I am thankful.
Thankful for my family. My businesses. My faith. My country.
I hope you have something to be thankful for, too.
Most real estate investors eventually ask me “How do I know the value of my income properties?”
All income – All expenses = Net Operating Income
Net Operating Income / Cash Invested = Cap Rate
If you are an investment market driven by cap rates that should get you what you need to know. But if you are a cash investor you may be better suited to value your property based on the formula for Cash on Cash;
Cash Flow Before Taxes / Cash Invested = Return of Cash on Cash
Knowing the different formulations and when to use them is a big part of the work in being a rental property owner.
The first two months are always the hardest. I’m talking about when we take over a rental property for the first time. Whether it’s already been managed by your or we have just finished rehabbing the house and now it’s ready to rent (well,especially if it’s being rented after rehab) we find that the first two months, from a property management standpoint are always the hardest. Why?
If we are taking over the property the tenants usually will want to tell us why. Let’s face it. If we are taking over a property it is probably because someone else hasn’t been doing a bang-up job. So first we have to clean up the deferred maintenance issues that are no doubt present, smooth over the tenant and do all this without freaking out your check book too much.
If we are renting a house that just got through with an extensive rehab then there are all sorts of things that may not have shown up in the rehab. For instance, you can run drains and flush toilets for construction crews but until you have a house full of people using toilet paper and using the toilets often you cannot know if there is a problem somewhere deep down the drain line. Or perhaps the furnace only works intermittently because of some weird deal. We always find at least a few things like this.
The caution here? Just make sure you have some repairs dollars still set aside for the first couple months of new tenancy. After that it usually slows down to just an occasional trickle of problems. But those first couple months I can almost guarantee you we will speak quite often.
For more than a few years I have been offering my services to examine real estate investments here in the Kansas City area for a flat hourly fee. Mostly it has been real estate investors from out of town that have taken me up on this service and I believe the relationships have been beneficial to both parties. Now I am beginning to offer my services for the purpose of coaching investors and their agents.
One of the most difficult tasks for the real estate investor in Kansas City and across this great country is the task of finding an agent that knows, understands and is willing to work in concert with the goals and passions of the investor. On the other hand, one of the most difficult tasks for real estate agents is knowing which real estate investor is an actual investor and not someone who is looking to cash in on the extreme efforts of the agent wherein the agent gets little to no return, ie writing 100 offers in the hopes that one sticks.
Having worked through hundreds and hundreds of investment property transactions, managed 135+homes in the KC area and having talked with literally thousands of investors and about a half dozen of really good investment property real estate agents I have decided there is a real need for this service. Ideally, both agent and investor will call me to discuss the services. But I know the reality is that I’ll probably only be working with one or the other.
Should be an exciting ride. Let’s see where it takes us.
Over on Bigger Pockets there was an article posted to real estate agents on how to work with real estate investors. And by in large I really cannot argue with too much of it. It’s critically important to work on finding the right real estate agent for real estate investors. I like to think that I am one. But I know my personality and style and target does not necessarily fit everyone else’s goals. So hop on over and take a read. As a real estate investor it will help you to know how to help your agent to help you.
But I also need to point out that when you find an agent that knows what he is talking about quit trying to abuse him. Do you know how many seminar goers I get wanting me to quit making a living and help them write 100 extremely low-ball offers so that maybe they will get one (and God willing, two) $40,000 houses? Do you know how much work that is on my part? Essentially some of you are asking real estate agents to work upwards of 60 hours in the hopes of making a commission of $768…or maybe twice that if two pop.
Would you work that hard for $768? (Based on a 3% commission paid by seller and then a 64% split with broker.) C’mon. This is supposed to be beneficial to everyone. A real estate agent that understands the numbers, the neighborhoods and the outcome is worth his weight in gold. Do you know how many retirements worth having I have helped to fund for people? And in turn I’ve made a nice living for my family. See how that is supposed to work?
If you want to be a serious real estate investor at some point you are going to need a professional realtor. Know what to ask. Know what to expect. Know how to compensate them fairly while maximizing your situation as well. Win-Win isn’t just a trite saying. It’s a profitable one, as well.
For the readers in the Kansas City area it’s time to start thinking about the holidays and holiday pictures. Did you know that Thanksgiving is only 4 weeks away?!?
If you are in Olathe or the greater Kansas City area you might want to consider Portraits Today Studios in Olathe as your portrait studio of choice. We’ve put a click to it so go on over and spread the word to your friends and family. I know this has nothing to do with real estate investing, but for me it’s another investment vehicle. :)
Are you looking for a duplex for sale with a stable rental history? Look no further. This attractive rental property is set in the older part of Belton but was built in 1998. Single family homes surround the property to the front and sides and an alley separates the income property from some retirement duplexes in the back.
Rents on this property are $770/mo and $750/mo and the property is being offered at $150,000. Bring your offers as the seller is highly motivated due to changes in their life.
Because of this property’s location to schools and downtown Belton vacancy is almost always a non-factor here. Stable, stable, stable. And don’t look for much deferred maintenance because this owner keeps his income property well cared for. Don’t believe me? Schedule a showing today!
Investment Property in Kansas City
Keller Williams Realty