Kansas City Real Estate Investing Blog

We've Moved

2007-11-24T15:21:00.002-06:00

This will, in all likelihood, be the very last post at this URL. BBQCapital is moving to it's new address at http://kcinvestmentproperty.wordpress.com/

Or feel free to visit our newest website/blogsite:

http://www.foreclosurehomeskansas.com

If you use my URL http://www.bbqcapital.com/ you should be okay and have to do nothing to update your feedreader or RSS. However, if you've been using the Blogger URL you will need to update your information.

I bid a fond farewell to Blogger. This was my first blog and I loved it. But as I began playing around with other platforms I saw expandability and cool tools that Blogger just doesn't offer.

I hope to see you at the new address for all of your Kansas City Real Estate Investing discussions! Feel free to contact us with any questions.

Thanksgiving in Kansas City & Misc Real Estate Thoughts

2007-11-22T09:31:00.001-06:00

It's a holiday weekend and so I really don't feel like getting into the nitty-gritty of real estate investing here in Kansas City. However, I do want to bring you these tidbits, real estate related and other wise. And don't forget. Tonight is the night they turn on the Plaza lights. Simply no more romantic place on Earth than the Country Club Plaza at Christmas.

NOTE: I "borrowed" the photo from KC Plaza Flights. Take a look and take a trip that you will never forget.

***

I posted this over at my ActiveRain blog since Google seems to pick it up quicker. The link will take you to a fourplex for sale in Belton that will make Coasters (as Lani call them) wet themselves. That's right, a Kansas City area investment property that costs around $155,000 and makes about $1,600 in gross monthly rents and it's in a neighborhood I think is on the grow. Eat your heart out Los Angeles.

***

Like Jay Thompson over at The Phoenix Real Estate Guy I too am proud that my 15 year old son just got his first "real" job. He's raked leaves, mowed lawns and the like but wanted desperately to get out into the job world. He's going to be working for Chick-fil-A, a good Christian company that's closed on Sundays. (Can you believe it?)

***

Two days ago I was showing an apartment in Olathe to a real estate investor and it was 78 degrees. I had my windows rolled down and a golf shirt on. Yesterday, it snowed! Not much. But it snowed! How fast everything can change.

***

The Kansas Jayhawks are in for quite a weekend. First, on Saturday, is the Border War with Missouri that has been aptly renamed Armageddon at Arrowhead. Again, if you are not from this region you probably cannot understand the animosity that exists between the two schools. It's gonna be something. Go Jayhawk football!

Then on Sunday evening our Jayhawk basketball team takes on Arizona over at Allen Fieldhouse. Basketball is woven into the very fabric of Kansas culture. So anytime you play a game against such a quality opponent you take notice.

Here's hoping MY Kansas Jayhawks go 2-0 for the weekend!

***

Real estate investing doesn't have to be rocket science. I've received several phone calls over the last couple of weeks from people saying they are confused and don't know which direction to turn.

My advice is to not spend thousands and thousands of dollars on guru knowledge. Just read this blog, Christopher Smith's Equity Scout blog and Jeff Brown's blog. You'll get better advice and it's free. There are a few others I could mention, as well.

Happy Thanksgiving. Happy investing.

WKRP - As God Is My Witness, I Thought Turkeys Could Fly

2007-11-22T09:29:00.001-06:00

As promised, here is part 2 of the WKRP Thanksgiving Day debacle.

WKRP Turkey Drop

2007-11-20T20:00:00.001-06:00

Here is one of my favorite Thanksgiving memories, ever. Part two will follow Thanksgiving morning.

In the mean time, enjoy your families. Happy Thanksgiving to all.

Legal Zoom: Do It Yourself Legal Documents

2007-11-19T14:24:00.000-06:00

For those of you so inclined you should check out legalzoom.com to see the legal documents services they provide. I first heard about them on the Jim Rome Show, and in fact if you put the name Rome in the promotions box at checkout you are supposed to get a discount.

Now, I'm not endorsing them. I'm simply pointing them out to you if you are thinking of forming an LLC or other such entity to protect either yourself or your investment properties. I still think their is real value in having an honest (well, that may be open to debate) to goodness attorney working for you and intimately familiar with your situation. But if you are independent and always looking to save money, legalzoom may appeal to you.

Good luck. If you use them, let me know your thoughts!

Real Estate Investing Returns Calculations

2007-11-18T17:36:00.000-06:00

Calculating projected returns can be of paramount importance when deciding on whether or not to pull the trigger on any particular investment property whether it be here in Kansas City or elsewhere. After all, real estate investing is about securing a return. Without that return your money would do better to be somewhere else.

So before buying that next "income" property you need to know whether there will be any income. (That's why I get paid the big dollars.)

Of course how you calculate that return is completely up to you. Jeff Brown recently discussed his Einsteinian theory over at BawldGuy. See the post here. And a nice little Q&A session happened in the comments section so be sure to read those, as well.

Let me just say that I prefer to know what the equity return on any investment property will be before I buy it. What is equity return? Quite simply it's how much I am receiving in benefits divided by how much I have invested.

Remember the 4 Benefits of real estate investing?

Cash flow before taxes.
Principal reduction.
Depreciation.
Appreciation.

Let's take the calculation of these step by step.

#1 was cash flow before taxes. Simple enough. Just take the amount the property is actually bringing in and subtract the amount the investment property is actually costing you. What's left over is your cash flow before taxes.

#2 was principal reduction. Again, quite simple to figure out based on the loan you have taken out. If you took out an interest only loan (you're welcome, Jeff) then you won't have any. If you have taken out almost any other kind of loan you can just look at your amortization table and figure out how much principal reduction there should be in any given year for your rental home.

#3 is depreciation. Okay, I could do an entire post here. Or two. If you are breaking down your depreciation between land and building only then you depreciate the building over 27.5 years. Rather simple to calculate and all you have to do to figure out the number is to refer to a depreciation table as to when you put your rental property into service.

If you choose to accelerate your depreciation through cost segregation then you will need to do some more figuring. But it's really only a few more steps. Although, that may be over simplifying things.

#4 is appreciation. Wow! Have you ever tried to predict appreciation? How did that work out for you? Listen, you can guess at what it will be and be awfully darn sure of what it was. But when figuring out if an investment property will be a good buy RIGHT NOW you are going to want to buy a rental property that will make sense based on the previous 3 benefits of real estate investing. Then appreciation is icing on the cake! And you wouldn't buy a cake unless you knew it would have icing, right? (I know, there's pineapple upside down cake. But let's move on.)

Again, before buying your next Kansas City real estate investment property you need to know before you buy whether or not that was a good idea. Take the time to work through your calculations to see if the rental property will be a good buy or a drain on your current resources. After knowing you are making a good investment then you can go back to planning your retirement worth having.

This Is War! Well, A Border War.

2007-11-18T14:42:00.000-06:00

At the risk of losing any of my loyal real estate investment clients because of their misguided loyalty to the University of Missouri I have to take a stand right here, right now on the Border War coming up next Saturday night in Kansas City.

For those of you that need some background on this, the most fierce of rivalries, take a minute and read this article by Blair Kerkhoff titled Border War: An uncivil beginning to a great rivalry printed in today's Kansas City Star.

I am urging publicly that Govenor Sebelius station Kansas National Guard troops on the border at State Line to be able to respond quickly to any danger the Kansas Jayhawk football team and/or their fans may face from the hostile Missouri crowd.

Why is this necessary? Three reasons:

Kansas and Missouri have agreed to play the next several games against each other in Kansas City's Arrowhead Stadium. Missouri soil. This offers us no protection from the descendants of Quantril and his raiders.
They are Missourians. You cannot trust them.
Alcohol will be served at the game.

Add those three things together and you can only have a recipe for disaster!!

Editor's note: Most of this blog post is done tongue-in-cheek. Well, except for the part where you might figure I don't like Missouri. While the rivalry is truly fierce, let us hope that people on both sides of the matter can accept a win with class and a loss with dignity. It will only take a few idiots from either side to ruin a great night in Kansas City next weekend. Please, show respect and restraint. Cheer for your side. Have a great time...oh, and know that KU will win. :)

Ask Chris

2007-11-16T09:56:00.000-06:00

I received this email early this morning from a would-be real estate investor that I'm working with:

I know appreciation is a big piece of the return, but in this market I don't know what I can count on. It makes me think I should maybe look cash flow instead until the market turns around and move more toward growth at that time. Your thoughts?

Well, I'm glad you asked.

First, let me state unequivocally that this would be investor is sharp. He is looking at real estate investing as a way to secure a retirement worth having. But when you are newer at anything there is always a period of confusion and wonderment. Now to the question at hand.

Appreciation and growth are always going to be important when you are working with me planning out your real estate investments. I don't advise heavy cash flow (run-down housing, mobile homes, etc.) income property and I believe that when you are starting a good healthy dose of leverage (with proper cash reserves) is in order.

Having said that, a rental property that pays for itself is of paramount importance. As the writer wonders, what will this market bring? What isn't stated, but implied, is:

How long will this market last?
How can I time it to move from cash flow to growth?

Quite simply, you cannot know any of those things. You have to go with historical growth calculated along with growth assumptions, population & job trends, available real estate and desirability (along with a few other things) plus experience and then you blend those all together so that you come up with a target area and property type. Easy, right? :)

In the mean time, you absolutely must acquire properties within those parameters that will pay for themselves based on the down payment you have, the loan product you choose and the expenses you expect (and don't expect).

Real estate investing is part science, part voodoo and a little bit of luck mixed in doesn't hurt. (See California's 20% a year growth. How 'bout the guy who sold it all at peak without knowing it was peak? That's luck.)

What am I saying? Buy your rental property, income property, investment property (whatever term you use) based on sound financial principals. Base your growth projections on sound homework. Then you should be fine.

Real Estate Guru Ratings: A Must Read For The Real Estate Investor

2007-11-14T22:26:00.001-06:00

Okay. So I must have been living under a rock to be the one person involved in talking about real estate investing to not know about John T Reed's Real Estate Guru Rating page. I found it today's through Christopher Smith's Equity Scout.

I must say that Mr. Reed seems a bit (how should we say?) cranky. But, I like cranky. And in most cases I laughed out loud because I agreed with him.

Oh, dear. What will he think of me?

Well, I cannot control that. But in the mean time if you want some truth and entertainment, why don't you click the link above.

(Sorry no pictures. I'm treating you like a grown up. I knew you could handle one post here about real estate investing that didn't have pictures.)

More Kansas v Missouri

2007-11-14T15:28:00.001-06:00

Providing both Kansas and Missouri win this weekend in football I can see next week as one of the ugliest weeks in history around the Kansas City area. I was just emailed this shirt.

It's not the Border War. It'll be Border Armageddon!

I want to encourage your trash talking here! This doesn't all have to be about real estate investing in Kansas City. We can have a little fun, too. Right? Especially after Kansas whoops up on you from Mizzou!

Kansas & Missouri: The Border War

2007-11-14T14:42:00.000-06:00

People throughout the sports world think they understand rivalries. There's Michigan v Ohio State in football. Duke v Carolina and Indiana v Kentucky in basketball. Boston v New York in MLB.

But there is nothing like the rivalry there is between Kansas & Missouri. Nothing. Sure, we haven't won as many championships between the two schools. But each and every competition between the two is called the Border War. And while ESPN can pimp all they want to the Duke v Carolina basketball rivalry, it is Kansas v Missouri that stands out in front.

Don't like each other? Seriously, what two other rivalries had great-grandparents that shot at each other? That burned each other's town to the ground? And look! The Missourians are still proud of it. (For those of you that don't know, that's Lawrence, KS burning on the shirt. Nearly 150 men of Lawrence were left dead or dying that fateful morning after Quantrill's Raid.)

I credit the Missouri nation for their creativity and success this year. It's one of the reasons I love to "hate" them. And I know they feel the same way. :)

***
By the way, the most creative shirt floating around Kansas right now refers to our successful football program...at least this year.

Our coach beat bulimia.

Rich Dad Poor Dad in Kansas City

2007-11-14T08:01:00.000-06:00

While reading today's Kansas City Star I noticed in the Local section an advertisement that Rich Dad Poor Dad Education was going to be putting on three days worth of seminars right here in the Kansas City area.

While I find the book to have some great principals and mildly entertaining I couldn't help but think of Christopher Smith's thoughts on the book. Well, actually. I think along those same lines.

If you choose not to follow the link here is a bit of Christopher's post:

In reality, real estate investing isn’t fluff. And it’s not rocket science or mysterious. It’s a practical, hands-on form of investing and a proven way to diversify your returns and build wealth. It’s not particularly sexy to talk about discipline, managing risk, building credit, evaluating properties, managing tenants and negotiating with contractors – but that’s what real estate investing is all about.

Think twice before buying the whole program hook, line and sinker.

Kansas City Foreclosures: Right In The Middle

2007-11-14T07:53:00.000-06:00

Living in Kansas City means growing up with a chip on your shoulder. We aren't New York. We aren't Los Angeles. Heck, we aren't even Dallas, Atlanta or Denver.

No, we're right in the middle...of everything.

We're in the middle of the country geographically. Housing prices hover around the national median. Sales of units...middle of the pack. Check out the rates of growth here during a real estate boom and you'll find we're right about the middle.

But also, during the foreclosure crisis facing much of the country where will you find the Kansas City housing market? Number 54 out of a 100. (The linked table comes from kansascity.com.)

I've said 1,000 times and here it comes again. Do you want your real estate investments in a safe harbor? Nothing fancy. Just predictable growth? Think about the Kansas City area.

Give me a call.

Are You Listening To The Right Person?

2007-11-12T08:17:00.000-06:00

Sooner or later you have to decide who you are going to listen to when it comes to real estate investing. Newbies have the hardest time deciding.

Many would be real estate investors begin to get interested from the shows they see on tv whether they be the HGTV or A&E variety or whether they be the infomercials put on by Carlton Sheets. Or maybe they read all the way through a Bob Allen newspaper ad.

The studious would be investor may even go to the bookstore and find the real estate section and be amazed at the variety of books available concerning real estate investing.

There are books on:

Short Sales
Buy & Hold
Fix & Sell (Flip)
Buying Tax Liens
Subject To
No Money Down

And I haven't even scratched the surface with that list. Confusion can set in. Should I listen to the REALTOR that gets a commission when he sells me a house? Should I listen to the "real estate investor" who seems to spend more time selling thousands of dollars of books and tapes than he does investing in rental property? Should I listen to my best friend's friend who says he's making a fortune in flipping?

I feel for you if you are a newer real estate investor. I went down a lot of these thought highways myself when I was getting started. But ultimately I chose a path of real estate investing that matched both my ability (financially and time-wise) to my values.

You should do the same.

FOUR FRIED CHICKENS AND A COKE

2007-11-10T17:23:00.001-06:00

It's the weekend. Get out. Listen to some blues. Eat some BBQ. Here's a band that's fun to see. A high school friend is the singer. The setting is BB's Lawnside BBQ...a favorite hang out for authentic blues and blues reviews like you'll see here.

A Missouri Property Manager...That's Licensed.

2007-11-09T09:51:00.001-06:00

As most of my frequent readers know I have often moaned and groaned about the fact that I have not been able to find a property manager in Missouri that:

Has an understanding of Missouri landlord/tenant law.
Knows that they have to be licensed in the state of Missouri AND complies.
Understands that I am a working REALTOR who works mostly with Kansas City real estate investors and that if they mess me over that will be the end of a lucrative partnership.

Well, I still have to go through all the materials they left me yesterday but I believe I may have found one, Advantage Homes. Funny thing is, I didn't find them, they found me. They found one of my blogs lamenting the fact that I cannot find anyone I can trust fully.

Side Note: I even had one dude here in the Kansas City area that works with real estate investors and manages properties. Now, aside from my basic belief that you cannot do both extremely well - maybe somewhat well, or kinda well, but not extremely - he told me, yes told me, that if I referred my investors to him for property management that he would now consider them his customers. And besides, after they worked with him they wouldn't want to work with me, anyway! Seriously? I won't name the guy. But what an ass.

Property management in Missouri has been my Achilles heel. Now I won't have to "temporarily" manage these properties for my real estate investor clients. I can, in good conscious, turn them over to a professional property manager.

See Where Kansas City Real Estate Stands

2007-11-08T18:10:00.001-06:00

From the blog SocketSite comes this nice little article. Read it and see where Kansas City stands. You'll be pleasantly surprised.

Finally. A Man Worth Killing.

2007-11-08T14:14:00.001-06:00

I love the 2004 version of the tale of King Arthur. The movie was done very well and is more historically correct than previous versions. The movie relates the very human principles of honor, purpose and destiny. It speaks to a side of me that is very dominant. The side that says these principles are not lost forever. Rather overlooked by pop culture. But exist they still do.

In the movie the Germana invasion leader is a fierce sort. A man who has lived by the sword his entire life. When he finally meets Arthur he finds a man more afraid of not living on principle than of dying in battle. As Arthur turns to go to ready for himself for battle the warrior says to no one, "Finally. A man worth killing."

A compliment of respect to be sure.

I work in a business where dishonesty and quick gain are there for the taking. There are many, many chances a year to overlook my moral code and to grab the cash. I'm not perfect. Nor are you. But the complete lack of respect for the laws, principles and morals that made this nation what it is today are what has given us the savings & loan debacle, Enron, Westar, the sub-prime crisis...and more.

What does this have to do with real estate investing and real estate sales? Well, I implore you to live by the verse found in the Bible located at Matthew 7:12.

"Do onto others as you would have them do unto you. For this is the law and the prophets."

You don't have to be a Christian to see the wisdom in that. You just have to be human.

Securing A Retirement Worth Having

2007-11-07T09:46:00.000-06:00

Securing a retirement worth having takes forethought, perseverance and planning. Exactly what a couple I'm working with right now has.

You see, they have a sweet equity position in their current principal residence. Now they could go out an buy a bigger home. One with another garage, an extra bedroom for that once a year visitor (wouldn't a hotel room be cheaper?) or the back yard that would blow all their friends away.

Or they could take money out and go on that vacation that would make you drool. Or how about driving a car that will turn heads?

No, this couple decided to do something rather boring. They decided to get rich slowly. They decided to plan for a retirement worth having by investing in real estate. Not the kind of real estate investing that you see on HGTV. Not the kind of real estate investing that is helping to bring down the sub-prime mortgage market.

The boring kind of real estate investing. The kind where you buy a house or duplex and you rent it out. Then reap the Four Benefits of investing in real estate. What were the Four Benefits, again?

Cash Flow Before Taxes
Principal Reduction
Depreciation
Appreciation

Want to know how these numbers work together in concert? Just email me and I'll send you a sample analysis. You can judge for yourself.

Los Angeles Here I Come

2007-11-06T10:36:00.000-06:00

The University of Kansas Jayhawk basketball team plays the Trojans of USC on December 2nd. So mixing business with pleasure, I will be visiting the lovely city of Los Angeles from November 30th to December 4th. I have to come out to watch my Jayhawks put the beat down on OJ Mayo and his Trojans. (Or so I hope!)

Anyway, after speaking with a couple of my Los Angeles clients it looks like I'll be getting together with them and a few of their friends (thanks Jeff Brown) to discuss real estate investing in Kansas City.

I would love to meet you to. We can get together for a coffee or something and just meet so that you can see I'm not the Boogie Man or the guy from Glengarry Glen Ross.

Again, if you have even a passing interest in moving some of your real estate investment portfolio from the Los Angeles area to the Kansas City area, just give me a call at 913.568.1579 or drop me an email. I'd love to hear from you.

Why Are All Register Recipts Two Feet Long?

2007-11-05T22:11:00.001-06:00

What I want to know is how much of our national forest is being devastated so that each and every purchase in America can take place with the customer receiving, in return for their hard earned money, both merchandise and a two to three feet of register receipt?

Seriously, this is getting ridiculous. I pay for everything with my Visa card that subtracts immediately from my checking account. So I have to keep the receipts. Easier said than done when you stop at the local CVS for a pack of gum, deodorant and razors that cost $11.27 with tax and then you are presented with 18" of coupons, advertisements, who the manager is, etc.

Pardon me, but where the hell is the amount I paid? Can't I just get that?

I've taken to ripping off the top 3"-5" with the important stuff like the amount paid and the date and company and just leaving the rest with the register person who ALWAYS looks at me dumbfounded.

Now, I realize this has nothing to do with real estate investing. But I'm telling you I'm not the only one that has noticed this disturbing trend that I am sure is going to bring down Western Civilization.

Sorry for the rant. But I do feel better. :)

Thoughts About KC Real Estate Investing

2007-11-05T08:14:00.000-06:00

Miscellaneous ramblings about the Kansas City real estate investing market...

- I spoke the other day about a real treat I had found from an investor. I put the word out to my real estate investors and they responded in far greater numbers than I could satisfy. Why?

The properties were 3 duplexes in a 55+ community. Both sides rented at $1,075 on 4 of the 6 units, $975/side for the other duplex. Asking price was $220,000 and HOA took care of all exterior maintenance for $100/mo. per building. Oh, did I mention they were located in one of the fastest growing suburbs in Kansas City?

Now here's the good news. The seller of those properties have given me a tip on another builder also looking to get out of his construction loans. He too has had to rent out his new construction homes to help keep from going under. So I'm entering negotiations today to see where those will head.

I've been predicting good things for this winter for the Kansas City real estate investor. Looks like it's going to happen. (But don't get too excited. Every year I predict the Jayhawks will win the NCAA tourney, too.)

- Where is fall? Seriously, I had to take my sweatshirt off at my son's football game on Saturday because I was hot. Enough already. Jeez. Some of the trees still have green leaves.

- I know of a Waldo home that is 3 bedroom and 2 full baths that just rented for $1,150/mo. I have a 3 bedroom 1.5 bath home in Waldo for rent at $965/mo. that is generating some traffic. The rental market remains very strong in Waldo. And for that matter, throughout much of Kansas City.

- Congratulations to the Jayhawk football team. They are in rarefied air at #4 in the BCS standings. Unbelievable. I'm still peeing my pants from hanging 76 on Nebraska. Sure I know Nebraska isn't up to their usual standards. But they are still Nebraska. Those kids were recruited over the kids Mangino has. And they've hung 60+ points a game on us for decades!

- This Saturday I'll be teaching at UMKC's Communiversity a class on real estate investing. As I understand it the class is about 75% full. I'd love to see you there. We'll talk about real estate investing in general. But specifically we'll talk about getting rich slowly to build a retirement worth having.

Come on out. It's about real life real estate investing for real people.

Myths of the Real Estate Investing REALTOR

2007-11-02T09:34:00.000-05:00

Here are a few myths that need to be dispelled about my abilities. I'm doing the best I can. But I'm only human. This just happens to be my full time profession. Well, that and rasing four kids!

I cannot tell the future any better than you can when it comes appreciation, foreclosures, etc. (I can use market data to tell you historical trends.)
When negotiating I cannot tell you the exact thought process of the opposing party. (I can give you best "guesses" based on experience, suspected motivation and deduction.)
I cannot control the behavior of the opposing party or their REALTOR advocate. (I can be a buffer between you and them and give sound, reasonable arguments as to why you are making the offer or counter offer you are making.)
I cannot find income houses that fit your criteria if your criteria is not realistic. (No, there are no brand new duplexes selling for $150,000 here in Kansas City that have 100% occupancy and rent for $900 a side. At least not that I'm aware of.)
I cannot control the market. (I realize you want $300,000 for your property. I get that. But the market says it's worth $250,000. I'm not saying that, the market is.)

Of course, I could go on. Here's the deal, if you are an experience real estate investor here in the Kansas City market you may have a lot of the same opinions on property that I do. We may even come to a lot of the same conclusions. But wouldn't you be wise before making any sizable investment purchase to compare notes and have a neutral set of eyes looking at your potential deal.

And if you are brand new at real estate investing, even if it's new to investing in the Kansas City market, you really do need the expertise of a REALTOR advocate. One that knows the Kansas City market. One that knows real estate investing.

Kansas Basketball

2007-11-02T09:29:00.001-05:00

I realize that many of you simply do not care. You want to read about real estate investing. Well, wait till the next post!!!

Last night I took my dad who was in town visiting from Charlotte, NC to the KU Jayhawks basketball game over in Allen Field House. He had never been to AFH and by all accounts, he had a great time. The Jayhawks rolled to a rather yawn inspiring 94-59 victory. But what do you expect from an exhibition game? Still the crowd was out in full force (how many places in America can they say that?) and the students were, as usual, a riot.

If you ever get the chance to see a game in Allen Field House you should do so. For that matter, Gallagher-Iba Arena in Stillwater, OK is fantastic, too.

Trick or Treat? Treat!!!

2007-10-31T13:38:00.000-05:00

Yesterday while combing through the MLS I found a real treat! I emailed the listing to my investor client base that actively invests in real estate here in the Kansas City area. To give you a clue as to how good the investment looks I have 11 potential buyers for 3 properties. Ooops.

That's a good thing for me, I guess. But I need to see if I can dig any more of these up to keep the others happy.

If you want to be added to my "mail-to" list just email me. Just so you know, I work on a first response, first served basis. It's the only way I know to be fair.

***

Keep in mind the time of year. As you drive home this evening be careful! I don't want you driving over a little ghost or goblin. So slow down and enjoy the ride.

***

One thing I try to remind everyone at Halloween is how real estate signs seem to magically move from one part of a city to the other. So if your house is for sale, do your REALTOR a favor and put the sign in the garage for the night.

Passive Loss Rule As It Pertains To Investing

2007-10-30T09:18:00.000-05:00

I'm not an attorney or CPA but I was trying to explain passive loss to someone who is the other day concerning his real estate investments here in Kansas City. So I did a Google search and came up with this web page regarding the Passive Loss rule as it pertains to real estate investing.

Despite what the title of the page says you do not have to be a REALTOR to be a real estate professional. Enjoy.

Kansas City Real Estate Investing

2007-10-29T09:32:00.000-05:00

Kansas City real estate investing is alive and well. And counter to the rest of the real estate market things are beginning to really heat up for the active real estate investor. In fact, I actually have more ready, willing and able buyers than I do properties I feel great about recommending.

But I believe that is changing. The properties side of the equation, anyway. You see as the high inventories begin to creep into the holiday season many sellers are beginning to get a little more flexible as far as their expectations are concerned. I'm seeing in the desperation of their agents.

"Motivated seller."

"Make offer!"

"Owner may finance."

These are all signs that the real estate agent and seller are feeling the pressure. (By the way, isn't it odd that the National Association of REALTORS is running it's a great time to sell commercials here in the Kansas City market? Really?) And when people feel pressure from within they tend to bend where they wouldn't bend before.

Kansas Jayhawk...Football?

2007-10-26T16:24:00.000-05:00

Be sure to tune into ESPN2 tomorrow at 6:00 pm (Central) to watch the Kansas Jayhawk football team continue their march to the inevitable BCS Championship game.

Watch as these Jayhawks grind out yardage against the once proud Texas A&M faithful and...

...I'm sorry. I had to stop and laugh. It's hard to say Kansas football and BCS in the same sentence. But who knows? If Florida can win titles in basketball (which I still consider sacrilege) then why can't Kansas win one in football?

I invite you to give me even one good reason we can't do it!

Proceed With Caution On Your Real Estate Investments

2007-10-26T09:40:00.000-05:00

The basics of real estate investing have never been more important than they are right now. I read a headline on Yahoo! that Countrywide Home Loans has announced a loss last quarter of $1.2 Billion. I read in the Kansas City Star that some analyst are expecting this real estate correction to last into 2009.

And while I cannot tell the future any better than you I can tell you that perception can become reality. For that reason alone I urge you to make sure that when you are purchasing your next income property that it makes sense financially to do so.

Listen, markets go up (we like that) and they go down (we like not so much). During a Seller's market it might be tempting to purchase income property on more of a "speculative" basis. A little negative cash flow may be acceptable so long as there is a belief that you will make money on the appreciation on the back side. I'm not advocating this! Just merely pointing out behavior.

But the real estate market here in Kansas City has come to a standstill, overall. Yes, there are definitely some areas of town where appreciation is still happening. Population growth and housing demand don't stop just because the credit crunch hits. But there are also many parts of town where days on market is soaring and prices are softening.

As I have always advocated and now yell from the mountain top, do not purchase income property you cannot afford to keep. Make sure that you are honest with yourself on the expense expectations including capital improvements and vacancy. Make sure rents will cover your PITI PLUS the improvements and vacancies mentioned.

Don't gamble with your retirement worth having. There is too much at stake. Now, if you are in a position to buy and buy right now, you should be smiling. But if you are in need of selling because you got caught speculating, you are probably nervous. You should be.

Just look at the slippery road caution sign. It doesn't say stop. But it does say proceed with caution and be aware of the pitfalls. The same is true with your real estate investing.

Changing Relationships

2007-10-24T23:46:00.000-05:00

I love it when I see real growth out of my clients. I had about a twenty minute conversation this evening with a gentleman I helped to buy his very first home three years ago. I said his first home. Not his first real estate investment property.

Today, he owns more property than I do. Seven to be exact. He had called for some advice regarding a particular concern he had. Hopefully I got him the answer he needed. But as we talked I asked him questions and gained insight to some things he was doing.

It seems I'm still his mentor in many ways. I'm about 16 years older. I've been working with real estate longer. And the advice of mine that he has followed has really provided him with some sweet, sweet equity positions. But I feel the relationship changing. Changing for the better.

It's a lot like when I talk with my fifteen year old, now. There was a time when I told him everything he needed to know. I helped him get dressed. I helped him fight his fights. Now I sit back amazed at the path he is taking. The answers he comes up with himself. Amazed at the man he is becoming.

Sure, I'm still there to say "what about this" now and again. But my role isn't so much to dictate as it is to advise. My boys, both literally and figuratively, are growing up.

Calculating Returns on Real Estate Investment Property

2007-10-24T12:05:00.000-05:00

When I calculate returns for my real estate investment property here in Kansas City I am usually worried more about what my equity return is than any other issue concerning returns.

What do I mean by Equity Return?

Quite simply, the money that you have tied up in the real estate investment. For instance, in your first year your equity will be:

Your down payment.
Any difference between what it's worth and what you paid for it.

A couple of years later (say the 5-8 year window I talk about for trading in/up your real estate investments here in Kansas City) you equity will be:

The difference between what you sell it for minus what you owe (including your down payment).

So keep in mind you've had principal reduction going on (unless you went with an interest only loan, which could have been a good strategy depending on your situation) in conjunction with appreciation to raise that equity.

Here in Kansas City when you first purchase an investment property I would encourage you to make sure you are getting at least an 18%-22% return on your equity investment. But as you can probably figure out 6 years later that equity investment return will probably have been reduced by as much as 7%-10%.

Why? Because your accelerated depreciation has been exhausted on most facets of the personal property in the rental property and the percentage of net equity to value has steadily dropped, therefore lowering your leverage.

Knowing how you measure what a successful real estate investment property is provides you with the fist step in knowing whether or not that particular house is the right house for you and your investment property portfolio.

As California Burns...

2007-10-23T12:28:00.000-05:00

Remember the people in southern California today in your prayers. I can imagine replacing my house. But replacing the memories, the photos, the keepsakes...those things you can't replace.

***

If you have your money in 401Ks and IRAs you are going to want to read this from last week. It's worth your time. Sound financial planning takes more than one vehicle. So go read Jeff Brown's Trojan Horse.

***

As I understand it the workshop I'm doing at UMKC regarding real estate investing already has more students registered than I usually speak with at one time. I've liked the smaller groups in the past because of the active participation. It will be interesting to see how this goes. You can register for this class by calling 816. 235.1448.

***

I was speaking to a would be real estate investor on the phone today and she said she went to a 3 hour course on REI and the only answers she got was to buy the books and tapes they had to sell. Gee, that sounds familiar.

You DO NOT have to spend thousands on books and tapes to be a good real estate investor. Work with someone that has a vested interest in your success. You could be reading one, right now.

A Real Estate Joke: Rated PG-13

2007-10-22T12:59:00.000-05:00

A businessman met a beautiful girl and agreed to spend the night with her for $500. They did their thing, and, before he left, told her that he did not have any cash with him, but he would have his secretary write a cheque and mail it to her, calling the payment "RENT FOR APARTMENT."

On the way to the office, he regretted what he had done, realizing that the whole event had not been worth the price. So he had his secretary send a cheque for $250 and enclose the following typed note:

Dear Madam,

Enclosed find a cheque for $250 for rent of your apartment. I am not sending the amount agreed upon, because when I rented the place, I was under the impression that:

#1 - It had never been occupied;
#2 - There was plenty of heat; and
#3 - It was small enough to make me feel cosy and at home.

However, I found out that:

#1 - It had been previously occupied,
#2 - There wasn't any heat, and
#3 - It was entirely too large.

Upon receipt of the note, the girl immediately returned the cheque for $250 with the following note:

Dear Sir,

#1 - I cannot understand how you could expect a beautiful apartment to remain unoccupied indefinitely.
#2 - As for the heat, there is plenty of it, if you know how to turn it on.
#3 - Regarding the space, the apartment is indeed of regular size, but if you don't have enough furniture to fill it, please do not blame the management.

Please send the rent in full or we will be forced to contact your present landlady.

***

Thanks you to Al S. for sending this way.

Kansas City Royals Have New Manager

2007-10-20T08:59:00.001-05:00

The Kansas City Royals have hired a new manager by the name of Trey Hillman. He's the guy pictured below celebrating a Japan Series win with the Hokkaido Nippon Ham Fighters. (Try saying that three times quickly with a straight face.)

As stated here before my first choice would have been for Frank White. Having said that, I don't think you want me running a baseball team with my vast knowledge of college basketball.

To date most of Dayton Moore's decisions have been spot on as to changing the talent make-up and losing culture of the Royals. We had very modest improvement this year with a manager that came in with a lousy record. So in walks this guy who knows how to win. He knows how to adapt. He wasn't a golden boy. He was the kid you wanted to cut but couldn't. At least that's what I get when I read between the lines. See Joe Posnanski's article in today's Kansas City Star.

Also, doesn't this all make you wonder about Buddy Bell's "retirement?" He retired to spend more time with family and work in the Royals' front office. Then, an hour and a half later, he takes a scouting job with the Chicago White Sox. Does that sound like he retired? Sounds like Dayton Moore allowed him to leave with dignity so that he could make a hire of a younger manager more in tune with all the young talent the Royals have both here in Kansas City and Wichita.

In a closing thought this can only help real estate investing, right? As the Royals begin a ten year tear winning 3 World Series titles the value of the team and the city will rise exponentially. It's perfect! :)

UMKC Communiversity Class On Real Estate Investing

2007-10-19T09:48:00.000-05:00

On November 10th, 2007 I have been asked to teach a class on practical real estate investing here at the University of Missouri-Kansas City's Communiversity. Communiversity is an adult outreach service of UMKC.

Of course I have agreed to do so because it is in everyone's best interest that as many people know about and understand real estate investing as possible. I didn't say everyone needed to be a real estate investor, though that wouldn't be a bad idea. But if people understand the basic dynamics of income property and real estate investing then maybe they won't fall victim to the get-rich-quick gurus out there.

Boston Legal To Take On Foreclosure Mess

2007-10-18T12:14:00.001-05:00

I was speaking to a client today and the subject of his work on Boston Legal came up. I asked him when Alan Shore and Denny Crane were going to take on the whole real estate foreclosure mess that has been taking place.

There was a pause, and then he said "soon." Seems Alan Shore is working up one of his passionate closings to expel the evils of banks, mortgage brokers and quite possibly real estate agents.

One of the reasons I like Boston Legal is because it takes on relevant current events. The show's format and characters allow several points of view to come forward before the inevitable closing filled with emotion, un-arguable logic and conviction.

Since real estate, real estate investing and the current condition of the market are of great importance to me I cannot wait to see how Hollywood interprets this current condition we find ourselves in.

As noted, here in Kansas City, Tulsa, Dallas and other cities the market really isn't that bad when compared to California, Arizona and Florida. I can't wait to see what their view cooks up. And I'll probably be siding with Denny Crane. :)

The College Basketball Experience

2007-10-17T13:05:00.001-05:00

Frequent readers of this blog know my passion and love for the game of college basketball and my beloved Kansas Jayhawks. Today is a special day in Kansas City and around the country for those that love the game of college basketball. The College Basketball Experience opened today. It's adjacent to the new Sprint Center and it's fantastic.

There is no way I'm going to do the place justice with one blog post. Let me just say that if you live in and around Kansas City you need to check this place out. Tickets are just $10.00 for adults and you will get your money's worth even if you are just a casual fan.

Upstairs I got to:

Shoot baskets against a clock.
Take free throws staring into the Illinois student section.
Listen to the crowd groan when I missed a last second three for the win.

I passed on the dunking areas. Unless I can do it on the 10' rim I don't see the point. And that wasn't going to happen. My heart raced, my breathing grew heavy and I worked up a sweat pretending I had any talent what-so-ever. After evaluating my performance, it's no wonder Larry Brown didn't spend any time recruiting me.

There are photos of everybody and anybody who has left their mark on college basketball. There are computer screens everywhere to hear from your favorite coaches. There are areas for the little ones to get into the game, too.

Make the trip to Kansas City and make sure you visit The College Basketball Experience. It is sure to be an attraction in our city that will bring folks from around the world that love college basketball.

Borrowing To Get Out Of Debt?

2007-10-17T08:24:00.000-05:00

I've been reading quite a bit lately and the blogs/newspaper articles that have been grabbing my attention all center around debt and consequences. And while this seemingly has nothing to do with real estate investing it does speak to the mindset of many of the people that you and I know. And the debt mindset has an effect on how much our money costs when we do borrow and filters down into every consumer item you and I touch.

(In the interest of full disclosure I am not now, nor have I ever been since the age of 18, debt free. Besides my houses I have a car payment and a couple of other miscellaneous debts. So I too am a part of the problem.)

Jeff Brown had an article yesterday talking about Social Security, the Boomer generation and the probable lack of funding for future generations. It's a read definitely worth your time. And don't forget to take a few minutes and go through the comments. You should also take the link jump over to Brian Brady's blog and thoughts on the subject.

Then in today's Opinion section of the Kansas City Star Lewis Diuguid has an op-ed piece that has some numbers I haven't seen before;

At the end of 2006 US residents owed $745 billion on general-purpose credit cards... up $34 billion from the previous year.
The savings rate for 2006 was NEGATIVE 1%.
13% of all credit cards have balances of more than $25,000.
The national debt now stands at $9,815 trillion.

Reading those numbers and knowing how our government works you cannot help but know that taxes will start going up to pay for a whole lot of people who chose cable television, SUV's and lavish vacations over savings. (Not everyone, but a good many.)

Younger generations are headed for uncertain times in which they'll be taxed to pay for their parents' and grandparents' retirements as well as having the additional burden of saving out of pocket for their own.

If the government continues to lower interest rates to prop up the ease of additional debt I'm really not sure with whom to be upset. The American population's appetite for instant gratification has gotten us to a point were financial disaster looms for tens of millions. And with our own government so far in debt (can you conceptualize $10 trillion?) there is really no way they are going to be able to help. Not in a manner that doesn't cost you and I a lot of cold hard cash...or maybe we'll just pay our taxes with our credit cards.

What Is A Pro Forma?

2007-10-16T09:32:00.001-05:00

People love to show me the pro formas on the investment property they are trying to sell. And I look at them...with a wary eye.

What is a pro forma? It's a set of numbers that project what a property should be getting/spending versus what it is getting/spending. It adjusts income and expense numbers to reflect true market rates. Or does it?

To me pro forma probably means "I'm lying to you." Now, I hate to sound cynical. However, if an income property should be getting $850/mo in rents per side why is it only getting $725/mo per side in rents? Also, how can you say expenses will only be "Y" when it is an eighteen year old property with the original heating, air, roof and water heater. Don't you believe there will be capital expenses to account for next year?

I know you can turn investment properties around. There is a lot of money to be made in doing so. But choosing the right property is a daunting task and it should not be based solely on what the seller's pro forma is showing you. You need to research, fact check and look at the numbers with a cold, rational approach. Take off the rose colored glasses before you get yourself into trouble.

Get Ready To Pounce!

2007-10-15T10:23:00.000-05:00

About two months ago I started saying that winter was going to be a great time to pick up good investment property here in the Johnson County, Kansas area. And I like it when a plan comes together.

Over the last two months inventories have swelled from about 42 multi-family housing units for sale in Johnson County to today's number of 72 multi-family housing units for sale. Many/most have starting prices too high and that is to be expected.

Realty is quickly setting in on many of these sellers. They are trying to sell at premium prices, above and beyond what was reasonable even 18 months ago. How do I know? Because their rent to purchase price ratios are out of whack. Numbers don't lie. I know I can show each of these sellers the past three years of pricing trends and get them down.

Most of these investors own these properties and know the real numbers anyway, even if their REALTORs don't. I just need to start picking and choosing.

Is That A Good Deal?

2007-10-12T09:06:00.000-05:00

It just seems to me that people keep missing the point. The question isn't "Is that a good deal?" The question is "Where else could I put my money and would that be more or less profitable?"

When it comes to real estate investing people are constantly asking me (after I've shown them a property) "Is this a good deal?"

"I don't know."

Now, I'm really not trying to be flippant. In fact, I'm trying to make you think. After all, what is a good deal for you may not be a good deal for the very next guy discussing the very same property. Why?

Different criteria.
Different job incomes.
Different credit scores.
Differing ability to take advantage of passive loss.
Different down payments.

Get the picture?

I am not advising here the infamous real estate investing technique of "paralysis by analysis." I am saying that you need to know what's on the market and how each of those properties would be expected to perform in order for you to answer the question "Is this a good deal?" about any one particular investment property.

Note To All You Costa Rica Spammers

2007-10-10T08:34:00.001-05:00

You are annoying the hell out of me with all your stupid "Great post! Have you thought about blah, blah, blah" followed by your stupid, un-asked for links.

You want a link from this blog? Let me tell you you are going about it all wrong. And in case you haven't noticed I just keep throwing them in the trash.

Please discontinue your links. If you like, and it won't bother me a bit, quit reading, as well.

More Growth News For Olathe, Kansas

2007-10-10T08:06:00.000-05:00

Looks like I'm doing a week long series on how real estate, and therefore real estate investing, is affected by the influx or outflow of jobs in a given region. Since I live in Olathe, I've been focusing on Olathe and southern Johnson County, Kansas. (Which includes Overland Park and Leawood and maybe some of Lenexa.)

***

From today's Business section of the Kansas City Star comes an article by Kevin Collison that states U.S. Bank is building a 100,000 square-foot facility that will house technical equipment to support this bank's nationwide operations. The western Olathe site was chosen from 93 possible sites and was chosen for reasons including "competitive utility costs and availability of labor."

While the contractor building the site will be from Minneapolis they are expected to use as much as 70% local subs . This new business in Olathe should bring at least 80 long term jobs.

***

From today's Olathe Neighborhood News section of the Kansas City Star there is an article written by Sarah Benson that talks about the continued growth of the Olathe School District.

Here are some choice sentences;

The district is growing at an unprecedented rate.

The district (Olathe) gained 842 students this year, bringing it's enrollment to 26,385.

Quoting Superintendent Pat All: "We've had straight-line growth for 41 years."

And my favorite paragraph of the article: Olathe's growth isn't just because of new subdivisions. All said that student population in older, established neighborhoods is up, too. That's because of young families with small children are finding affordable housing in older neighborhoods.

As a real estate agent who lives in works in Olathe that last paragraph goes along with what I'm seeing. Do date the older neighborhoods aren't decaying. In fact, many buyers are buying low and fixing up to build their equity and live closer to where they choose.

As Olathe steams towards the projected goal of 300,000 people by 2050 we are going to see a lot of changes. It will be important to keep our schools healthy as well as our job growth. Olathe, like Overland Park, can be a strong city in it's own rights. Not just living off of the jobs provided by Kansas City.

Forsee Out At Sprint: What This May Mean In Kansas City

2007-10-09T08:15:00.000-05:00

Coming on the heels of yesterday's post about the growth and expansion of Garmin is last night's news that Gary Forsee has stepped down (fired?) as CEO of Sprint. It seems that Sprint has been hemorrhaging customers and has lost it's way concerning customer service, vision and execution.

This is potentially very good or very bad news for Kansas City's economy, specifically Johnson County and it's housing market.

Should a new CEO come in and embrace Sprint's Kansas City roots, turn the company around and cause economic growth/expansion those middle management houses will once again be in short supply and high demand. But if some east coast guy comes in who thinks of Kansas City as a liability more than an asset and decides to move more and more operations towards Reston, VA, well, there could be big, big trouble.

This is development worth watching. I have quite a few clients that are Sprint employees. Sprint is the single largest employer around Kansas City and pays very well compared to many other tech companies here, from what I'm told.

Real Estate Values & Expansion

2007-10-08T09:11:00.000-05:00

A basic tenet of real estate theory is that anywhere there is job growth real estate will be more in demand. As there is more demand, there is pressure for prices to rise. Less demand usually follows jobs fleeing an area. The people will follow leaving a downward pressure on housing.

How does this relate to real estate investing in Olathe, Kansas? Just thought you would like to know that Olathe's Garmin, Inc, the world headquarters of the GPS leader, is expanding again just a few years after completing their new headquarters.

Also, Olathe still predicts a near doubling in population over the next twenty years. A commercial agent I know says light industry and warehouse space is going quickly.

Just thought I would share.

Am I The Only One Who Didn't Know?

2007-10-07T09:58:00.001-05:00

Okay, so yesterday I wrote about how mad I was about the way tickets disappeared in 30 seconds or less. Check the time of my post and I think you will see that it was just minutes after 10:00 am. After having done so I made one last pathetic attempt to find tickets on Ticketmaster.

No such luck.

So imagine my surprise when I open the paper this morning and find that they sold out 9 shows. They must have made the announcements moments after I turned off the computer and went out to live the rest of my life. I didn't know I had to hang around and monitor for more shows. I thought they would announce them later.

I've since tried again this morning hoping for a secretly announced 10th show. I must be destined to not see him this time around. Oh well, I'll have fond memories of the show I saw in the Cap Center outside of Washington, DC. There all I had to do was make a phone call.

Sprint Center + Ticketmaster = Corruption

2007-10-06T10:05:00.001-05:00

Okay, so Garth Brooks tickets went on sale 6 minutes ago. By 10:00 they said no tickets available online. Now I have 3 computers all refreshing by the second and a phone dialer (who never got through) and we've been doing this since 9:58 am as I'm sure thousands of others were. But are you telling me that at 10:00 am when the tickets went on sale that they were already sold out?

How exactly is this thing working? How do you sell 18,000 seats in less than 30 seconds? Were 18,000 really available or was it like the Hannah Montana fiasco where they only made 4,000 available to the "regular" people?

I'm sure Brooks will add concerts. But will the public have a fair shot at them? Or will they go to people hand picked by the Sprint Center, Wal-Mart and Ticketmaster from out of town. My guess is the latter. It will bring in great tax revenue for the city. But the people who voted to fund this thing really don't have much of a chance. Granted, I live in Olathe so I didn't vote or pay a tax (yet, they'll get me at the Power & Light District) but it's still frustrating.

Kansas City Part of Quiet Boom?

2007-10-06T08:58:00.001-05:00

Will Kansas City be part of a quiet boom due to the commodities that flow through our region? I really hadn't thought about it but after having read this post by THE GNOME OF ZURICH INVESTOR my gut reaction is that he may be right. I'll have to think about it a little longer.

But let me say this. Since Kansas City is a central railway/trucking hub and transportation is a huge part of our economy along with all the agricultural products that come through our town, it does make sense. Think on this and let me know your thoughts.

Investors Say They Were Duped In Real Estate Scam - Part 1

2007-10-05T13:49:00.001-05:00

It's one thing to say you were duped. But am I to believe that each and every one of these people did not read their loan application? No, I don't believe it.

As for the mortgage guys I hope the state banking commission will go after these guys full force.

Never forget that any fudging on a loan application will only lead to trouble down the road. Just don't do it.

And here is a tip: If you make $35,000 a year and are getting approved for $2,000,000 in loans...something might be up.

House Alarms: Annoying or Helpful?

2007-10-05T09:45:00.000-05:00

Am I the only one who finds house alarms more annoying than helpful? Seriously, I fear nothing more than opening the door for a client and not having been told that there is an active alarm.

This actually happened to me once. The sellers forgot there was going to be a showing and set their alarm. An honest mistake to be sure. But a gigantic waste of time for both myself and my buyer as we stumble around trying to figure out what to do.

Should we wait for the police? Whom do we call? Darn, the seller isn't answering! Now what? Do we just leave? Sorry, it's hard to see the features of a house when a horn is blaring in your ear.

I'm quite certain that alarms have saved people's lives...somewhere. Usually they just go off on accident and annoy the neighbors whose baby was trying to sleep. At least that's been my experience here in Johnson County, Kansas.

Next subject: Why does Tulsa (how crime ridden can it be?) have so many gated communities?

Shouldn't This Go Without Saying?

2007-10-04T14:10:00.000-05:00

So I had some time to kill over lunch and I needed to pick up a signed contract and earnest money from a client who works at the General Motors Assembly Plant in Kansas City, Kansas. (Fairfax) While there I decided to use the "facilities" and was amused with these signs on the wall for everyone to read.

Shouldn't this just go without saying? Do I really have to put myself in the position of hearing this question coming from behind a closed stall door?: "Does anyone have any extra toilet paper...and a cheeseburger?"

SPECIAL NOTE TO ATHOL KAY: Disclaimer, really. I didn't have a camera. This was taken with my Treo Palm in a low lit (fluorescent lighting) bathroom. So get off my back about the quality and focus!!!! :)

Building Real Estate Wealth in a Challenging Market

2007-10-04T08:15:00.000-05:00

Anyone that has talked to me about real estate investing knows that I really like John Schaub's book . Mr. Schaub has a new book out concerning real estate investing titled Building Real Estate Wealth in a Challenging Market.

I've only just begun the book. (Chapter 4 at this point.) But once again I have to say that I am happy with what I'm reading. As reasonable adults with differing opinions I stress that I don't endorse 100% of Mr. Schaub's thoughts and ideas. But by in large, it's right on track with my way of thinking.

From the Introduction...

For 35 years I have adapted my investment strategy to change. Recessions, tax law changes, and fluctuating interest rates have all taken their best swing at the housing market. Through it all an din spite of periodic predictions of a housing collapse, house prices have continued their steady climb.

Today the stage is set for a wave of distress selling and a new era of buying opportunities. Lenders have long forgotten the collapse of the real estate market in the 1980's. New young lenders are making many high-risk loans. Some of today's borrowers will become tomorrow's distressed sellers. The next few years will bring the opportunity of a lifetime to buy quality properties at bargain prices.

It should be noted that the copyright on this book is 2007. Meaning he wrote those two paragraphs at some point in 2006 BEFORE the mortgage crisis. Nothing beats experience.

Building Real Estate Wealth in a Changing Market: Reap Large Profits from Bargain Purchases in Any Economy

When Good Mascots Go Bad

2007-10-03T13:16:00.001-05:00

Principles Stay The Same, Performance Moves Forward

2007-10-03T08:39:00.000-05:00

Flying is a terrific way to get from Point A to Point B. And logic presumes that any airplane could do that for you. But is that true?

During the process of learning to fly an airplane I quickly learned that each and every airplane is different. Different checklists. Different performance levels. Different capacities, weights and balances.

The earliest pilots flew planes much like this Piper Cub still in use today. These planes would make them free from the Earth and allow them access to the skies in unprecedented fashion. They could travel farther, faster and more enjoyably than ever before.

Science moved forward in lock step with engineering. Compare the cockpit of the pictured Cub to the all glass cockpit of the Boeing 777.

Excuse me, Chris. But you are doing it again. May I remind you that this is a blog about real estate investing. We know you used to fly airplanes. Cool. We're impressed. Whatever. Can you please get back on topic.

Alright. Sorry. But again I have to remind you that lessons in life are easily transferred. Today's Boeing 777s fly on the exact same principles as yesterday's Piper Cubs. But the 777s have learned from experience, improved on function and the result is superior performance.

Yes. Both planes can take you from Kansas City to Los Angeles. But one can get you there in 1/10th the time while allowing room for error and greater performance.

Today, many real estate investors are still using the real estate investing techniques of the Piper Cub. Twenty to twenty-five percent down. The one percent rule. Cash flow is king.

And while not discounting those, and many more, tried and true methods I want to point my finger upwards to show you the jet that is smoking you. It's flying higher, faster, farther than you are and without the fuel stops that you have to make.

Consider other options to maximize your investments. Learn from the real estate investing principles that have been given to you and see what others are doing with them. Don't know what I'm talking about? Then we need to talk.

Questions To Ask When Investing In Real Estate

2007-10-02T11:07:00.000-05:00

Other than telling you to read this post by Jeff Brown I have nothing to say. Quit reading and hit the link. Do it now.

Renting Your Home To Family

2007-10-01T11:02:00.001-05:00

I got a phone call today from a person wanting to know about real estate investing. In fact, she and her husband will probably read this post and know I am talking about them. :)

Anyway, the subject of buying a home and letting their mother live in it came up. Is that an investment rental property?

Maybe yes. Maybe no. The IRS, as I understand it, wouldn't look too kindly on that situation. It's not "arms length." So if you are going to do something like that you had better check with your CPA first. One thing you could do is to make sure, and document, that your family member pays fair market rents for that housing unit.

Of course, if the IRS disallows the rental property as an investment you might be able to count it as a second home. Any thoughts chimed in here by CPAs would be most appreciated.

American Royal Barbecuelooza This Weekend

2007-10-01T08:20:00.001-05:00

I can't say as I know very much about horses and rodeos. But I do know bbq. And there is a very exciting weekend coming up down at the American Royal.

Barbecuelooza will be kicking off at 3:00 pm on Friday, October 5 and again on Saturday, October 6 at 10:00 am.

Yeah. There's music. Fireworks. And horses, I guess. But more importantly there will be bbq. And lots of it!

Come hungry. You won't be disappointed. For more information on this subject visit this site.

Football Update: I'm Feeling Frisky

2007-09-30T19:43:00.001-05:00

For our San Diego area readers who may have missed the score:

Kansas City 30 San Diego 16

For our Texas area readers who may have missed the score:

Kansas State 41 Texas 21

Why do I do things like this? I don't know, civic pride? Heck, I'm not even a 'Cats fan.

Kansas City Real Estate Attorney

2007-09-29T11:41:00.000-05:00

I would like to introduce a new blog to you by Eric Moore, Esq. with Ghafoor, Cook and Associates in Independence, Missouri.

(Not actual portrait.)

Eric and I had lunch over at BB's Lawnside BBQ about a month ago. I was very impressed with his focus on real estate and real estate investing law.

It is my hope that we will be able to get him to do a guest appearance here every now and again. But until then, stop by his blog at Kansas City Real Estate & Zoning Lawyer.

Condos for College Students

2007-09-28T10:17:00.001-05:00

I've helped several people do this over the years who have students over at the University of Kansas. Want to know more? Contact me at listwithchris@kw.com.

Thank you to Ilyce Powell for pointing this video out.

Real Estate Investment Analysis Is Not Sexy

2007-09-27T22:10:00.001-05:00

Some people think I live a pretty exciting life. Ah, the world of real estate investing. Living the in the life of the BMW driving & Starbucks swilling elite of Kansas City.

If only it were that cool.

Let's see. First I left the house earlier than usual to meet a contractor at a house getting a rehab job. Then it was off to meet an HVAC guy to inspect a furnace. Afterwards, I stopped by two duplexes I needed to see to examine whether or not to tell my clients about. Then I did grab lunch (Arby's - I used a coupon for the Jamoca shake) on my way to a closing.

Family responsibilities came next. Dinner, football practice and tickle time with the girls. Then off to the home office to run numbers on 4 properties so I can send them off to a client tomorrow morning.

That's right. I ran numbers for an hour. Examining expenses, income and forecasting future repairs, appreciation and rent rates. Figuring equity rates of return, cap rates and cash on cash.

Pretty exciting, huh? No. But that is why you don't see any HGTV or A&E programs about the real estate investors that buy right, rent at good to great rates and then sell when appropriate. When is appropriate? I don't really know at this point. But I'll tell you when you get there. Maybe 3 years. Probably closer to 5-7 years. Rest assured, I'll let you know when the time is right.

Real estate investment analysis is not sexy. But if you want to have a retirement worth having, it's necessary.

Priorities Make Choices Simpler

2007-09-27T12:03:00.000-05:00

Priorities make choices simpler.

Cash flow or growth?

Single family home or multi-family home?

Duplex or fourplex?

Urban or suburban?

Two bedrooms or three?

Long term or short?

Turn key or rehab?

Answer these questions and you are on your way to a successful real estate investing career. Wing it property by property and who knows what you'll end up with.

The Beauty of Real Estate Inspections

2007-09-26T09:59:00.001-05:00

The really great thing about the home buying process in the Kansas City area is the 10 inspection period allowed for in the standard Kansas City Regional Association of REALTORS contracts.

Recently I had an investor that had worked out a pretty sweet deal on a duplex in the Kansas City area. Sweet that is as far as we could tell.

Now I'm pretty experienced at spotting potential problems. Furnaces, basements, roofs, etc. Heck, I even know what a mud tube looks like and can spot suspect wood damage. But inspecting homes everyday is not my gig. That's why I encourage the hiring of a reputable, professional termite guy. Especially here in the Kansas City area.

Getting back on story, I knew or suspected I knew, that the house had termites or had had termites. I even conveyed this to the buyer and showed him why I was suspicious. We kept that in mind on the offer and assumed a $1,000 or so in repairs.

Hold the phone. After the termite guy gets done inspecting it during the inspection period he shows me a tunnel I missed that spreads to basically everywhere in the house. He starts poking his screwdriver through floor joists all over the basement area and again on structural, load bearing tri-lams.

No matter how sweet our deal was, it wasn't going to be enough to cover all this. And we were figuring the long term liability was too great EVEN IF we could get the seller to come down further.

I've seen extensive damage before. There is repairable. There is not repairable at a price that makes senses. This didn't make sense. Best to move on. That's the beauty of real estate inspections.

A Friend Is Hurting

2007-09-25T08:32:00.000-05:00

My friends from Austin, TX are hurting. A brother and father was lost. When I learned of it yesterday I thought back to when I was driving around with no life insurance, or health insurance for that matter. My wife and (at that time) only son's future were completely out of my control.

I'm older now. I've been blessed with more. And while I still have no control over the future I am able to have a life insurance policy large enough to help out. A house or two to sell if necessary, as well.

But unless you are extremely blessed from the beginning most people in America spend at least part of their 20's and maybe 30's without significant life insurance. Go back to those days, at least for the moment. And think how you would have needed your friends, family and acquaintances to step in if necessary.

Belton, Missouri Duplex For Sale

2007-09-24T09:30:00.001-05:00

Now that I'm back on the subject of Kansas City area real estate investing I would like to tell you about this 9 year old duplex for sale in Belton, Missouri.

The basics:

Asking Price - $164,995
Rents - $750 per side
Occupancy - 100%
Leases - 1 year. Expires 3/31/08 & 8/31/08
Bedrooms - each side has 3
Bathrooms - each side has 2 full
Taxes - $1,630
Insurance - approx $617 (per seller)

I do have copies of the leases if you would like to review. Both are Section 8 occupied through the Housing Authority of Southwest Missouri. One is a longer term tenant that the owner/seller feels isn't going anywhere.

For those of you unfamiliar with Belton, Missouri, it is a growing suburb of Kansas City and is located right off the US 71 Highway as you are heading south. This duplex for sale is located in the heart of the original Belton area and is surrounded by a good mix of single family and all brick duplexes. The neighborhood has held up very well throughout the years.

For amenities that your tenants are looking for the duplex is just 2 blocks ~ from Scott Elementary and the Belton School District has a great reputation. There is also plenty of shopping and access to the highways just minutes away.

Go ahead and run those numbers through your calculators. I believe you will like what you see.

Kansas Jayhawks Start Conditioning

2007-09-24T08:05:00.000-05:00

Sorry I'm off topic, again. But I open up KUSports.com this morning and find conditioning drills have started for the Kansas Jayhawk basketball team. Ahhhhhhh.

Can you smell that?

The basketball season is oh so close. Can't wait.

Will Brandon Rush be back 100%? Will Missouri improve under Coach Anderson this year? Will KState be a train wreck with the new head coach or a pleasant surprise? Who will win the Big XII? The tourney?

The Cost Of A Gallon Of Milk

2007-09-23T23:05:00.000-05:00

All I keep hearing about is how great the economy would be going if housing would pick up and we didn't have the sub-prime debacle. As if housing didn't carry the economy for a number of years while Greenspan buried his head in his hands pretending not to notice.

Well I have a question for you: Has anyone purchased a gallon of milk lately?

Confession time. I will occasionally help out around the house by purchasing the groceries. But I never pay attention to the prices I just get what I'm told to get and run it through the cash card.

Well Saturday I decided to pay attention and I'm sorry I did. Milk was/is $3.55 a gallon! Now this may not sound like a big deal but my kids drink about 6 gallons a week.

When did milk get so expensive? Heck, when did groceries get so expensive? Maybe it's not just the ARMs adjusting up. Maybe, because of the cost of our precious oil, everything is shooting up?

Leave REALTORs Alone!

2007-09-21T20:44:00.001-05:00

This is disturbing.

Drainage Problems & Your Kansas City Rental Property

2007-09-21T08:03:00.001-05:00

I'm not sure why a real estate investor won't take care of their Kansas City rental property but it just seems to me that drainage problems and rental property go hand in hand.

Fixing a basement in Kansas City can be very, very costly. Heck, if you put in a 4" wall brace every six feet and you have 140 linear feet of basement wall you are going to end up with a bill close to $9,000 for repairs. And that's if you don't need any other major corrections...which is highly unlikely.

Some simple things you can do to protect your rental property investments;

Water the lawn when there has been no rain for an extended period of time. Especially about two feet out from the foundation. If you think your tenants won't water because they pay the bill offer them a $25 rent credit to offset their water bill.
Make sure ALL downspouts have elbows on them at the water exit. Otherwise it's like a blasting tube for water during thunderstorms. I've seen holes as much as a foot deep dug by the foundation walls. Not good.
Add those $15 flexible black pipe extenders to your downspouts to get the water directed to the closest slope away from your rental house.
Add dirt around your foundation so that you have a one inch drop away from the house before you have gone more than twelve inches away from the foundation.
Avoid buying rental property in Kansas City at the bottom of a hill if there is no berm or drainage systems to direct the water away from or around your rental property.

This list is by no means all inclusive. Nor will it insure that you never have a foundation problem. But it sure as well help keep your negligence from being the doom of your Kansas City rental property. And how much do you think any of those items costs, anyway?

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

2007-09-19T22:02:00.000-05:00

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.

Running A Test Here: Nothing To Do With Investing

2007-09-19T12:47:00.000-05:00

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!

Net Operating Income aka NOI

2007-09-19T09:17:00.000-05:00

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.

Olathe, Kansas Investment Property For Sale

2007-09-18T12:38:00.000-05:00

Alright, for all of you real estate investors out there that would like to own investment property in and around Olathe, this post is for you.

4 Duplexes For Sale in Olathe

Priced between $179,000 and $215,000. Two of the duplexes for sale are side by side. One was built in 1978, the other in 2000. Close to downtown Olathe and bringing in rents of $850 to $950 a side.

My favorite duplex for sale in Olathe is located right around the corner from one of my properties. Vinyl siding, newer roof and brick trim. Each side has a rental income of $800/mo. Asking $189,000.

Single Family Homes in Olathe For Sale: Investment Grade

These single family homes are all priced between $75,000 and $103,000. All are in the older part of Olathe and rent rather quickly. Rents vary from $650 a house to $750. Most are in average condition though 3 really stand out to me. There are 8 rental properties available. 5 of these rental homes are on one street and could be purchased as a package deal.

Please email me at listwithchris@kw.com or call at 913.568.1579 to get additional information. These homes are not on the Heartland Multiple Listing Service which serves Kansas City.

Again, if you are looking for Olathe investment property give me a call.

Do You Like To Play Russian Roulette?

2007-09-18T08:14:00.000-05:00

"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.

What Is A Real Estate Investor?

2007-09-17T08:26:00.000-05:00

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

2007-09-15T08:46:00.000-05:00

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

2007-09-14T09:11:00.000-05:00

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.

Real Estate Investing: How To Make Money In A Slower Market

2007-09-13T11:48:00.001-05:00

Originally posted on my ActiveRain blog...but I liked it so much I thought I would bring it over here, too.

Fast appreciation and quick flips are an investment model of the past, it seems. At least here in Kansas City the best way to make money as a real estate investor is going to be your mid-term Buy & Hold strategies. It's been a while since I've been through it, so bear with me.

THE PURCHASE

You can make quite a bit of money on the purchase of your next investment property. Yes. I said the purchase. Right now with inventories in Kansas City at historical highs and colder weather just around the corner I believe real values are going to be out there to be had. (I saw 3 today!)

TIP: Look for vacant houses in bread & butter neighborhoods close to transportation centers. Days on market of 60 or greater will play into your purchase plans. Days on market at about the 170 day mark are prime targets. The real estate agent with the listing is probably ready to lose the listing and will do just about anything to make a deal work...and salvage at least some commission.

Knowing what the true market value of a home is that you are going to bid on is of paramount importance. Work with an experienced real estate agent or appraiser to figure value. After true value has been established you are now trolling for properties that you can pick up 10% under market...or greater.

But don't get greedy. Walking into a home with 10% bonus equity is sweet. Don't screw it up by asking for too much. Again, experience, leverage and intuition are going to come into play here. Oh, and as from an ethical standpoint, try not to use inspections as a back-door negotiation tool. It just annoys everyone and usually doesn't work the way you want it. If there is a glaring defect deal with it in the initial negotiations for the purchase of the said investment property. At least that is how I want it handled for my investors purchasing property in and around Kansas City.

TAKING CONTROL

If you have done your homework you now have a home ready to go for rental purposes. Maybe you bought it turn-key or maybe you had to get some repairs done for some additional sweat-equity. Either way you were careful to find a home in a clean, desirable neighborhood with not too many rental properties.

Hire a good property manager, or do it yourself. Advertise like crazy. Use craigslist, Hotpads and rentometer to figure out how much and to get the word out. Screen your tenants carefully but understand that the reason we have so many renters in the market right now is because their credit isn't allowing them to buy. Be careful on their credit history but not too picky. Remember, to weigh different items in the credit report differently. Again, you may need to be working with an experienced property manager to help you assess risks.

TIP: Why hold out for and extra $25-$50 a month rent when you could have had it full a month and a half ago? It takes quite a bit of time and money to make up for even one month's vacancy. So get it filled with a quality tenant as fast as possible at a fair price.

EVALUATING WHEN TO SELL

Each year, yes I said each year, you should be re-evaluating whether or not to hold on to that income property or to sell it. Let's take a traditional 6 year scenario here with a fully amortized loan (sorry Brian and Jeff - for example only...we'll counsel them at the table later) at 7% and an average of 5% a year appreciation.

Purchase Value $100,000
Purchase Price $ 92,000
LTV 80%

Value after 6 years $134,000
Equity growth after 6 years $39,379
minus sales/exchange costs of $7,700
Net equity growth $31,679

(By the way, calculate that return based on your original $18,400 investment...and that doesn't count allowable depreciation and a minimal/growing cash flow before taxes.)

Would now be a time to sell? I don't know. Depends on you, your criteria, risk tolerance, growth schedule, years to retirement and current real estate market. But I can tell you one thing; By pulling out that $50,000~ you can probably now own two properties and let those grow twice as fast!

REAL ESTATE INVESTING IN KANSAS CITY

Listen, I'm told all the time what a great move buying just a few rental properties made in the lives of individuals. I know darned good and well that most readers of my blogs think that the majority of my clients own 10, 20 or 50 rental houses. And that's just not true. Most of my real estate investors own between 1-6 income properties.

Have some fun. Sit down with a calculator. Work out growth projections and different strategies based on your goals and see how few income properties it really takes to make a difference in your life. But start. Start with one. Just start.

Real estate investing can be very profitable, rewarding and fun. It can also be extremely damaging to your financial situation and moral and a nightmare to deal with. Which of those two scenarios would you prefer? Then get started today with someone that can lead you along the path.

Allow me to offer my services. I'm a real estate agent that specializes in helping people with their residential investment property here in the Greater Kansas City area. Myself and my team are at your service.

Chris Lengquist
Keller Williams Realty
Olathe, Kansas
913.568.1579
listwithchris@kw.com

www.listwithchris.net/

Worth Reading Mortgage Advice

2007-09-12T05:23:00.001-05:00

Brian Brady is a left coast mortgage professional who often writes things that are right on time. Here is a link you'll want to follow regarding mortgages and how they can be/should be used.

Perpetually Poor Or Willingly Wealthy ? It's The Amortization, Silly !

Ah, To Be Young Again

2007-09-12T04:57:00.001-05:00

If I'd only...

If I were young again...

I remember when...

This is what I'd do differently...

Here I sat yesterday speaking with two completely different twenty-somethings about the possibility of investing in Kansas City real estate. Sharp individuals with different hopes and dreams and goals.

It was literally all I could do to not stand up, jump across the table and grab them by the collar and scream "Do it! Just do it! Get started today!"

If you are 40+ you know what I'm feeling. Investing, whether it's in Kansas City rental housing or a 401 K or mutual funds or anything, is so much more rewarding as years go by. (Assuming proper management, growth and all the usual lawyerly asides.) The younger you start, the more you'll end up with. It's just a fact.

And I, too, think of the "what if's" and the "I shoulda's" but here is the deal: No matter where you are today it's time to start. It's time to start investing today. Now.

Now as a real estate agent that specializes in Kansas City investment property you might expect that I'd urge you to invest right here in income housing. And you'd be right! For many, many people real estate investing has been the ticket to greater wealth than any other path they could have taken.

Is real estate investing right for you? There are some questions you'll have to get answered and some due diligence on your part that will have to be undertaken. Start today. Now. Don't "I shoulda" yourself again.

Multi-Family Housing For Sale In Johnson County, Kansas

2007-09-10T21:51:00.000-05:00

Here is an update on multi-family housing for sale in Johnson County, Kansas. There are currently 54 duplexes or apartments for sale. I would only recommend about 5 of them based on what I've seen, condition and price structure.

Tip: Duplexes and apartments are like regular houses in that if they are overpriced no one is going to buy them. No one advised by me, at any rate.

***

I had no fewer than 4 "price adjustment" emails sent to me today. I've said it before and I'm going to say it again. For you real estate investors out there with cash in your pocket and a healthy credit score you are going to clean up this winter.

Call your mortgage guy, get the pre-approval letter ready and be ready to strike when I call. I promise you that you will be happy.

Everywhere I Go People Ask About Real Estate

2007-09-10T08:36:00.000-05:00

There are some folks out there that think real estate agents make too much money. That is funny to me. Usually (always) these people work at some job where they put in their 40 and go home. Complain about their job they do. (Did you catch the Yoda structure of that sentence?)

Anyway, the point is that I'm out socializing last evening and all anyone wants to talk about is the current real estate market. I'm out at my son's football game Saturday night and I get two phone calls regarding real estate matters. The phone almost always rings when I'm having dinner with my family. And while I ignore it until I'm finished eating everyone hears it and it's on their minds.

So "some folks" may not like what I'm gonna say here but "Mind your own damn business and if you want to make more money do something different. And quit worrying about what I make or don't make."

These same "some folks" aren't feeling bad for me when I've invested a thousand dollars in time and money and a seller decides not to sell. Or drive a buyer around to 10 houses and they decided not to buy. So quit chastising me when times are good for me.

Okay, I feel better.

While I'm ranting, Blogger no longer seems to allow me to dump certain comments. Why? I got spammed over the weekend by some "person" with nothing better to do than add links from my blog. I'd love to dump them. If the jerk, er person, keeps spamming I'll have to turn on comment moderation and nobody wants that.

So two things;

Blogger, put the trash cans back on my comments section so I can get rid of these stupid ads that no one will read anyway.
Spammers, leave me alone and get your own readership.

(Can you tell the Chiefs got killed yesterday with no hope for the season? Looks like I'll have to spend my football season rooting for the Washington Redskins and against the Raiders.)

Kansas City Real Estate Investing During The Holiday Season

2007-09-08T10:44:00.001-05:00

Are you thinking of purchasing Kansas City real estate investment property? Can I share a hunch with you? One word..."HOLIDAYS."

With the higher inventories, slower growth and nerves on edge I believe that mid-November through the first week of January is going to be Buying Season. Not necessarily for the "regular folk." But for you, the real estate investor.

Our weather turns colder, buyer scurry off to their winter hiding places and hope of selling diminishes greatly. Choose carefully, have your finances in order and be ready to pounce.

It's just a hunch. But this is what I do...

Do You Know Where You Are Going?

2007-09-08T10:14:00.001-05:00

Admit it or not, every pilot has a fear of being lost. Or worse, landing at the wrong airport. Now, no pilot wants to be lost. And certainly no pilot wishes to land at the wrong airport. Safety issues aside (too small a runway?) think about the paperwork and embarrassment that pilot will endure.

As I was reading Jeff Brown's latest post the thought of being off course and ending up in the wrong place occurred to me, again. Jeff's point is that people hit a comfort level and cruise from that point on. And while this is certainly true within real estate investing circles and life in general, I also believe another key factor is thinking you are on course to your destination only to find that it's the wrong airport.

To a pilot low on fuel and short on nerves the sight of a desired airport out the cockpit window is a sweet, sweet sight. The planning, the effort and the goal all laid out before him from 5,000 ft.

Relate that to retirement planning. I'm only 42 and sometimes get tired of the daily grind. Imagine when I'm 60 and all my efforts have come to fruition...or so I think...turns out I thought I was landing at RVS and the pilot's lounge tells me I'm at MKO. Oooppps.

During your journey to retirement there is no doubt you are the pilot in command. The ultimate decisions and consequences rest with you. But may I make a suggestion? Contact air traffic control for flight following. They are happy to do it for you and will alert you to obstacles or bad weather in your way. They'll basically leave you alone unless you need to hear from them.

Consider what I do, and what Jeff does, as ATC flight following. We just want to make sure you get to where you thought you were going...safely.

You MUST HAVE A Real Estate License To Manage Property In KC, Unless...

2007-09-07T09:22:00.001-05:00

Okay. Let's put an end to the question of whether or not you need a real estate license in the State of Missouri in order to hold yourself out as a property manager.

As I said in an earlier post today I called the Missouri Real Estate Commission at 573.751.2628 and left a message concerning this whole issue. A few minutes ago Joe Dinkler with MOREC called me back and said that I can quote him. But since I don't have a tape recorder or a photographic memory, I'll summarize.

(By the way, the photo above is probably a little harsh.)

In order to offer for rent, rent or hold any kind of rents in the State of Missouri you must be a licensed real estate sales person or broker. Unless... The only unless offered by Mr. Dinkler was unless the person doing those duties was an EMPLOYEE of the property owner. And an employee is not someone who is under contract with an investment property owner.

ANY third party transactions must use a licensee. He went on to state that there is a lot of confusion in the Kansas City area because Kansas does not require a property manager to be licensed. (Until they reach a certain threshold. - My words, not his.)

I hope this clears up the issue. I wish I weren't right. Mr. Dinkler says he answers that question almost everyday. Feel free to call him if you wish.

Am I Right About Property Management Laws In Missouri?

2007-09-07T08:49:00.000-05:00

A reader here of BBQ Capital has responded to an article I wrote a couple days ago titled Property Management In Kansas City. You can see the comment by clicking the link. The basis of his comments are that he believes that either myself or his property manager is wrong about this.

So you'll see in the comments where I quoted some of the Missouri Rules & Statutes. It's seems clear to me. But confusion still seems to reign.

Therefore, I have put in a call to the Missouri Real Estate Commission to get this interpretation cleared up once and for all. (I've had this discussion before with a broker making my argument and a property manager making his.)

Let me say right here and right now that I hope I'm wrong on this. My life will become so much easier if I can quit worrying about whether or not a particular property manager operating in Kansas City is licensed or not.

The MOREC answering machine promises answers in 24 hours. Is that human hours or government hours? Who knows. But I'll keep you posted.

Know When To Say Stop

2007-09-06T15:57:00.000-05:00

One of the great strategies when negotiating real estate of any kind, especially investment real estate, is to know what the highest price you will pay will be BEFORE you begin the negotiation process.

Here in Kansas City, a good rental property will be many things. But one of the most import things it will need to be is profitable. Profitable rental property is not an accident. It is by design.

Before I let any of my clients begin bidding on a home I encourage them to know where their Stop Line is before beginning They can share that number with me if they want. But I'd rather they didn't. I'd rather they keep trying to get the best deal possible until they get to that line and then just tell me, "that's it. No more."

I'll understand. Honest. When you are figuring your numbers for your investment property you need to know where it is profitable. Why go above that number?

Property Management In Kansas City

2007-09-05T20:13:00.001-05:00

I have got to tell you, good to great property management in Kansas City is very difficult to find!

I've been actively looking for a quality property manager in Kansas City, Missouri for quite some time. I can recommend some good property management companies in Kansas. Just not Missouri. Here is my problem.

The last four, I said 4 (quatro, for my Spanish readers), property management firms I 've spoken to who are willing to take on more clients in Missouri are not licensed.

"You have to have a license?" is the standard response.

Jeez. If I have to tell you that Missouri is different than Kansas in that a property manager must have a real estate license to do business, any business in Missouri, then I'm not filled with confidence that you understand the rest of the landlord-tenant laws in Missouri.

I have half a mind to start a full fledged property management firm. Talk about a need. I could be at 100 units before January 1. I'm convinced of it. (Oh boy. I can hear Jeff Brown now.)

Seriously, if you are a quality property manager who is legally operating in Missouri and would like to discuss how we can do business, give me a call. Otherwise, you illegals are about to get competition. And I know how to make phone calls to Jefferson City. That will eliminate a lot of my competition right there!

When You Have Cash Time Is Your Friend

2007-09-04T20:41:00.001-05:00

If you are a real estate investor looking for below market rental properties you need to realize that Cash is King, but Time is the Motivator.

Yesterday I was reading Jim Crawford's post titled In the Current Real Estate Market Cash is King Negotiating the Sale of a Home With A Cash Buyer. I found the post to be well written, on topic and especially helpful to the real estate investor looking to expand his or her portfolio.

But I do want to hone his argument to a finer point. While Cash is King most sellers receive cash (or equivalent) at the closing table. So it's not the cash that will motivate the seller to sell below his asking price. Rather, it's probably the time and ease the cash buyer brings.

Cash buyers can close next Tuesday. Time. It's the motivator.

A "borrowing" buyer can get cash equivalent but it's going to take a couple to a few weeks and is subject to underwriting standards. To someone under stress or really motivated to move on, time will equal an undisclosed amount of cash. And the less the time, the greater the time to cash equivalency will be.

Are you following me here? Saving a seller one more mortgage payment is easily worth that payment. Probably a premium above that, too. Helping a seller to get out of town to join her husband with the kids will be worth "X". Relieving a cash strapped single mother of three working two jobs to make ends meet, and relieving her of that burden this week, is worth something to that overworked mother.

It doesn't matter the motivation of the seller so long as you tap into it. I think you'll find that in many cases it boils down to timing. How that timing relates to their situation is what you have to find out...and use to your advantage since you have cash. After all, you are a real estate investor, aren't you?

Real Estate Invesment Report Card: What Will You Get?

2007-09-04T07:25:00.000-05:00

What if you weren't going to be here tomorrow? What kind of grade would your spouse or significant other give you on your choice of real estate investments?

After all, it's them that are going to have to deal with these properties upon your passing. I'm not trying to be morbid. Just asking a question, really.

Many a real estate investor went out and purchased properties outside their criteria during the great real estate run-up. Maybe they bought houses with zero or negative cash flow. Or they bought houses in neighborhoods they would never let their wife visit. Or a whole host of other possibilities.

Either way, when you're gone, what kind of real estate investment portfolio have you left behind?

Mortgage Rate, Bicycles & Kansas City Royals

2007-09-02T09:23:00.001-05:00

Did you notice mortgage rates dropped again? Just further proof of what I've been saying. If you have good credit and some cash to invest in real estate, now is the time. The market conditions are really stacking up in your favor.

***

Customer service is becoming a lost art. When you receive good customer service it stands out so brightly that you cannot possibly miss it.

***

Has anyone noticed that the Kansas City Royals are sitting at 60 wins with only 27 games to go? That may not sound like much to you. But to me and other Royals "fans" that means their magic number is 3. Not 3 to win the pennant. 3 to make sure we don't have a third 100 loss season in four years. Not too shabby. (My how expectations have fallen.)

***

I may or may not post again before Tuesday. I'm not planning on doing too much today or tomorrow. So let me wish you here a happy and relaxing Labor Day holiday. Enjoy your time with your family. Now I'm off to church.

Sock Puppet's Bad Photos A Laugh Riot

2007-08-31T20:48:00.000-05:00

Does making fun of others help you to feel better about yourself?

Does you feel superior when you can laugh at the ridiculous behavior of others?

Then you really should spend time on Athol Kay's blog. It's a must read to make you realize that you are not the worst employee or REALTOR on earth!

Do You Have A Coach For Your Investing Business?

2007-08-30T20:13:00.000-05:00

When I was in my early twenties I read a book that helped define how I would live my life. Loving college basketball the way I do I had always admired Coach John Wooden's accomplishments on the hardwood. So I decided to read his book They Call Me Coach.

If you haven't read it I strongly suggest that you stop right here and click the link and buy the book. You won't be disappointed.

The reason I bring this up is that I believe that John Wooden succeed where other coaches haven't for a variety of reasons;

He had good moral fiber.
He strived to be excellent.
Character was as important as talent.

He didn't just teach the kids how to play basketball he taught them how to live life. He went beyond coaching and became personal mentors to more than just a few of his players. And in doing so he created a dynasty that might never be repeated in college basketball.

Chris. This is all very nice. But I don't come to BBQCapital to read about college basketball or Coach Wooden. I come to read about real estate investing. Or more specifically Kansas City real estate investing. Besides, didn't he coach at UCLA? I thought you were a Jayhawk fan.

Don't you see how they are related? (And I am a Jayhawk through and through. But I still respect success and the effort it requires...unless it's Missouri.)

Tonight I was reading the September 2007 edition of REALTOR magazine. One of the articles was a rather lengthy one about why more real estate agents should be courting real estate investors as their clients.

Darn! It's supposed to be a secret! (Though I'm not too worried.)

One of the great quotes in the article was from Chad Dixon, ABR, CRS and designated broker with Hearth & Haven in Chandler, AZ.

"I've found quite a few clients who mistrust real estate practitioners. These clients are looking for someone to help them build wealth, not just sell them something."

In the words of my friend Jeff Brown, "duh."

Chris. This is getting on my nerves. What has this got to do with me? What does Coach Wooden have to do with me? Why are you wasting my time?

I'm not wasting your time. You can click away at any moment. This article has already been too long for anyone that is not a serious real estate investor. But those that know this blog know I'll tie it together sooner or later. So...

The Big Finish

The question I want to ask you, know matter where in the country you are, is, "are you working with a real estate agent that sells houses or a real estate agent that is a real estate investment advisor?"

There is a huge difference. Every city has qualified real estate investment advisers. Probably almost a dozen in any given metro. But are you interviewing properly to find them?

Any agent wants to sell houses. But if I were you I'd be looking carefully at the qualifications of the person helping you in your attempts to build wealth. What is their understanding of the measurements of real estate investing? Can they calculate returns? Or give you a basic understanding of tax planning? Or refer you to professionals that can make sure you are on the straight and narrow with these very large assets?

Many an agent is extremely good at what they do. They can stage a home, market a home and successfully walk their clients from listing to closing with barely a hiccup. But when it comes to investments they aren't really sure of the right path at the right time. (Same is true when asking an investment advisor agent about staging your luxury home. What would he know?)

Coach Wooden was the best of his time. IF a kid were good enough to get on his radar he should have thrown himself at Coach. He would help him with the basics of basketball like any coach. But he would also teach him the magic, the mental toughness, the character it would take to succeed in the game. And in life.

Who is your coach when it comes to real estate investing? Are you allowing him in? Are you keeping him abreast of your every move in your quest to become great?

When you stray away from the coach and the team and the system, bad things can happen. I don't want to upset one of my investors but this is what happened to him. He made a move he didn't want to tell me about for reasons I'm still not clear on. I've never held him back from purchasing a property he found on his own. (But when he needs an agent he better use me!) This investor took a left turn and invested $20,000 into an investment situation in a manner that I would never have allowed him to take. At least not without certain guarantees and tools to protect his interest.

Now I see him losing most if not all of the $20K. That's real money. And I feel badly for him. Fortunately, he's the kind of investor that will learn from the mistake and press forward. And now I think he sees the need for a team, a coach, a counselor. That's what Coach Wooden was. That's what I want to be.

Kansas City Investment Property: Right In The Middle

2007-08-30T08:58:00.001-05:00

Yesterday morning I had the pleasure of meeting with three New York/New Jersey area real estate investors who had come to Kansas City to see what the potential of investing here. They had apparently spent the better part of the week researching tax lien houses and parts of the city, well, I'm not too crazy about from a real estate investing standpoint.

Yes, I realize I may upset them with that last sentence. But I believe I said the same thing as we sat and talked for about 2 hours in the Marriott Courtyard lobby area. All three were sharp. All three seemed to be well funded. And it was my impression that all three see the Kansas City area as a place for for at least part of the real estate investing portfolio.

You all know me to talk ad naseum about the benefits of Kansas City real estate investing. But I'm going to give you another reason. Silly as it may sound.

Ease of access.

Whether you are a real estate investor from New York, Florida, California or Texas you can get to Kansas City in two hours. Non-stop. Through multiple airlines. Take Express Jet, or Midwest Airlines. Those are my two favorites. Then there is are the big boys that you are used to.

A round trip flight to Los Angeles' Ontario airport is only going to cost me $230 this winter, and it's non-stop. At least on XJet. Kansas City's airport has grown in passengers served, airlines and flights over the last two years. It's an easy airport to get in and out of (though relatively boring compared to most other airports) sits at the junction of two highways that will get you anywhere in our area.

If it sounds like I'm promoting the Kansas City airport...okay. I just want you to know that if you are thinking about investing $25,000-$35,000 into a property anywhere in America, you can check out Kansas City for only a $230 flight. Sounds like a business trip to me. I'll buy the BBQ.

There are, of course, many reasons to own income property in Kansas City. (Two of the ladies flinched yesterday when I said I could get them cash flowing duplexes with capital investments as little as $20,000-$30,000.) Cash flowing investment properties in good neighborhoods, that is.

Please Explain!

2007-08-29T15:57:00.001-05:00

It just happened again! Can somebody out there explain to me the logic of driving 35 mph on a 40 mph road and then running the yellow light to make it through? (Leaving me to wait through the light!!!!)

If you are one of these idiots, er people, please explain. I'm begging you. Are you driving below the speed limit to be safe? Then why run the light?

We both could have made it if you would just drive the 40 mph!!!

Okay, I feel better. :)

Real Estate Investment Property Criteria

2007-08-29T12:11:00.000-05:00

I've written in the past about knowing what your criteria is for your real estate investment properties. Single family or duplex? Tri-plex or apartment? Urban or suburban? Etc.

But I want you to look at it from another angle, as well. What kind of tenants are you hoping to attract? I don't mean from a racial or religious standpoint. (Or any other standpoint that violates the federal Fair Housing laws.) I mean from a economic standpoint. A life-style standpoint.

For instance, if you purchase a smaller 3 bedroom two bath home 3 blocks from the University of Missouri Kansas City, what kind of tenants do you think you might get? How would that be different from a 1/2 duplex also with 3 bedrooms and two baths just 3 blocks away from an elementary school here in Olathe?

Waldo seems to attract a certain kind of tenant. So does the Armour area of Kansas City, Kansas. And again, that is different than what you might get in Blue Springs.

Think about that when deciding what kind of property you are going to add next to your investment property portfolio.

Overland Park, Kansas Rental Property For Sale

2007-08-28T16:48:00.000-05:00

I just wanted to let you know of a couple rental property opportunities for sale in Overland Park, Kansas;

Overland Park 5 Unit Apartment Priced at $425,000
100% occupied with close to no vacancies for past two years. Gross income of $41,100/yr.

Overland Park Single Family Home For Sale Priced at $79,500
2 bedroom, 1 bath w/newer water heater and electric update. Would rent for about $750/mo. Will take about $2,000 to update and get ready to rent. But minor stuff.

Call me today to discuss these and other opportunities I have identified here in the greater Kansas City area real estate investing market.

From Home Ownership To Renting: An Investment Opportunity Awaits

2007-08-28T09:19:00.000-05:00

In today's Kansas City Star Business Weekly section Chris Lester writes on the subjects of rising foreclosures, too many subprime loans and historical home ownership trends. It's worth the read if you want to look it up on KansasCity.com. Or do something really radical and buy a copy!

Ah, who am I kidding? On my whole street I think only about 5 of us still take the newspaper. But that's another subject for another time.

Chris does make the point that historical home ownership in this country had, for decades, run between 63-66 percent of all households. During the recent real estate boom where money was cheap and easy that percentage climbed up to 69.2%. Then Chris writes (paraphrasing here) that we should look at the 66% mark for home ownership much like we look at the 4%-5% mark for unemployment. About maxed out.

And I think it's a great observation.

So what does this mean to the real estate investor?

Well, if we are at about 68.5% home ownership and heading back to around 66%, then there are a lot of people who need to rent houses and there are going to be a lot of houses available to put them in. Chris suggest that maybe apartments is a way to go. But I would argue that...to some degree. Houses and duplexes, in my mind, are always a better way to go.

I think what hurt most of these people who are going through the pain and suffering of foreclosures wasn't so much the house payment. It was the expectation of home ownership. They were used to renting. If they were late to the landlord, and late on a consistent basis, they would just move and maybe or maybe not get sued later.

When they had problem as a tenant they would call a landlord and it was his responsibility to get it fixed...and pay for it. Now when Mr. & Mrs. Subprime had the furnace go out there was no one to turn to.

Any bump in the road on income turned into a crisis. Any repair a choice between fixing the house and eating. $4,500 to paint the exterior of your home to protect it's value and integrity seem like a mountain when you are living paycheck to paycheck.

Some of these people should never have taken on home ownership. Or they should have purchased more modest housing. Now the blame game is going on.

As a REALTOR I can tell you that I sat across the table from people and told them they should not buy this house. But they had a pre-approval letter and the will to do so. Backing from mom or dad helped, as well. So what was I supposed to do as their agent? I counseled them. I encouraged them to move down their expectations. But am I to refuse helping them? Please.

I sleep at night just fine because over my 5+ year career I don't know of any homes or home buyers that have gone into foreclosure. But even if one had I would still feel okay because I told them what I thought at the time.

But I stray from my main point. (As usual.) The point is that the rental market across the country and here in the Kansas City area is strengthening. It has been for about the last year. I can remember "free months" and "no security deposits" not too long ago. Those stopped and now rents are actually creeping up. While house prices are modestly increasing, stagnant or dropping ever so slightly here in our metro.

That smells like a real estate investing opportunity to me.

Tenant Screening Service & Post On Lease Options

2007-08-27T23:19:00.000-05:00

Lisa Wells of Landlord2Landlord has authored a very nice piece about lease option purchases and how they may be of benefit to today's sellers. In this tougher buyer's market sellers are going to have to explore other opportunities if they absolutely have to sell.

Opportunities like:

Pricing the house right the first time.
Chasing the market down.
Getting top dollar by lease-optioning.
Renting.

These are not all the options a seller has at their disposal. But if you go the rent route, or the lease option purchase route you are going to want to know you are getting a quality tenant or potential buyer.

I recommend always using a tenant screening service to cover your backside. Whether you are a property manager or a owner of income property. It always pays to do your due diligence.

Do Auctions Make Sense When You Are Investing In Real Estate?

2007-08-27T09:46:00.000-05:00

In the past few months I have had the opportunity to interact with a couple of the larger auction companies here in Kansas City. And my question is, are auctions a great way to add to your real estate investment portfolio?

So I thought I would ask the experts. Today we are going to hear from Robert Mayo of Mayo Auction & Realty as well as Greg Duncan of Cates Auction & Realty. I want to thank both for taking the time to answer the following questions while not knowing how the other would answer. I hope you, the reader, will benefit.

Thanks for visiting guys. Why auctions?

M: Auctions are an effective vehicle to buy and sell real estate. The primary reason is that the seller knows when the property will sell, and the buyer has the opportunity to eliminate negotiating and buy at market value.

C: Simply stated, auctions let sellers sell on their terms and let buyers buy at their price. Auctions are the most efficient method available for buying and selling homes, land, and commercial property. They are simple, quick, and transparent.

What do you think the biggest misconception of an auction house is?

C: Whatever a person’s misconception might be, somewhere there is an auction company that will match that expectation. Since we are a professional firm that specializes exclusively in real estate, some people are surprised that we don’t operate a gallery or accept consignments of personal property. Some are surprised that we are selling millions of dollars of real estate each year. Others are surprised that most of our properties are not “in distress” and that many of them are first time to market. Some people are still surprised to find that we aren’t sporting huge belt buckles and cowboy hats!

M: The biggest misconception of a real estate auction is that the buyer is unable to obtain financing. Although most auction transactions are conducted without contingency, including but not limited to financing, most professional auction companies will allow a 30 day window for closing. This provides ample opportunity for the buyer to utilize financing.

Is a real estate investor likely to be the high bidder at an auction or the prospective home owner?

M: This really depends on the property and the terms of the auction. In many cases there are both investors and owner occupants participating at real estate auctions. At the end of the day it is very similar to the traditional transaction in that every property has a potential pool of buyers. Our goal is to get that pool of buyers involved in the auction. In regards to who the high bidder is, it just depends on who wants it more.

C: Yes. Real estate auctions are attractive to investors who are selling as well as those who are buying. We regularly work with both. Sellers appreciate the speed of the transaction, the ability to plan around the sale, minimizing carrying costs once they have decided to sell, selling “as is”, and avoiding the complications of contingent offers. Buyers like working with motivated sellers and many follow auctions watching for certain types of properties to come up or looking for certain price ranges.

How involved are real estate investors in the auctions you hold?

C: Very. Many investors are on our email and mailing lists. Many are regulars at our open houses and our Auction Showcase events (where multiple properties are sold gallery style).

M: Real estate investors are involved in most of the auctions we conduct.

What piece of advice would you give to an experienced real estate investor looking to utilize auctions as a source for either acquiring or liquidating an income property?

M: In regards to buying, my advice would be to use the same tools that you currently use to evaluate an income producing property. I would also recommend that they do all of their due diligence prior to the auction and come prepared to bid what the property is worth to them.
In regards to selling, it is important for the property owner to choose a method that will meet their specific needs. It is also important to evaluate the reputation of the company that they will be choosing and to make sure that they have a clear understanding of the auction marketing plan from beginning to end.

C: Understand the market in which you want to operate. Auctions are an excellent way to buy and sell real estate, but they don’t ignore basic market realities. Examine your goals. For every potential deal, be sure you know what matters most to you and what matters least. Ask questions of the auction company. Be certain they are experienced in the kind of real estate transaction you are considering and that they have a full professional staff to support the process.

Do you co-op with a real estate agent like me when I bring an investor to you? (I know you do. I’m just trying to let people know it’s okay…somehow I will make money.)

C: Yes. We work closely with other brokerages and offer commission sharing to both referring agents as well as buyers’ agents. Partnering with other agents is an important part of how we do business.

M: Absolutely! We Love to pay both co-op commissions and referral fees to agents who either bring a buyer to the auction or refer a seller for the consideration of an auction. Our philosophy is that "It doesn't matter how we split the pie, as long as we have a pie to split." First and foremost it is our mission to put our clients needs first, and that includes offering the property to the broadest audience available, and paying other professionals for helping put the deal together.

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There was actually another question about reserve vs. absolute auctions. But in the interest of space I've decided not to print the answers here. But feel free to call either company to get the definition. I'm sure they'd love to speak with you.