Free Military Retirement Financial Planning

On May 9, 2019 I will be speaking for The Moreno Group at their Free Financial Planning for Military Retirement workshop.  I think it will be a great deal of fun.  We’re gonna talk a little about how real estate investing is a good thing for just about anyone AND as a military professional it may just be crucial to a “Retirement worth having.”

Why would I help other agents sell real estate when I sell it myself?  Well, that’s easy.  First, I love teaching on this topic.  Second, I truly believe in the power of real estate as a great investment vehicle for most people. And lastly, heck, I get to promote our property management business over at Ad Astra Realty.

If you’d like to find out more about the event and invite yourself on out, check out the link provided above.  I’m sure the Moreno’s would love to have more people hear how to maximize their retirement incomes through the buyer/seller services they can offer.

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Two Promises from Ad Astra Realty, Inc

Working in the field of Kansas City real estate investing and property management is not rocket science and yet it is not easy, either. Everyday both myself and my team look at the Kansas City market, make evaluations and recommendations as to which properties look promising and which we’d walk on by.

When it comes to property management, this is a little more complex.  So many things can go right, and wrong, with a property.  Tenants, pets, local laws and policies, weather, bad luck, good luck, etc. work as variables to make each property and each year unique.  To that end we here at Ad Astra Realty, Inc offer these two promises that we will not waiver on;

  1. We will watch your money.
  2. We will tell you the truth, even if it hurts.

WE WILL WATCH YOUR MONEY
Do you know what the #1 reason rental property owners have for moving from Company “X to Ad Astra? It’s because property owners have grown tired with their property management company not paying them on time or not giving a full accounting of their expenditures.

So when I say “We will watch your money.” I’m saying that, while not perfect, we will always be able to tell you what you spent your money on and we work very, very hard to get our owners paid on or about the 10th of each month when funds are available.  I say “about” because if the 10th falls on a Saturday or Sunday we may not fund until Monday.

We know how important it is for you to know about and to receive your money. To that end, we take our jobs quite seriously.

WE WILL TELL YOU THE TRUTH
Let’s face it, sometimes the truth hurts.  Maybe we made a mistake.  Maybe you are trying to delay and expense because money is tight and yet the tenant needs air conditioning because nighttime temps are still up around 85 degrees.

I call this “Having fierce conversations.”  And property management is full of fierce conversations because of all its inherent moving parts that were mentioned earlier.

When we have a relationship based on trust and honesty, nearly everything else can be worked out.

Thank you for taking the time to learn a little more about Ad Astra Realty, Inc.

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Property Management and Investment Properties

Wow.  I just realized I have now been working with investment properties in Kansas City for fifteen years now and before that two years in Tulsa.  In addition, I have been working as a property manager in Kansas City since 2006.  My how time flies.

There have been a lot of changes in my career and the investment property business since 2004 when I returned to Kansas City.  I arrived in boom. Lived through bust.  And now we are (at the end?) in another boom.

Rental property homes are at a premium right now. West coast (and East) are flooding in to KC driving prices higher and higher and returns lower and lower.  I’ve seen this before;

  • Red hot seller’s market
  • Low/Reasonable interest rates
  • 100% loans for anyone with a 620 credit score or above
  • Investor loans with 90, 95 and even 100% LTV
  • Investor loans that include rehab money

Yes, I call those times 2006-2008 in Kansas City.  The bust started in KC when the banks stopped lending in September 2008.  Of course, the coasts experienced the shift much sooner. Still, this is time is a little different;

  • While both time had/have limited seller inventory, this time there is real limited inventory…we just don’t have enough housing units
  • The new-builds happening are WAY ABOVE what most first time home buyers can afford

Does that mean we’ll not have a bust? Or even a slow down here in the Midwest?  Does that mean the buy, rehab and hold is still a great strategy…that keeps getting better?  (Note that link is from 2011…can’t get those returns or prices today.)  Does any of that really matter and the economy will still shift here in the middle of the country?

Look, I still believe wholeheartedly in real estate investing.  Owning income property is a great way to hedge inflation while earning from the 4 Benefits of Real Estate Investing. Yet, timing can matter.  All I’m saying is proceed with caution.  If you are planning on buying and renting property for the next three to four years I’d be super cautious.  If you are planning on owning rental homes for the next seven years or more, I’d say green light.  After all, time is your friend when you own real estate.

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Get Rich Slowly Through Real Estate Investing

There are many forms of buying, rehabbing, selling houses that are called real estate investing.  Especially here in Kansas City where our relatively low prices make it easy for east and west coast money to come in and attempt to manipulate our real estate market.  Yet, I’d like to purpose to you that the best way for most rank and file, mom and pop if you will, real estate investors is to get rich slowly through real estate investing.

No.  It isn’t sexy.  No. I don’t get to stand up in front of big crowds, play loud music, speak super fast and tell tales of a deal I did six years ago like it was yesterday.  But I do get to help many professional wage earners to secure their retirement worth having through the strategy of buying right and holding the property through successful property management whether that be through their own efforts or that of a professional property manager.

Take the following scenario available in Johnson County, Kansas ( a suburb county of Kansas City, MO) in the town of Olathe.

Ranch house priced at $185,000 because the owners have been in there quite a while and it needs some (quite a bit) of updating.  New carpet, paint, fixtures, etc. The After Repair Value is around $195,000 – $205,000 depending on said updates. So not nearly enough to flip, but again, a ranch home in Olathe, Kansas with great schools.  A solid rental house for years to come.

Let’s say you buy at $180,000 (I have no inside knowledge, just an assumption) and put 25% down ($45,000).  That leaves a remainder to be financed of $135,000 and let’s just say that you get an income property interest rate of 5%.

Principal and Interest  equal $724.71/mo. 

Now we have to figure expenses, right?  For updating, I’m just gonna throw in about $12,000 for all those updates we spoke about. I believe you could do it a little less expensively and yet we are working the property up to the standards that today’s renters are looking for when they lease a home.  So yes, you can skimp.  And yes, it will cost you vacancy time.  In other words, you need to have your home up to the same standards as the homes around you.  That will be an immediate cash expenditure, bringing your total investment up to $57,000 in the home.  (The down payment plus improvements.)

Now lets talk about rents.  A quick look around on a few rental website and comparing some of the 400 plus homes we manage at Ad Astra Realty, Inc Property Management and I believe the rents will be between $1,450 and $1,525.  So let’s say $1,475 as the rents. Is that okay?

Expenses will matter, too.  We need to account for insurance and taxes and let’s add in some property management, a few unexpected repairs for the year and utilities while the place is empty….which brings up vacancy.

Historically speaking, we used to count vacancy somewhere in the 10% range when doing these figures.  Yet, since 2008 I have been hard pressed to find vacancies above 5% here in Johnson County, Kansas.   So I’m gonna use 5%.

Now it is math time.

$17,700  Gross Rents minus
$     885  Vacancy
$  1,200  Insurance
$  2,682  Taxes (2018)
$     200  Utilities
$     900  Repairs
$     500  Misc (because)
$  1,976  Property Management (includes lease-out)
$  8,697  Principal and Interest

= $660 Cash Flow Before Taxes  (Wooohooooo! You’re rich.)

No, $660/yr cash flow isn’t gonna make you rich.  Heck, that is only $55/mo m/l.  And if you are the type that manages your own rental homes, well, you can add another $1,976 to your earnings.  But since most of my sales clients hire me to manage their properties, I thought I’d add that in.

What are the other ways you are making money on this home?

Well, let’s see.  There is Principal Reduction.  The fact that your tenants are making your house payments for you is terrific!  Consulting an amortization table I calculate that your tenants have paid $1,829.53 of your balance in the first twelve months.  (Of course, that goes up each year because of the way home mortgages are amortized.)

Then there is Depreciation.  You get to tell the government your home is worth less each year.  (What a great country!)  That is another of the 4 Benefits of Real Estate Investing. That’s another $5,200 m/l in benefits of the property.

Interest totals $6,704 after a year.  We get to deduct that as well.  So with Depreciation and Interest we create roughly $11,900 of deductions.  Say you are in the 32% tax bracket and after subtracting those deductions from your Net Operating Income of $9,357 you have created a tax savings of $813.

Now let us figure your return.  Your total benefits without appreciation add up to

$   660  Cash Flow Before Taxes
$1,829 Principal Reduction
$   813 Tax Benefits
Total benefit of rental home before appreciation is $3,302.

You invested $57,000 in the home between purchase and fix up.  So your overall return the first year is roughly 5.8%

Is that good? Is that bad?  I don’t know.  Maybe you are making more than that somewhere else?  Everything is relative.

Appreciation is where the magic happens though appreciation is only something I can tell you happened as I simply cannot predict what it will be.  I can use history.  Through the ups and downs of the many economies I have seen in my real estate career since 2002 I can show you that in Johnson County, Kansas appreciation has been pretty darned close to a 3.5% straight line.   So can we use that?

If I have your permission then, let’s just say that the $195,000 appreciates 2.5% in 2019 as that is about where I expect it to be.  (Again, I never really know.)  That adds on $4,875 in benefits.  Now you have the 4 Benefits all together and that totals $8,177.  So your return skyrockets to 14.3%.  Follow me?

The real money made in real estate investing in the Kansas City suburban city of Olathe is in the appreciation.  Time is working for you, not against you.  And your tenants are paying down the house all the while!

It’s getting rich slowly through real estate investing.  Pencil it out another ten years and see the equity you will have and the return that grows as rents creep up while your payment remains the same.

Now obviously, I cannot guarantee any of this.  I can only tell you what has worked for me and my clients since 2002.  If I can be of any service to you, don’t hesitate to contact me.  I’m easily found.  Just look in the Contact Information up and to your right.

 

 

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Filed under 4 Benefits of Real Estate Investing, Olathe, Real Estate Investing

Understand Your Criteria When Buying Income Property

When it comes to securing your retirement through rental properties it is best if you understand your criteria when buying income property.  Today I sat down with a fellow realtor here in the Kansas City area and two investors that own one rental property with plans to add many more.

What I found is what I usually find.  You see, I asked them what their criteria was for what they were looking to acquire.  I’m not picking on them, I’m really truly not when I say they did what most newer real estate investors do… they went silent.

Investment Property Criteria Part 1

Investment Property Criteria Part 2

kansas city investment property criteria

Those links above the picture are the links to a series of videos I did for real estate agents seeking to work with investors and for the investors themselves.  Here are a few things you should know what you are looking for before going too deep in to your next investment property search;

  • What return are you expecting?
  • How do you measure the return?
  • Location?
  • Bedrooms?
  • Single Family Home or Multi?
  • Rehab or Turn-Key?
  • Is the school district important?

I could add a whole bunch more.  Or, you could watch those videos.  Listen, I know the videos are boring.  I don’t know how to make real estate investing more exciting unless I stand in front of a rented garage full of luxury sports cars and half dressed women.  Oh wait, for the gurus out there I’m sorry (not) if I offended you.

 

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Costa Rica Investment Property

So I’m never very far from real estate investing.  And these past few days have been spent learning a little more about Costa Rica Investment Property.  Well, to be truthful, it has really been more of a time for my wife and youngest daughter to make some memories and get away.  For those of you that do not know, we lost our oldest daughter back in February 2018. It’s been rough adjusting.  Part of my grief, I guess, was putting bicycling and writing about real estate to the side.

costa rica real estate investing

These last five days here in Tamrindo, Guanacaste, Costa Rica have been quite therapeutic.  Between the bicycling, zip lining, surfing and snorkeling I have been paying attention to the real estate market.  Here are a few of my off-the-cuff observations;

  • There is more property than demand.
  • However, prices are not bargain.
  • Obviously, the closer to the ocean the higher the cost.
  • My preference? Up the mountain a bit with a great view.
  • For the right property, marketed correctly, there is money to be made.
  • Or at least a “free” vacation home for yourself.

For the last year or so I have been reading up about Costa Rican real estate law, etc.  There are issues with squatters if not properly managed.  While the government and economy are very stable it is still Central America…with Nicaragua and it’s every 25 years of problems right next door.  Still, I think the opportunity and the “Pura Vida” lifestyle outweigh those concerns which can be overcome.

Should you wish to follow along, keep checking back with this blog on Kansas City real estate investing…and now Costa Rica real estate investing.

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KW MAPS Coaching

So here is a fun fact; I am now a KW MAPS Coach.

Kansas city real estate investing

In addition to my duties as Broker/Owner of Ad Astra Realty, Inc ( a Kansas City property management company) I am also the Team Leader of Keller Williams Realty, Diamond Partners, Inc of Olathe, Kansas.  Those two positions are not new and many of you already knew that.

Recently, because of our success at building KW’s Olathe office, MAPS, an agent and leadership coaching company for Keller Williams, asked if I would also coach other Team Leaders for KW around the country. Sounded like fun, so here I am.

Real estate has been a very good business for me.  I want to thank all those who have provided this opportunity to me.  My thankfulness starts with each and every client that has entrusted me/us over the years to help them with their buying, selling and/or investment real estate needs here in the Greater Kansas City area.  My thankfulness also extends to;

  • My wife and family for all the time missed
  • Randy Lindemuth, my first broker at Scott Douglas Realty down in Tulsa
  • The staff, past and present, of Ad Astra Realty
  • Larry Kueser who offered me the position of Team Leader at KW
  • Dianna Kokoszka for offering the position of MAPS Coach to me
  • Mike Bastian for modeling what a coach can do for a real estate agent and team leader

There are so, so many people to thank.  We still stand ready to help you with any of your real estate investing needs here in Kansas City. We offer accountability, honesty and a sincere effort and professionalism to help you with your “Retirement worth having.”

Thank you everyone for everything you’ve done.  Ya’ll rock.

 

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Filed under Kansas City Real Estate, Misc. Real Estate, Personal Real Estate Opinions