operating Income. Without a true knowledge of that you are sunk from the start.
Return Comparables, Not Neighborhood Comparables - Your real estate agent should be able to calculate all measures of return important to you to accurately measure one property against another. Remember, you are buying future returns when you buy income property. The house or duplex is just the vehicle you choose.
Negotiations - This is where it can get sticky. When you are buying duplexes and apartments you are almost always buying them from other real estate investors. They are savvy. They've been to the dance before. They will know what they want and they read all the same negotiation books you read. Just today I had a phone call from the seller-agent of a duplex my clients made a bid on. He was probing and probing trying to get to the root of motivation. Once he has motivation, he has leverage. Finally, I advised him that I understood what he was doing but that I was also a professional. He chuckled and understood.
Now I don't blame him for trying. I do, as well, on every transaction. Sometimes I run across agents that will give away the store. But not usually. Still, I try.
Take these three areas to heart. And your real estate investing career will go a lot smoother!

Wednesday, July 25, 2007

Yellowstone Bison

Here is something you don't see everyday...

Understanding Your REALTOR's Role When Buying or Selling Real Estate

No question about it. There is a lot of confusion over what exactly your real estate agent should be doing for you when you are purchasing or selling property. So if I may...

Regular House Agent's Role

A regular house agent's role is different than an investment property agent's role. Today we will talk about the "regular" house agent. And before we get started you need to know that all real estate agents are independent contractors. They have a lot of freedom (within their brokerage's framework) in how they run their businesses. So while these are my guidelines that I think you should consider, you may find an agent who works differently.

What a buyer's agent does do:

  • sift through homes for you that meet your needs.
  • preview homes for you to save your time.
  • help you to narrow the field to two or three homes.
  • learn as much as she can regarding seller's motivation.
  • advise as to negotiation tactics and offer opinions.
  • keep lines of communication open at all times during negotiations.
  • recommend quality inspectors and title company.
  • keep you on track to satisfy contract demands.
  • follow up with seller's agent to make sure seller is following contract demands.
  • review Settlement Statement for compliance and/or errors.
  • give you the keys to the house.

What a seller's agent does do:

  • show you accurate comps to your home.
  • help you set a price that will sell.
  • properly stage the home to maximize appeal.
  • market your home using today's technologies.
  • remember that agent has a fiduciary duty to you and not throw you under the bus to "double side" the deal.
  • help you to understand and evaluate feedback.
  • help you to understand and evaluate offers.
  • advise as to how to respond to offers.
  • keep lines of communication open during entire process.
  • coordinate inspections with buyer's agent and set stage for renegotiations.
  • work through inevitable renegotiations.
  • make sure buyer's agent is keeping buyer on track for closing.
  • communicate with buyer's loan officer at least once to make sure buyer is on track for closing.
  • review Settlement Statement for compliance and/or errors.
  • congratulate you on the next step of your life.

These lists are not all encompassing and many of the points should have several sub-points. There could also be a long list of what an agent does not do. Let me know if you think I should include something else.

Monday, July 23, 2007

Understanding The Current Real Estate Market In Kansas City

Whether you are looking to sell a home in Olathe, Kansas or buy a home in Kansas City, Missouri you are probably asking yourself about the current real estate market.

With every group of people I meet the question is "How's the market?" People want to know.

And so do I. Yesterday, I saw a couple of agents while I was out and about showing homes. When I asked them how the market was I got one "Great!" that seemed rehearsed and another "Well, I'm making a living. But that's about it."

IT'S NOT ALL ROSES OUT THERE but it's not all thorns, either. A little history is in order here. During the great price run ups of the early 2000's people got used to being able to sell their houses rather easily. Here in the Kansas City area we didn't get the 20% appreciation rates they got out west and east. But we did get to the point where you could sell every year for 5%-10% more than last year. And sell it withing 60 days.

Today's market is a bit different. It's a "normal" market. Yes, despite what CNN and FoxNews tells you there is still appreciation here in Greater Kansas City. Yes, there are a few zip codes that have gone backwards. But not in a free fall fashion like parts of Cleveland. And yes, there are zip codes that have had significant increases, but not like Denver or Tulsa.

The key to selling your home today is proper pricing. Study the comparables carefully. Judge the condition of your house brutally and compare that to the SOLD houses. Where do you stand. Be honest, it will be the difference in whether you sell your house in 60 days, or not.

Don't think that is possible? It is. Want proof? I can email it to you. Take a gamble and leave "negotiating room" and you will likely slip into that 4-7 month sales time range. Go ahead, argue with me. See how it goes.

Of course, buyers are loving life right now. Even if they sell their $150,000 house at a 5% discount they can pick up their new $235,000 house at a 5%-10% discount. See how they still benefited?

And selection, ah, the selection.

Sunday, July 22, 2007

House For Sale In Olathe, Kansas - 4 Bedrooms, 3 Full Baths, 1 Half Bath

Here in Olathe, Kansas is a house for sale within the Blue Valley School District. Offered at $232,500 this 4 bedroom, 3 full and 1 half bath home is getting new exterior paint and wood rot repairs started on July 30.

Come and get your piece of the American Dream. To see more, just make the jump.

Looming Stock Market Trouble?

I'm not much of a gloom and doomer. Though I can recognize situations to stay out of. From today's Kansas City Star Money Wise...

Investors are borrowing record amounts of money to finance trades on the New York Stock Exchange. Margin debt jumped to $343 billion in May.

Now for those that argue you can leverage stock investments, you can. But the rules for "the call" are much different.

Hedge Funds vs. Real Estate Investing: This Is Going To Be Fun

Not too long ago Jeff Brown wrote an article titled My 4% Will Beat Your 10% Any Day - Stocks vs Real Estate and it received quite a few comments.

Then in through the door walked Michael Cook. Michael left a couple of compelling comments. And to make a long story very short (heck, you can just follow the first link and follow along) what we have here is two heavyweights getting ready to square off.

Don't get me wrong, it looks to me that these two gentlemen have the utmost respect for each other and both make reasonable and sound arguments. And I don't know about you, but I love a good intellectual debate.

Not sure if there will be a winner or loser in this debate so much as two guys arguing their approach to wealth building. I will tell you who will be the winner, though. Readers who take the time to follow along and educate themselves. You cannot have too much education.

Saturday, July 21, 2007

The Country Club Plaza: Kansas City's Crown Jewel

There simply is no place more beautiful or romantic than Kansas City's Country Club Plaza at Christmas. I've had the good fortune of seeing New York's Rockefeller Center and Washington's National Tree lighting ceremony.

But Kansas City's one great contribution to Christmas is The Plaza. Photos just cannot capture the majesty of the place. And it's not bad the rest of the year, too.

Last evening my wife & I along with our best friends decided we needed an upscale night on the town. There are plenty of entertainment and dining options in Johnson County, Kansas. But for romance and a truly world-class experience there is really only one place to go.

History & Flavor

The Country Club Plaza was first designed in 1922 to be the country's first suburban shopping district. From the linked website comes the following...

The Plaza is an outdoor museum of romantic Spanish architecture and European art where people actually live and work every day amid its beauty. ~ Those who have traveled overseas might do a double take when they stroll past the statue of Sir Winston Churchill. Just steps away two of Spain's landmarks--the Giralda Tower and the Seville Light -- tower majestically on the horizon. Down the street in a quiet courtyard sits an original bronze of Pomona by Italian sculptor Donatello Gabrielli. Is this England, or maybe Spain, or could it be Italy? What a surprise to the traveler to find these magnificent European works of art in the heart of the Midwest -- on Kansas City's famed Country Club Plaza.

Modern Times

Today's Plaza if filled with the finest shops you would expect to see in Paris, New York and San Francisco. Visitors from out of town on their first visit to Kansas City, are always amazed at the experience they are filled with upon first arriving at The Plaza.

International level hotels from big names and boutiques are closely located to and within the boundaries of this magnificent destination. National chain restaurants and local fair are intermingled with the shopping, fountains and street experiences. Pedestrians have the right of way on The Plaza. Really. With only a couple of stop lights interfering with the charm drivers are instantly educated to the fact that this place is one of a kind. Park the car and walk. No matter the weather.

Romance is easily discovered. Carriage rides of all shapes and sizes are available. And in the warmer months gondolas meander up and down Brush Creek. Or you can just stroll up and down the streets window shopping or admiring the beautiful fountains.

The Country Club Plaza in Kansas City is truly our area's pride and joy. The proper balance of condos, close by homes and big business all work together to make this a spot you must visit during your lifetime. Don't shy away from a visit to Kansas City. You will leave with a smile on your face.

Friday, July 20, 2007

Real Estate Investing Returns vs. Traditional Investing: Fun With Math

Investing is a fascinating topic for me. I like simple math. So here is a little something I figured out in a few minutes regarding traditional investing (stocks, bonds, whatever) versus real estate investing.


Traditional Investing

Let's start with a $10,000 liquid savings account. We'll buy some stocks, not counting any fees, and we'll add $200/mo. to that balance. Every month.

And we are going to say that we have an 8% return each and every year. (Yes, I know some years will be higher, some lower. I wasn't born yesterday.)

After 30 years you should have approximately $398,698. Hey, that's pretty good! I'd take it. Unless...

Real Estate Investing

Let's take the same $10,000 and leverage it into a $200,000 duplex. Now the cash flow on this will be negative so we'll contribute that same $200/mo. we used earlier to help it break even. Just to be fair I'd hate to throw in the other advantages of real estate investing like depreciation. But we will use principle reduction and appreciation.

So after 30 years the mortgage will be paid off (by the tenants!!!!) and we'll use an annual appreciation rate of 4%. That sound more than about right.

Where are we after 30 years? Right around $650,000. Doh!

Real Estate Is A Funny Thing...

Real estate sales is an inexact science, at best. Take the house pictured at right. We started it off as a two bedroom. After a few months of barely any buyer views we converted the home back to a three bedroom, though one bedroom was pretty small.

Again, barely any buyer views. Then one day 10-12 days back I had 4 different agents show it in a 24 hour period and we accepted an offer.

Before that offer, over the course of 6 months I probably had 2 sign calls inquiring about the house. Since we've accepted the offer I've probably had about 10 calls inquiring about this Kansas City, Kansas home for sale.

I can't explain it. I really can't. I market all my homes for sale very aggressively and use nearly the same formula for all of them. Some sell quicker than others. And some generate more interest than others. But that's twice this year, so far, that as soon as I get a house under contract I get quite a bit of interest.

I may never figure this business out in that regard.

Bleeding Kansas: Taxation Without Representation

Once again Missouri has figured out a way to stick it to Kansas. And once again, Missouri will lose if Kansas chooses to retaliate.

Reported in today's Kansas City Star (go out an buy a copy)...

The first shot was fired by Missouri when Gov. Matt Blunt signed a bill this month providing an income tax break for Missourians who receive Social Security. It contained a little-discussed provision eliminating a deduction for real estate taxes paid outside Missouri.

That’s a $190 ding for the typical Johnson County resident who works in Missouri.

When someone asked Governor Matt Blunt of Missouri about the tax that screws Kansans his response was again reported in the Star as...

Blunt said he was the governor of Missouri and his focus was on reducing taxes for Missouri residents.

As someone who has to pay some Missouri taxes, this is just stupid. Why? Because when Kansas inevitably responds, here are the numbers

Based on commuting patterns, Johnson County’s Economic Research Institute estimates that more than 71,000 residents from eight nearby Missouri counties work in Johnson County. And at least 53,000 Johnson Countians work in those Missouri counties.

So by getting taxes from 53,000 JoCo residents the Governor will cost 71,000 of his residents higher taxes. Will Missouri ever learn? This is why there is so little cooperation between the "rich" Johnson County and the "incompetent" Kansas City/Missouri governments.

Nobody asked, and it has nothing to do with real estate investing... No wait, it has everything to do with real estate and real estate investing. More taxes cause higher expenses. Higher expenses cause higher rents and fees. Figure it out. Just my $.02 on the subject.

For you out of town readers Kansas City, Jackson County and the State of Missouri are always trying to figure out how to screw Johnson County, Kansas. When they did a study and found out the majority of ticket buyers to the Chiefs and Royals were Johnson Countians they added a per seat tax. Then they "locked out" Kansas ticket buyers for the perennially sold out Chiefs until all the Jackson County residents who wanted tickets had tickets. (Not that Jackson County can support the Chiefs all by themselves.)

Then there is the City payroll tax. The bi-state tax and the never ending attempt to get Johnson County to further subsidize Kansas City, Missouri. I'm all for civic cooperation, realizing we all have a stake in this metropolitan area. It would help is stupid policies like these weren't instituted. It just builds further resentment.

Thursday, July 19, 2007

Property Collector or Real Estate Investor


Yesterday I was having a conversation with a younger person who considers herself to be a real estate investor. During the conversation I was bringing up "old-fashioned" notions (I'm 42, I've been called a lot of things...just not old-fashioned.) like a cash reserve, putting some money into the deal and making sure the math works within your criteria before purchasing a home.

This younger person is extended beyond belief, has a portfolio of houses that don't fit together and are strung out all over the city and seem to be in no relationship to one another in any category including;
  • price range.
  • condition.
  • quality of tenant.
  • location.
  • style of house.

Now, don't jump all over me. I realize there is a word out there called diversification. But there is also an "old-fashioned" theory out there called having a plan. Purposeful Planning is what my friend Jeff Brown calls it.

I'm not going to dive into this too deeply. I could make this a four part post. But I am going to say, that in my mind at least, there is a huge difference between being a real estate investor or being a property collector. Real estate investing takes planning, purpose, education, guidance and hard work. All of those combinations put together create all those conversations that start with "Boy, you sure were smart all those years ago to buy those properties. I wasn't that lucky..."

With property collecting, you will need some luck involved. Some people make it through with this philosophy. Some "investors" don't even realize they are property collectors.

Stop right now,review your portfolio of income property. Does it look like it happened on purpose? Then keep it up. Is it a mish-mash? Then let's talk.

Wednesday, July 18, 2007

A Smart Investment? Is The TV Worth $3.7M?

Loyal readers know how I love numbers. Numbers are concrete. They add up. They are infallible...so long as you plug in the right numbers.

Real estate investors tend to love numbers, too. But this link below is worth reading for everyone. Not just people concerned about their real estate future. But everyone concerned about their financial future.

How to Earn $1 Million by Not Watching TV

Isn't This Interesting?

At our office listings are down a little bit but sales are way up. What does that mean? This market has been a little confusing. But generally, here in Kansas City, the real estate market is still moving right along for those that price their homes properly.

That is especially true of the Olathe market. Heck, I'm listing a home in Olathe on Friday and a careful study of that neighborhood shows there is only a 60 day supply. That's a lot different than what you are seeing on the cable news programs.

Remember, you live in the Kansas City area. They don't report your news. That's not conspiracy theory. Just facts.

Tuesday, July 17, 2007

Kansas City's New Sprint Center

This morning at the weekly Kansas City Breakfast Club meeting we had a guest speaker by the name of David Pulford. David is the Director of Operations for Kansas City’s new Sprint Center, the key component to the new Power & Light District.

Being both informative and fun, here were a few of the nuggets David shared with us…

  • There are 2,204 windows (that’s a lot of cleaning!).
  • There are 11,000 parking places in close proximity to the Sprint Center, or so he says…
  • The Sprint Center opens October 13, 2007.
  • There are 36 events planned between October 13th and December 31, 2007.
  • The Sprint Center will be open for public tours from October 10-12th.
  • Man hours to build the Center are approaching 1,000,000.
  • For basketball, the Sprint Center will seat about 18,000.

Now, because David is sworn to secrecy upon penalty of death he could not share with us all the events that are currently scheduled. He did say that information should be made public in the next week or two. David also brought up that Disney’s High School Musical would be coming as an ice production. (Sounds like a nightmare to me…though my 9 year old would love it.)

Regarding a permanent tenant David promised we would have both the NBA and NHL locked in by January.

Okay, the previous sentence is patently false. I just wanted to upset David. Although I’m sure he is working hard to do his part to make it happen.

On a personal note, and as a college basketball junkie, I am happy the Sprint Center is coming. The more Big XII basketball we can get here the better my life will be. Oh, and “Rock Chalk.”

Monday, July 16, 2007

REALTORS & Pilots: No One Needs Them Till Something Goes Wrong



For the related story to this compelling video, click here.

Many of you know I like to compare my real estate business with my flying hobby. And all of this talk about whether REALTORS are really necessary, are they paid too much, whose money is the commission remind me of pilots.

And by that I mean this. Pilots earn their way up the pay scale ladder like anyone. And when they get to the top area they are making $150,000 or more in some cases. And people love to say "are they worth it?"

After all, the computers practically fly the thing. And I want my tickets cheaper. Can we cut his salary a little and save money? Well, I guess you could. And then the really experienced guys might find other options.

How much would you have paid that pilot that landed that Jet Blue plane? Would you have been negotiating his salary as you flew around LA for 3 hours burning off fuel so he could put that bird on the ground? Did you see how straight he kept that thing going down the runway? Did you notice no one was killed? How much should that pilot make for his services? After all, most of the time there is no emergency, right?

Seldom, and I mean seldom, am I involved in three real estate transactions in a row and not have to get into some sort of troubled waters and get things cleared up. It could be;

  • title problems.
  • loan problems.
  • appraisal problems.
  • inspection problems.
  • other agent problems.
  • flood plain problems.
  • insurance problems.

Do I need to list all of the possibilities. When you pay a competent real estate agent you are paying for their education, their licensing fees, their overhead, their insurance. You are also paying for their experience, their knowledge, the professionalism.

Think about that plane the next time you are wanting to discount your agent's commission. If you want me to cut my rates by 40% I may only be inclined to solve 60% of your problems. It's just human nature, right?

Real Estate Investor Commitments

So, Chris. What are the commitments a real estate investor has to make to be successful?


That's a great question I received not too very long ago. And it's a complex answer. But I'm going to try to boil it down to a 4 topic blog post. Obviously, you'll need more counseling with your chosen real estate professional.

Time

Almost all of the Buy & Hold real estate investors that I know have other professions. The investors that own 1-3 rental properties tend to help find them, manage them and are involved in the day to day operations.

But that's tough to do when you get to 5+ income properties. Your "day job" is generally pretty involved to generate an income that allows you to own income property. And dealing with 5-10 tenants on an ongoing basis can begin to consume all of your spare time.

So then it's time to bring in a good property manager. But you'll still need a little time to work with him/her.

Money

I've seen the infomercials and heard most of the "gurus". However, you are still going to need to make a financial commitment if you are going to own rental property. What happens if the tenant doesn't pay for a month? Or it's vacant? Or the roof needs replacing?

And don't forget to keep a minimum of 3 months mortgage payments per property in reserve. The day will come when you will be glad you did.

Patience

Patience? Yes, patience. Patience to find the right property. Patience to find the right money. Patience to find the right property manager. Patience to find the right tenant. Hot heads don't do well with Buy & Hold real estate investing.

Though you might try out for A&E's latest series of frauds, er, flip shows.

Time

Chris, you already mentioned time. I know. I know. But I'm now talking about time to let your investment grow and mature. The sweet spot here in Kansas City for investment properties is right about 5-8 years. After 5-8 years The 4 Benefits have peaked and will now start a slow slide down on returns.

Don't try to shortcut the 5-8 years. In most cases it's the time you'll need to maximize your investments so that you can then turn them and start over again.

Saturday, July 14, 2007

Real Estate Investing Risk Management

Real estate investing as a means to secure a retirement worth having is all about risk management. And risk management can best be accomplished through education and due diligence.

Nobody goes into a business transaction hoping to lose money. (Well, maybe if they can take advantage of passive loss but that's a whole other post.) The key is knowing what the current position of the property is, what the income and expenses really are and utilizing past performance mixed with current variables to forecast the next 5-8 years.

Does that sound complicated? It doesn't have to be. Real estate investing is not rocket science. But it's not child's play, either.

Spend time educating yourself before you jump in. When you went to college, did you research your school or just go because they had a good basketball team? (You may not want me to answer that.) Read. Choose a good professor and then start your journey.

And subscribe to this blog's RSS. That way you can keep up to date with what is happening in the Kansas City real estate investing market.

Free Concerts In Olathe, Kansas - A Great Evening For The Whole Family


One of the things about being a busy real estate agent based out of Olathe, Kansas is the crazy hours. There are a lot of times when I want to do something fun with the family but need to provide service to my clients instead.

But not last night. At 7:00 pm the Olathe Concert Series brought to our city Mark Selby along with opening act Fast Johnny Ricker. (Fast Johnny pictured right.) So Marie and I packed up the four kids +1 and headed over to Olathe's Frontier Park. Now, I've written about the Olathe Concert Series before. And we've had fun there.

But last night was another level.

Before yesterday I had no idea who either of these guys were. I had heard of John Ricker. But never heard anything by him. I had never heard of Mark Selby. But as it turns out, these two dudes rock and can bend some strings and sing. For fun, you should check out their websites and listen to a few tunes.

So consider this post a plug to get out and listen to live music here in Olathe, Kansas. Jeez. They bring it to our front door. Cover bands. Singer/songwriters. Established bands. New bands. The works. It's a good time and it's FREE.

Two of my kids had fun.




Pictured is the actual shirt I bought along with the Mark Selby cd titled "and the horse he rode in on".

Now, the license plate shirt is the one I bought. Though I should have gotten the Big Joe Turner shirt, as well. There is another great blues guy. And you KNOW he's from Kansas City.


So citizens of Olathe and Kansas City, get out and have a good time. Now I'm fully aware that a man cannot live only on real estate, blues and bbq...but I'm doing the best I can.






Pictured left is Mark Selby.

Some of his song writing credits include;

- Blue on Black made a hit by Kenny Wayne Shepherd
- There's Your Trouble made a hit by The Dixie Chicks







Friday, July 13, 2007

Things To Do In Olathe, Kansas

If you are looking for things to do tonight in Olathe, Kansas don't forget about the free concert series. My family and I will be out at Olathe's Frontier Park to see Mark Selby play. Looks like he has impressive credentials.

Though I've never heard his music it's a beautiful day here in Olathe and I love to hear non-top 20 music. In fact, I get sick of the radio!!!

If you see me there, introduce yourself...

Thursday, July 12, 2007

Thank You: You Are Wonderful

A couple days ago I published a post that would make an investor money and help a single mom stay in her home. Well, we are coming down the wire and we have a couple people in serious pursuit. Thank you. It will make a difference to this woman and her children.

Real Estate Investing Lessons

As many of my more loyal readers know I am a private pilot, though I'm not presently current. And the comparisons between real estate investing and my period of learning to fly are oddly similar. Not in function but in training and application.


Each day I wake up, check my emails and go to work. And each day I work with clients who;
  • understand that I have their best interests in mind.
  • aren't sure that I have their best interests in mind.
  • assume I do not have their best interests in mind.

The last two can, frankly, be difficult to work with. Not personality wise but because they never really buy in to the fact that the more money I can help them make the more money I make. It's really that simple. Real estate agents can sell a house, make a few dollars and move on to other professions if they like. A lot are doing that right now.

But I'm 42 years old with a lot of really good years ahead of me. It is in MY BEST INTERESTS to make sure your best interests are being protected and that you will make money. If those two things are happening, who do you think you are going to call when you need a real estate agent?

Getting back to my flying analogy...

When I was learning from Felicia Barton how to fly an airplane I listened intently. And yes, I also checked her out and cross-referenced her knowledge. How? I bought books about flying and read. I bought DVD instructional pieces that taught me the same thing she did, as it turns out.

But let me be very, very clear about this. When I was in the air and the ground was a significant distance below me, and her, I listened and did what she said. It just seemed to me that if something bad happened she was going to suffer the consequences as well.

It was in her best interest to let me know all of her knowledge. To educate me. And to get me out there on my own. I didn't argue. I didn't debate. I didn't tell her what my brother-in-law's opinions were about her practice of flying. I chose her to teach me. Now it was my turn to let her do her job and learn as much as I could.

And when you have a controlling, Type A personality (High D for those in the know) you have to understand how hard it was for me to make my will and intellect submissive to hers on this subject. But it was the smart thing to do.

Flight instructors and their students get killed every once in while. The reasons may vary but I doubt seriously that the student had done everything the instructor had said or taught. Foreclosures happen in real estate. For the first time home buyer it may be because someone advised them and they chose to ignore the advice. With real estate investors a foreclosure is probably the result of defying the odds when it comes to proper due diligence and running the numbers.

Real estate investing has rules. Follow them. Hire a guide. An instructor. A counselor. Another set of eyes. You might think my fees are high and that REALTORS make too much money. So be it. How much does a foreclosure cost?

Wednesday, July 11, 2007

Kansas City Area Mortgage Brokers

Jeez oh Pete. Are there any Kansas City area mortgage brokers out there that want to make some money?

Please, give me a call or an email. But I'm looking for someone with an established client base that has people that would fit the real estate investor profile. (Not flippers.) Buy & Hold real estate investors is who I'm looking for. That's all I'll say at this point.

Preparing Your Home For Sale In Olathe, Kansas

I have two schools of thought when it comes to preparing your home for sale here in Olathe, Kansas.

1. Price it for it's current condition.
or
2. Take it up to tip-top shape.

I'm always amazed at the Sellers who want to get top dollar in a short amount of time for homes that are not in tip-top shape. Yes, I know the house down the street sold for $245,000 in 28 days. But did you see it?

It was gorgeous. New paint inside and out. Newer carpet that was super clean. Updated lighting fixtures, landscaped exterior and a roof with 20 years of life left.

And here you sit with a furnace that needs weekly service, dings in the walls and about 7 areas of wood rot on the outside and you want the same price? Well, then get the home up to the standard of that home condition wise and the price should follow.

Try and short cut this at your own risk. With the swollen inventory of homes out there Buyers will go in about 8-10 the same day they see yours. How does yours stack up? If it doesn't stack up in condition it better have a price that "wow's" them.

A little tip to help you get your Home For Sale sign changed to a Sold sign. Just my $0.02 for the day.

Monday, July 09, 2007

Emergency! But You WILL Make Money: Single Family Home Investment Property

I've already put some calls out on this so if it's gone by the time you call/email, sorry. But here is the deal.

I received a call from a distressed single mother who got flim-flamed. Being raised by a single mom it irritates me. Anyway, she signed a lease option agreement in November 2006 for a single family home in Blue Springs, Missouri. Three bedrooms, one full bath and two half baths, and a two car garage. Long story short, she got messed over. But this could be to your gain.

Some Facts;

  1. I will operate as an agent representing the Buyer.
  2. In the interest of full disclosure I will also be pulling for the tenant to some degree because she has not had good experiences and is not experienced with these kinds of negotiations.
  3. The house in question is in Blue Springs, MO.
  4. The house in question is in foreclosure proceedings.
  5. You will have less than 30 days to close.
  6. You will purchase "As Is."
  7. Current lender payoff is roughly $107,000.
  8. My fee will have to be added to that number.
  9. ARV of the property is $125,000 - $130,000.
  10. Roof is serviceable for a number of years. (Not a guarantee.)
  11. Furnace and A/C operate well but are on last 6 months to 4 years. IMO.
  12. Water heater is newer.
  13. Structural integrity looks very good to me. IMO.
  14. Needs painting, some wood rot repair.
  15. Needs attention to poor drainage

In my opinion, the paint, wood rot, furnace and A/C and drainage are all doable under $6,000. Probably under $5,000. The rest of the condition of the house is good.

Current tenant needs to rent with option to purchase for a period of 24 to 36 months. Probably 36. At that point she wishes to purchase home. Some rent credit to be built in.

If you are interested call or email immediately. Not much time on this one. I think you'll make money and do a good deed.

Kansas City Real Estate For Sale, For Rent & Other Miscellaneous Thoughts

Here is an Olathe, Kansas townhouse for sale. It would make a lousy investment property... but a fantastic home! To see the details of this 3 bedroom, 3 bath house for sale go to here.

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I know of a great 2 bedroom, 1 bath duplex that rents for $775 in the heart of Overland Park. Let me know if any interest.

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Over the weekend I read another great post by Christopher Smith over at Equity Scout. Most certainly worth your time. It's all about negotiations and how they are handled when buying or selling real estate of any kind.

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Folks, there are a plethora (I love that $10 word.) of income property options out there right now. I'm getting ready to list a duplex in a revived part of Kansas City that is really on the upswing. Just minutes (seconds really) to City Market and the downtown district and only a few minutes from the new Power & Light District. Are you ready for this? Price should be in the mid $130's with rents at $650/side.

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Also, I know of a real estate investor cleaning our her inventory to put into commercial. Some not on the market yet. She's pretty savvy so she's not giving the rental properties away. But she's pricing them where she know they will sell quickly. She is a professional real estate agent with a competing company. But she's given me the inside skinny. All 7 units are 100% occupied and monthly rents run about .008 of asking price for investment property duplexes located in Johnson County, Kansas. So you know they won't last long.

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Did anyone notice that our U-20 kids beat Brazil???!!! I said we beat BRAZIL in the U-20 Championships. I said Brazil. Brazil, people.



Freddi Adu is #11.




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Shameless plug:

When you think real estate investing in Kansas City, think about the services of Chris Lengquist of Keller Williams Realty of Olathe, Kansas. No book sales. No tape sales. Just professional counseling and analysis about investment property.

Saturday, July 07, 2007

Real Estate Investing vs. Stock Market, Again

I really don't have too much time to spend on the blog today. Wall to wall appointments. But when I saw Jeff Brown had posted a post titled My 4% Will Beat Your 10% Any Day - Stocks vs. Real Estate I thought I would have to point you in that direction.


In fact, Jeff is in the habit of handing out Bawldy awards to the best posts of the day. I want to urge Jeff to give himself one.
My opinion? I can't agree with Jeff any more than I do. To me it's a moot point, anyway. I don't have the cash it takes to play in "the market." But I do have the ability to get 5% down, buy a place and let someone else pay for it. Rental homes to sell when I'm older that I didn't pay for. Just seems like a good idea to me.

Friday, July 06, 2007

Half Duplex For Sale In Olathe, Kansas

Offered at $109,900
Located within walking distance to Garmin's World Headquarters and convenient to I-35 and Olathe South High School this half duplex for sale UNDER county appraisal is a bargain.

And for the real estate investors out there, the home currently has tenants with a lease that runs through September 14, 2007 at $775 per month. They pay all utilities. And they would love to stay.

Want an added bonus? The Seller will consider some owner financing on this 3 bedroom, 1.5 bath home with a full, unfinished basement. Want more information, just call or email.

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Want to search for more homes for sale in Kansas City? Just click the button below. You can search without me ever knowing you were there. If you would like to save your search, all I ask is that you register and then you can keep your info. But I won't contact you until you contact me. Sound good? The start your Kansas City house search now.

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Want to subscribe to this Kansas City real estate blog? Then hit that fancy orange button at the top right of this page. Or right here....

Thursday, July 05, 2007

Building A Competent Real Estate Investing Team

For those of you who are actively investing in real estate you know that one of the most important things you have to do is build your real estate team.

You are looking for an attorney, a CPA, contractors and a competent real estate agent that can help to walk you through situations for which you may have been unprepared. Professionals that will give you guidance and alternate points of view.

To better serve you it is important that you know that I am constantly acting as a student to those who have gone before me. And I am actively looking for an agent to add to my team that can follow behind.

Because of the success of BBQ Capital in combination with my other marketing efforts through the web I am to the point where another pair of hands would come in handy. So first, let me say "thank you." And I want you to know that the point of all of this is to run a successful, profitable real estate business that provides service and advice that is second to none in the Kansas City area when it comes to real estate investing.

It's just that I need help so that I can run this successful business AND see my family on a regular basis! :o) After all, I know some of you are anxious to learn of the different opportunities out there that you would salivate over.

On another note I am really wanting to expand the capabilities of this real estate blog for you. What are your needs? What are you looking for in a real estate blog concerning the Kansas City area? Who would you like to hear from? An attorney? A CPA? Nominations would be welcome. Let me know what you think!

What Will That Investment Duplex Rent For?

What are the real rents?

Do you think that question is funny? You shouldn't. If you have been a real estate investor for any period of time you know that rental values can be manipulated. Here are ways;
  1. Charging a higher monthly rent but getting 1-2 months "free."
  2. Charging Section 8 tenants more than the market will actually bear.
  3. High rent...but utility cost are included in rent.
  4. Charging a higher rent in lieu of a security deposit.

That should get your mind started. When I look at rents in a particular income property I am always curious as to what the rest of the neighborhood is getting. Curious enough that I will research the rents online and also knock on doors.

I've actually had sellers tell me they are getting $995/mo when every other property in a two block radius is getting $750. Well, maybe they really are. But when it goes vacant, what do you think you are going to get to replace it?

Know your true rent values. That's my $.02.

Wednesday, July 04, 2007

Happy 4th of July From BBQ Capital: Kansas City's Real Estate Blog

Regardless of race.
Religion.
Or political affiliation.

To every man, woman and child since Columbus landed that has given their life in sacrifice to this country I say "Thank you."

Your sacrifice has allowed me to

Stand proud.
Disagree.
Live free.




Pictured in the photo is this country's only WWI Memorial recognized by the United States Congress. It is located in Kansas City.

Tuesday, July 03, 2007

Real Estate Investor From California Loves Kansas City - Real Estate Investor Interview #2

Today's real estate investor interview is from a gentleman residing in the Los Angeles area of California. He chooses to go by Phil "N" and that is enough for you to know! You see, many people are not looking to sell books and tapes as real estate gurus. They are looking to build a Retirement Worth Having.

This interview stands in stark contrast to the last interview I did. Our last real estate investor had owned property consistently over the last 50 years and had many properties. Compare that to this interview and see the similarities and differences.

Q: How long have you been investing in real estate? I have been investing in real estate for almost one year now. That is with the duplex in Blue Springs, MO. I researched for about two years before I bought.

Q: Why did you choose to start investing your capital into real estate? I think it is a good idea to invest in real estate because of he fact that you're able to leverage a larger amount of appreciation of funds for a smaller amount invested. In other words, my $30,000 investment is actually $150,000 appreciating at 4% a year, not to mention that someone else is paying off the mortgage, I'm able to benefit with reduced income taxes, and the duplex I bought in Blue Springs is actually operating in the black by $300/month already.

Q: Okay, but you live in California. Why did you choose Kansas City? I chose Kansas City (after much research) because it offers good cash flow on my property. The combination of purchase price v. rents was a good ratio (i.e. good cap rate). The neighborhoods are nice, the per capita income in Kansas City is higher than the national average, and Kansas City seems like a good place for large businesses to operate from.

Q: Does owning property so far away cause you to lose any sleep at night? The only concern I have is that because I'm so far away, I'm not as familiar with the day to day changes within the community where my duplex is. I rely on my property manager to keep me up to speed on changes in the neighborhood that might influence future value of the property. I subscribe to an online newspaper for Blue Springs that allows me to keep up with local news.

Q: So now you have one under your belt. What are your future income property plans? I'm very happy with the duplex, and I plan to buy one or two more properties within the next year in the Kansas City area.

Editor's Note: These interviews are done without me writing the answers. I swear. But they sound like things I preach. Hmmmmmmmm.

Monday, July 02, 2007

The Police in Concert

You will have to pardon me if I don't have a lot of heavy posts today and tomorrow. You see, I have a bunch of phone calls to make, contracts to check on and inspections to work with before I leave at 1:00 pm today to head over to St. Louis for The Police concert this evening.

I worked all weekend with my real estate investing business. It's time for play this evening. Now, if I could only find my parachute pants...

Osawatomie Under Seige...Again


In a story that is being reported around the country Osawatomie, Kansas is under siege by flood waters. 46% of the town has been ordered to evacuate this small town about an hour's drive south of Kansas City, KS.
I drive through here all the time on US 169 on my monthly trips to Oklahoma. Good people live down there. But sometimes the Marais des Cygnes river bests them. Even with all the levies and dikes built around the town.
John Brown, the famous anti-slavery fighter, fought against the Missourians there in Osawatomie. And the term Jayhawks is believed to have first been used there. So I like the town already!