1031 Tax Deferred Exchange Explanation

Over on my real estate training blog for real estate agents I did a video on 1031 Tax Deferred Exchanges. Therefore, I thought I would write this very short blog to link to that text if you wanted to take a look. Just hit the highlighted link.

Market Update
Here in Kansas City real estate investment property is stupidly over-priced  in so many cases. We are keeping our eyes out for suitably priced rental property.  However, picking are slim.

My advice? Hoard money.  I may not be the old man on the hill but I’ve been around long enough to know that economies go up and economies go down. We’ll eventually level off and allow prices to get more in line with wages.  In the mean time if you find something you must have, buy it. (So long as the numbers work.)

Otherwise, sit back and stock cash.

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Mortgages for Income Properties

Here is a video from one of my most trusted lenders when it comes to buying income properties. He has helped many of my Kansas City real estate investors to buy investment property without any surprises at the end.  This information is accurate as of March 2017.

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Questions About Kansas City Real Estate Investing

I received an email this morning from a young, would-be real estate investor here in Kansas City.  Rather than talk about it I just thought I would share his well thought out questions and my answers.  My hope is this correspondence will help someone out there as they begin to start their real estate investing journey.

***

 Hello (name hidden),
I wish you luck.  Proceed with caution but calculated risk.  Years are your friend. You have a lot of them.  Save a minimum of 5% of everything you earn, 10% is better.  It will look ridiculous at first and you will be tempted to accelerate the process with too much risk.  Again, time is your friend.
See my comments below.
->
Hi Chris,
I am contacting you today because I am a recent University of Kansas graduate who is looking to learn more about real estate investing and I am particularly interested in the Kansas City market. I happened to stumble upon your website and really enjoyed getting some useful information! I was hoping that you may be able to find some time to answer a few questions?
1) Who would you consider to be the top real estate investors in Kansas City in the last 10 years and why?  I have no idea. I don’t think of it in these terms.  You have to determine your plan and sit down with someone that can help you make a solid plan that is do-able and realistic.
2)What would be the top 3 things that separates the Kansas City market from the rest of the country? Affordability is first.  Affordability is second.  And affordability is third.  We are median.  The west coast looks at our housing prices and rent ratios and it looks like a candy store to them. 
3) What would be a realistic goal for a number of properties to buy within a 5 year time frame on a salary of about $30,000 a year?  So much depends on your strategy and starting capital.  If you tell me your starting capital is zero, we’re going to have to save first.  Now, you can use hard money…be careful.  There is money to be made here but only by the determined and quick-witted. There will be dozens, no hundreds, no thousands of get rich opportunities for those starting with no money.  Choose your advisers carefully.  Very carefully. 
4) What has been the biggest mistake you’ve made in your career so far? Not fully understanding how money works and how time is your best of friends.
 
Listen, I’ve blind copied a man named Ryan on this email.  Should he be willing to respond to you it would behoove you to buy the man a cup of coffee (probably of the 12 oz beer variety).  Ryan bought his first home with me at 21, I believe.  We’ve clashed over the years as to the amount of risk he was taking but he came out on top.  He’s smart and now in his mid-30s and owns over 125 doors.  
 
As I said, he’d be an excellent “investor” for you to get to know if he chooses to answer this email.
 
As for me?  I’d advise someone with limited capital to get a real estate license and learn to sell.  You can be the “middle man” with little to no risk and make a serious living in an honorable and ethical way.  Yes, it is hard.  But so is everything worth doing.
 
I wish you luck on your search.  Now that you are out of college you can begin to learn how life really works.  Nothing is given. It has to be earned.  It can, however, be earned in a way that you’ll be proud you accomplished your goal.  Never set aside ethics. And never, and I mean never, set aside your dream. It can evolve and change and morph.  But don’t quit.  There will be plenty of nay-sayers.  My wife and I like to reflect on them when we are sipping cold drinks in Mexico. 
 
If I can be of any further assistance, let me know.
 
Rock Chalk.
Thank you so much for your time if you have made it this far.  I really hope to hear back from you! Have a great day!

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Is It Time To Evaluate Your Investment Property

The New Year is fast approaching and I have to ask; Is it time to evaluate your investment property?

Many of our clients purchased their rental properties during the Great Recession.  They bought low and now may be the time to sell high.  Or is it?

The very first thing you need to know in order to make an intelligent decision is to get a comparative market analysis of your income property.  Listen, it doesn’t have to be detailed.   But if you can be plus or minus 3%-5% you can have a good idea as to how to measure your future options.

  • Should I continue to hold because I’m making good money on my investment?
  • Should I 1030 Exchange myself in to fewer but more valuable income properties?
  • Should I sell, pay the tax and relax?

There are, of course, a few other options and variables not the least of which is “where are you in your life?”  What I am saying is that the real estate market in Kansas City has changed by leaps and bounds since 2009 and so may have your investment needs.

So, is it time to evaluate your investment properties?  If it is, give me a call at 913-568-1579.  I’d love to help.

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Mistakes Real Estate Investors Make

Here are some of the more common mistakes I see real estate investors make year after year in the real estate investing business.

  • Hiring a “home” agent to help them buy or sell.
  • Not double checking their assumptions regarding rents, expenses and loans.
  • Over-leveraging.
  • Under-leveraging.
  • Not choosing the right property management company.
  • Buying when prices are at their peak.
  • Multiple bid situations.
  • Buying too much too fast.
  • Not acquiring to a strategic plan based on future need.

Just a little food for thought for you.

 

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Stop Asking About Fees

Listen, I’m as cost conscious as the next guy.  But it just drives me crazy, almost literally, when a real estate investors’ first question about our Kansas City property management services is “What are your fees?”

Can I give you a tip?

Stop asking about fees as the first question.

Seriously.  A vast majority of our 110+ owners are counting on their rental property (or multiples) to partially or fully fund their retirement incomes.  Essentially, these investment assets are more than just a rental property, they are a future.

To me, the first question is “How do you go about protecting my asset(s)?”

Here are questions I would ask before I got to fees. And, yes, I’d ask about the fees, as well.  But seriously, the value of your asset can rise and fall on the property management.  Get that right. It is every bit as important as the asset itself.

  • How long have you been managing properties?
  • If required by state law, are you licensed to manage rental property?
  • What are your money practices?  ie, How do you hold deposits? When are collected funds disbursed to the owners?  Are you subject to state or owner audit?
  • How do you go about selecting tenants? ie, What are your advertising practices? Do you show in person or do you do lock box showings? What are the credit and income criteria that you use to qualify, financially, the tenants?
  • How do you document the condition of my investment property when you take it over from me or my current property manager?
  • How do you document the condition of my investment property before and after a tenant moves in/out?
  • What are your best practices when it comes to legal challenges?
  • What is your vacancy rate?
  • What is your turnover rate?
  • How long does your average tenant stay with you?
  • What is your eviction rate?

There are more questions, of course. Those are what I’d start with, however. Spend as much time choosing your property manager as you do selecting your investment house.  You will be glad you did.

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Kansas City Property Management Evolves

I have been watching Kansas City property management evolve here in these last two years.  In fact, I think high quality, business-oriented property management companies are one of the great things that came about as a result of our Great Recession here in the United States.

Here-to-fore property management had always been mom & pop and not on a grand scale.  Some mangers cared more than others in the past, and the same can be said of today.  But, property management is growing up.  More KC property managers are a part of NARPM, or the National Association of Property Managers as are we here at Ad Astra Property Management.

But it is more than that.  A new generation of managers has realized that customer service matters.  That image matters.  That the better condition the property offered is in the more likely you will draw a tenant that appreciates that property and is willing to take care of it.

Tenants used to be easily and quickly dismissed as “tenants”. Which is to say, that they were some how second class citizens that didn’t appreciate safe, clean housing.  Many owners used to “milk” their rental properties for every dollar they could get at the expense of ongoing repairs.

With housing values as high as they are today and retirements at stake, most of our investment property owners are on board with taking care of the maintenance on their rental homes and making sure we are not deferring too much maintenance. After all, it is literally “pay me now or pay me later” when it comes to maintenance.

In short, I’m proud of our vision here at Ad Astra Property Management.  And I’m proud of much of our competition.  The game is getting more competitive and that is a good thing for both the tenants and the owners.

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