The Kansas City housing market, especially where it pertains to Kansas City real estate investing, continues to run hot. And frankly, I don’t see it changing anytime soon. Below are some random, bullet-point thoughts.
- There is a shortage of “affordable housing” for both rent and sale. In Olathe, Kansas, (in the 66062 zip code) good luck finding a turn-key home with 3 bedrooms, 2 baths for less than $250,000. At the time of writing this there were only seven 3/2 homes and only one of those was priced below $260,000.
- Corresponding rents in this area START at $1,695/mo.
- With interest rates hovering about 3.125% to 3.5%, even for real estate investors, money is cheap so margin is certainly possible with 20% or 25% down.
- In Raytown, Missouri, especially east of Raytown Road, there are four 3/2 homes currently on the market, with the lowest price being $159,900 and the highest being $199,900.
- Rents in Raytown start at about $1,050 and go up from there.
- The 1% rule is long gone unless you want to go into real estate markets that we don’t care for.
- We don’t care for those 1% rule markets because qualifying tenants become in short supply, income is often less stable and the schools are not on anyone’s list as “great.”
- What has been true since I started selling here in KC is still true; Generally speaking, you buy in Kansas for appreciation and Missouri for cash flow.
Because I coach real estate offices all around the United States I get a very good look at what is happening on a national level. Because I am an Owner/Broker here in Olathe, Kansas, I get a very good look at what is happening in the Kansas City area, especially with rental properties. (We currently manage just over 640 doors.) Here are some thoughts heading into the future.
- On a national level we are expecting 2021 to look a lot like 2020 with the possible exception that pricing gains may (finally) begin to level off and/or slow (considerably?).
- Unit counts sold will probably break records for both new housing and existing stock.
- Interest rates should continue to hover around the 3% – 3.5% bracket.
- The Fed seems to have painted themselves into a corner on interest rates. I’m not sure how we are going to ween our economy off nearly free money.
- The competition between first time home buyers and real estate investors will continue to heat up.
- Someone is going to begin to unlock building more affordable housing stock.
- Our Kansas City culture may finally begin to realize that townhome living, as is popular on the east and west coasts, may not be such a bad idea for first time home buyers and those scaling down. (Do I actually believe this? Not sure. Our culture of 3-4 bedroom homes with lawns to mow runs deep here in the middle of the country.)
I hope this helps to bring you up to date on what is going on. Should you have any questions or comments. Feel free to reach out. I love talking about real estate and property management.