Rental Property For Retirement

What is the number you need for a secure retirement?

You probably have something in mind.  And we’ve all been taught it is a number rather than a cash flow.  But what if you could own rental property for your retirement?

Your social security check, if it still exists, will be cash flow. The withdrawals on your IRA, 401(k), etc will be considered cash flow.  Why not rents from your rental properties?

I have discussed over and over again on this blog, since 2006, the pluses (and minuses) of owning and managing income property.  And it is still my opinion that the pluses far outweigh the minuses.  That is especially reinforced this week when I see my IRA drop in value by 10% in two days while my rental property continues to perform.

Yes, 2008-2011 was a real estate apocalypse as far as real estate values are concerned. But you know what?  Because I had purchased those investment properties (pre-2006) on sound fundamentals I weathered the storm.  Sure, the value of the rental went down but the rents actually went up!!!  So my PITI remained mostly constant (taxes fluctuated a little) but my rents went up. I’ll take that over what just happened to my stocks and mutual funds this week.

Yes, I own investment property.  Yes, I’ll buy another one or two. Yes, I’ll still continue to have monies in the stock market as well.  And yes, I’ll continue to grow my real estate business.  I believe in having as many income streams as I can so that when I do retire I won’t have to worry about it the entire time.

I’m building a “Retirement worth having” and I can help to counsel you to do the same where it involves residential investment property in Kansas City.

Chris Lengquist
Ad Astra Realty, Inc
913-322-7515

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What I Wish I Had Originally Known About Real Estate Investing

Like most people, I didn’t really know what I was getting in to when I started working in the field of real estate investing.  Fortunately,  I met a man named Phillip from Bainbridge Island, Washington who showed me the ropes and gave me quite an education about real estate investing, working with real estate investors and what to look for in a rental property.

Over the course of about 18 months I learned a ton from that man.  He hired me to liquidate a couple dozen of his income properties and it was education by immersion. Here are a few of the things that I learned along the way that I wished I had known from the very beginning;

  • The difference between proceeds and profits.
  • Cash flow versus appreciation and the inverse relationship.
  • What a quality property looks like.
  • What a quality tenant looks like.
  • What a quality property manager looks like.
  • Trust, but verify.
  • How to measure returns in a way that is meaningful to your situation.
  • What a real estate investor is looking for in a real estate agent.
  • What a real estate agent is looking for in a real estate investor.

These are just a few of the seemingly simple categories that deserve a lot of attention in your thought process of acquiring residential income property.  We can talk about these in detail.  All you have to do is invite me out for a coffee or beer…or heck,we can talk by phone.

Ad Astra Realty, Inc
Chris Lengquist
2011 E Crossroads Ln #305
Olathe, KS  66062
913-815-3473

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Kansas City Real Estate Investing In A Seller’s Market

Johnson County, Kansas is definitely in a seller’s market.  It has been for several months now. So how do you go about investing in real estate in Kansas City in a seller’s market?

Well, first off, you recognize the shear size and cultural complexity of Kansas City.  No, we are not the most populous nor densely populated city in the States. But we are huge geographically.  Lucky for us, we have lots of highway miles for a city our size.  But heck, the airport is 43 miles from my home in Olathe, KS and the airport is located in Kansas City!  (ie, I can be in KCMO in less than 10 miles.  But it can take me 43 miles to get to the northern end of the city.  By east coast standards, that a long way.)

So not all of KC is in a seller’s market. But Johnson County, KS is.  Johnson County is Overland Park, Leawood, Olathe, Shawnee, Mission, Prairie Village, etc.  Since about early March the market has been red-hot. Prices haven’t been skyrocketing but Days on Market has been short lived.  With the heat of July (and the vacations) the market has cooled somewhat.  But it’s still simmering.

You have a choice.

Either buy smart and accept that the prices are up and thus, returns are down or sit and wait. But wait for what? Maybe the market doesn’t go down.  Maybe, and this is highly probable, interest rates start to tick up.

Now interest rates would have to really tick up to be “bad”.  But every extra expense in interest is less house you can obtain and still get acceptable ratios for rental property.  Higher interest rates are not good for landlords, nor renters.  If rental housing supply is still low when interest rates are ticking up the investor will try to pass that cost along to the tenants.  Easy to do in a low vacancy county like Johnson County.

The best time to invest is when you have the money and are ready to pull the trigger.  Economies wax and wane.  Go ahead and get aggressively patient.  Search out that “good” rental house.  And when you see it, act quickly before someone else does.  Don’t buy just to buy.  But be ready to act quickly once an opportunity presents itself.

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Maintenance and Property Management

Maintenance is by far, and it’s not even close, where most of our time is spent in property management. Why?

  • Everyone has different expectations
  • Houses are constantly deteriorating
  • Trees
  • Sewer lines
  • Where trees and sewer lines intersect
  • Tenant turn-over
  • Bad weather

But nothing, aside from tenant selection, is as important.  Proper maintenance keeps up the value of the house.  Proper maintenance attracts a better tenant. Proper maintenance keeps repair costs down when it’s time to sell.

If you haven’t figured maintenance, and updating, into your costs of owning residential income property, you need to go back and do so.  Because selling a “melting ice cube” doesn’t leave much at the end.

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The Supreme Court, Disparate Impact and Property Management

Well, in the opinion of this author, we’ve moved yet another step closer to hell.  Today the Supreme Court ruled that Disparate Impact lawsuits for discrimination can move forward and are part of the fair housing acts enacted in the 1960s. This is a HUGE expansion of fair housing and I’m not really sure it can be defined.  And that is what make me nervous.

I am all for the seven protected classes that fair housing protects.  No question. And we are very careful to not violate those classes.  But now the definition of discrimination has grown so broad that I don’t know when we’ll be discriminating and when we wont.

See this link for an example.
http://www.kentucky.com/2015/06/25/3917235_supreme-court-opens-door-to-housing.html?rh=1

Here is the important paragraph:

A “disparate impact” arises when a practice produces different effects across racial groups, even if the practice wasn’t racially motivated. For instance, if a mortgage lender establishes borrowing standards based on income and net worth, and some racial groups are less likely than others to qualify for loans under those standards, this could result in a disparate impact

And I had a Kansas City housing official tell me about a year ago that in his opinion (now green-lighted by the Supreme Court) that because I refuse to lease homes to people with violent criminal pasts and that disproportionally people of color go to jail because of violent criminal behavior that I am discriminating against people of color under the broad definition of “disparate impact.”

Here is the scary, scary thing. It doesn’t have to intentional.  And we all know it doesn’t have to be really even proven in civil court.  So regardless of the fact that I won’t rent to a white guy with a criminal past I may still be discriminating under disparate impact because I won’t rent to a person of color with a criminal past.

Where does this stop?  Read carefully and think about the two examples given. Then take time to shiver.  Government has taken another step into allowing housing to become a populist right.

Again, to answer some of the arguments I can already hear, I am not discriminatory. Not in my nature.  But I’m not stupid, either.  This will be used against property managers, landlords, realtors and lenders to the tune of hundreds of millions (billions) of dollars in lawsuits.  And that will “trickle down” into your expenses, too.

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Kansas City Investment Property For Sale

Are you looking for Kansas City investment property that is for sale? Check our website links to see current status and to find out more details.

Duplex – 13139 S Brougham, Olathe, KS  – Priced at $200,000

Duplex – 1025 E Dover Circle, Olathe, KS – Priced at $215,000

Duplex – 705 N Washington St., Spring Hill, KS – Priced at $115,000

SFH – 705 N Woodland St., Olathe, KS – Priced at $98,000

The duplexes that are for sale are pretty much turn-key.  The single family house for sale in Olathe could use a make ready to the tune of about $6,000 – $7,500.  From there it would be a great rental house.

Let me know if you have any interest!

Chris Lengquist
Ad Astra Realty, Inc
913-815-3473

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Integrity Matters in Property Management

I just had another agent from another company give me the biggest compliment I’ve ever received in real estate. He told his client that the reason he’d want to do business with me and my company, Ad Astra Realty, is that we have integrity.  Not that we’re perfect or the cheapest or the best or whatever. But that we have integrity.

I think integrity matters in property management.  In real estate. In everything you do.

Do your words match your work?

Ethics and integrity get thrown around and out the door pretty quickly now days and in business.  It seems everyone has a set of core values, until their pocket book may be in jeopardy.

I’d like to say that business owners with integrity are out there.  Larry Kueser, the Operating Principal over at Keller Williams Realty, Diamond Partners, Inc. is one.  And I could continue and name others.  But I could also go down a much longer list of individuals and businesses that seem to forget integrity when the chips are down.

Sometimes having integrity means just saying “I’m sorry.” Sometimes it means being patient.  Sometimes it means spending the money to make something right.

Now, having integrity doesn’t mean you have to be wronged. It doesn’t mean you are always wrong.  But in your soul, you know the right thing to do. Do you have the guts to do it?

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