It’s crazy how limited the inventory for multi-family housing in Kansas City is right now. Just sayin’.
I suspect we are going to have another rise in property values as the market here in KC keeps getting a little stronger each year since 2010. I don’t expect a 2004-2006 sort of rise but the inventories are limited and the demand is up. Especially in Johnson County, Kansas.
Instead of making resolutions you may never intend to keep, may I suggest setting your 2014 goals for your real estate investing ventures? How many properties do you own? How many would you like to own? Here are some things to think about as you are setting 2014 goals;
- Should you sell or exchange in 2014?
- Should you buy?
- Should rents be moved up or down?
- Is it time to change who manages the property?
- Is this the year to catch up on deferred maintenance?
- Have a good tenant? Maybe it’s time to send them a “thank you” letter.
- Any value-added improvements that could be done?
Hopefully those few things can get you started on your planning for next year.
Real estate investing isn’t supposed to be all that complicated. But so many times I really believe that real estate investing is for dummies. And I don’t mean that in a complimentary way. The shear gullibility of so many would-be investors and/or the shear lack of understanding of the very basics of the numbers cracks me up. I have to laugh because maybe I should cry.
I recently had someone who wanted me to sell properties for them down in the Murder Factory part of Kansas City. These homes should never have been purchased by a new investors, let alone a new investor from out of state with little knowledge of the area. Why they were sold to him I cannot understand unless the moral compass of the agent is a little off. There is simply no way I want to be involved with trying to recoup the losses from bad purchases in the middle of bad rehabs in the middle of a bad part of town, economically speaking.
I recently had someone decide to not work with me because I am “defensive” about charging an additional commission for my years of expertise. Apparently these two new, first time investors who both have professional situations, seem to think that their realtor who can guide them to good properties shouldn’t earn much of a living. They want me to do breakdown analysis for them, identify properties for them and walk them through the contract and buying process and make less than $600 – $800 because they only want to buy $40,000 (or so) properties.
Now, I’m not mad. Just amazed. Astonished, really. I’ve helped people buy and sell investment property in Kansas City for quite a while now. I’ve helped people grow and grow their investments and have more positive references than you could positively want. Over the years I’ve had so many people who didn’t listen to me on the “buy” call me and ask me to help them out with their “sell” because the property turned out to be a mess.
No, I’m not mad. Just astonished that people keep making the same mistakes over and over. I wish people could learn from the experience of others. I wish people could believe a guy that lives on commission when he’s telling them not to buy something. But I guess human nature being what it is, I’ll still be doing this five years ago and having the same thoughts. :)
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.