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.

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

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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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Communication and Deferred Maintenance

I have a confession to make.  (No, this is not a lead in to a Foo Fighters song.)  Somewhere last week and this week I have failed miserably in the communication to an owner of seven properties we manage.  I thought I was being clear.  But based on what I’m hearing from one of our staff and the nature of the client’s questions, I know I’ve failed.

But here is the message:  You have to occasionally spend money on your rental properties. 

We want our investment owners to make as much money as possible on their income properties.  But after you’ve owned property for a number of years things need updating, bushes and trees need trimming, items that slowly fall in to disrepair need repairing.

This doesn’t have to happen all at once. But if you want the full value of your rental property on down the line in terms of maximum rents and resale value, it’s is a must.

I just need to start all over again with this owner  and be sure I have communicated completely this need.  But ultimately it’s the owner’s money and the owner’s decision.

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A Prayer for Baltimore

baltimoreI spent 15 years in Suburban Maryland which, of course, identifies more with Washington, DC than Baltimore.  But Baltimore was only 30 miles away and reminded me more of a “real” city.  Washington pushes paper and people around in one big shuffle.  Baltimore works for a living. Washington is a dark tinted Mercedes.  Baltimore is trusty Ford.

As a private investigator I got to all the streets of Baltimore.  It was the ’80s and early ’90s and the downtown renaissance had just come to early adulthood. The scars of the ’60s and early ’70s had begun to fade and the city was moving onwards and upwards.  But, in the shadows, the divide always seems to be there.

Nowhere was I able to finally show my wife and family this better than on a vacation trip for the 4th of July, 2008. We were celebrating with the fireworks over the Inner Harbor. It’s a truly stunning visual knowing that Francis Scott Key wrote the Star Spangled Banner just a few thousand yards from where I was sitting on the edge of the water.  The crowds of families were delighted, peaceful and festive.

Then came afterwards…

The street urchins and wanna be gangsters descended and began to do what they pretty much do on many great Baltimore nights.  They started blocking streets and causing havoc, though there was little property damage.  My wife was freaking out and the children watched with bemusement when the police barricaded a street  from moving because these street thugs had blocked one of the main exits to the nearby highways.  They walked between our cars and even on top of some cars.  They were seemingly delighted they were causing so much mischief and worry to the suburbanites trying to head home.

Make no mistake, these idiots are not the vast majority of Baltimore. But something in this city has allowed them, excused them, to behave this way. Sadly, I see the same beginnings here in Kansas City on The Plaza.  Bored youths who think it’s fun to terrorize.

A great quote from the Baltimore police chief last night concerned a hooded kid being recognized by his mother.  Rather than the kid’s mother excusing him or remaining passive she went out, removed his hood and slapped him a couple times in the head before leading him home.  The chief said he wished more parents would take charge of their kids that way.  As do we all.

Say a prayer for Baltimore.  My guess is this isn’t over.  And that it has little to do with the protests. It’s just another reason to cause terror.  Hooliganism they used to call it in Great Britain.

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