Investment Real Estate In Kansas City: Don’t Stop

Chicken Little loved to say the sky was falling. And if you read all of the newspapers you will see that they like to do the same when speaking of real estate. The media loves all the fodder regarding stagnant growth, reverse growth, minimal growth, large inventories, etc. But, and you need to listen here, it really doesn’t make too much of a difference if you own investment property, especially here in the Kansas City area, and you own it for the long haul.

If you’ve read my blog for any length of time you know I’m not a big proponent of Buy & Sell strategies. Buy & Hold income property is a whole other subject. Inman News is a great portal to keep up on real estate news. And today I read an article on Inman that reported that the home-price index fell 0.7% in the fourth quarter while rising 0.4% compared to the same period of time the previous year. A mixed signal but relatively flat, none-the-less.

However, (read the article) it goes on to speak of growth since 2000. Detroit is the worst city on the index with a rise of 19.51% since 2000 and Miami had the highest rise at 180.87%!

We can assume that Detroit will not face the correction that Miami will. (We don’t know, but it’s an educated guess.) And neither will Kansas City. But lets say Kansas City appreciated somewhere along the lines of Denver at 37% and Dallas at 23%. (I’ll use the 25% number since I believe we aren’t Denver but a little nicer than Dallas…oh, I can see the angry emails now.)

Example: Paid $150,000 for duplex in 2000. Appreciated 25% over the 6 years and now has a market value of $187,500. For the sake of argument, we can say that it really appreciated 27% but over the last year dropped 1%. Doesn’t really matter. The point is your equity grew on appreciation alone by $37,500. Your remaining principal is now $111,230 (or so assuming you put 20% down at 7.0% back in February of 2000) so your tenants paid your loan down an additional $8,770 on your investment property. That’s total equity growth of $46,270.

Therefore, your initial $30,000 cash investment is now worth $76,270. A 254% increase. Are you getting that? You had 25% appreciation on the property but because of leverage you had a 254% increase in your money. How are your stocks/bonds doing?

And I have not even mentioned Cash Flow Before Taxes or Depreciation. Two more of the 4 benefits when owning investment real estate.


Filed under 4 Benefits of Real Estate Investing, Kansas City Real Estate, Misc. Real Estate

4 responses to “Investment Real Estate In Kansas City: Don’t Stop

  1. Platz Home Loans

    I know this probably sounds like a stupid questions (why is it that novices always say that?) but is it smarter to try to flip homes or get renters when you are trying to invest in property???

  2. Chris Lengquist

    Smart depends on your criteria. I am big on Buy & Hold real estate. It provides good steady growth with the rest of the 4 Benefits of owning residential investment property.

    Buy & Sell, IMO, is about replacing job income. Big rewards, big risk. (I have a client right now about to lose about $8,000 on a Buy & Sell.) It can be done and done well but it can also be risky.

    Buy & Hold allows OTHER PEOPLE to buy you a property and THEY allow you to depreciate the property, take the appreciation and give you a little extra cash each month to keep the property up and possibly the odd vacation here and there.

    Thanks for visiting! Feel free to go to the labes listed on the right and look for some articles that relate. I think you’ll be happy you did

  3. Several times I read article at this blog, but this maybe my first comment.I dont know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog.

  4. Mary Ann, thanks for reading.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s