KW MAPS Coaching

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

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.

 

The Power of Passive Income

As I get older I begin to appreciate more and more the power of passive income.  How awesome is it to figure out a way that you continue to earn based on earlier investments or efforts?

Of course at this website you would expect me to talk about passive income as it relates to residential investment property.  And you’d be right.  But in this article I’m not going to bore you with breakdowns of cash flow. You can find that elsewhere in the website.

But I am going to ask you to stop, just for a minute, and imagine your life with more passive income.  What would your retirement be like? How much earlier could you retire?  What would you do with your retirement?

Passive income is allowing me to ride my bicycle more. It’s allowing me to see Mexico more.  It’s allowing me more peace of mind.  And how much is that worth?

Income property isn’t the only form of passive income out there.  But I FIRMLY BELIEVE that each investment portfolio should have at least a measure of rental properties.

Real Estate Investing Versus The Stock Market : Part 2

Yesterday I did a post describing the benefits of a rental property after 20 years of ownership.  Please read Real Estate Investing Versus The Stock Market : Part 1 for the entire scenario and to catch up to where we are today.  Because today we’re going to ask what if you had taken that $38,500 ($35,000 for the down payment and $3,500 for closing costs) and left it in the stock market versus investing in a rental house.

THE INVESTMENT
I will readily admit to not being as in tune with the stock market as quite possibly many of our readers. I do real estate.  So that makes sense.  Yes, I have an IRA.  Yes, my wife has a pension with KPERs. Yes, I have other investments (though not large) in mutual funds and one other well known stock.  The point is,  I don’t eat, breath and live in the stock market.  And I don’t believe most working professionals have the time or expertise to follow the market on an hourly or even daily basis, either.

So we’re going to say that your $38,500 is in a nicely performing mutual fund (or stocks, heck, I don’t care.) that after all the buy fees, sell fees, yearly fees, etc, is yielding you a nice return of  9% per year, for the next 20 years.  I’m told, and have researched, that 9% is a good return number to be expected.   (Are you getting 9%?)  Yes, I am well aware that spikes and dips can happen.  But how is that any different than real estate?

So, using a very simple investment calculator math you simply take that $38,500 at a 9% annual return and you end up with a balance of $215,770.

REAL ESTATE VERSUS STOCK MARKET
Looking at yesterday’s real estate returns after 20 years (but not calculating increases in rent or tax benefits and conservatively adjusting for additional obsolescence) we had a total benefit of $216,611.

The same $38,500 invested in the stock market over the same period of time became $215,770.

PICK’EM?
Can we agree here that the difference is not that great? But what if…?

RISING RENTS
Rents rise and fall like housing prices…and the stock market.  Let’s just say that rents rise over the years at 2%, or slightly less.  Not unusual. Well, with that being the case, we have a different ball game.

Remember, our Part 1 scenario considered the cash flow before taxes to be $1,536/yr based on a rent rate of $1,575.  Now lets say that we calculate the rent rises.  I won’t bore you with all the math, but it takes our total 20 year cash flow before taxes number from $30,720 to $63,150.  That’s another $32,430 in favor of the rental house.

MOVING FORWARD
Listen, in my experience real estate is not as easily liquidated and carries more risk.  However, it is easily leveraged by real estate investors with good credit and assets and you can harvest the equity out of this house 10 years in to create a second income property with similar numbers.  Now the game has changed!

To be fair, stocks/mutual funds take less management, are easier to liquidate or buy/trade, and carry a whole let less risk.

And, let’s be clear, I own both rental property and mutual funds/stocks.  My preference after I have maxed out my IRA (and that of my wife) each year is to put the money in to real estate.  Just makes more sense to me. Why?

1. Real estate has better returns.
2. Real estate has better tax advantages.
3. Real estate can be passed on capital gains tax free.
4. Real estate can be leveraged.
5. Some one else (tenant) is providing some of the equity growth.
6. I have more control over house or property manager than I have over a far away company making widgets.

I could go on and on.  I am not saying don’t invest in the market.  I am saying, you should also be investing in real estate.

 

 

Will You Be My Friend? Facebook & Twitter

Writing a blog about Kansas City real estate and investing keeps me busy.  Selling real estate in Kansas City keeps me busier.  Because of the amount of business I receive through this very blog, referrals and previous customers I don’t really do any other advertising.  Other realtors I know find this to be simply unbelievable.   But it’s true.

If you are a Facebook user you can follow this blog by going to this link.  To be my friend in Facebook simply search Chris Lengquist.

Twitter is another matter all-together.  I have been struggling with Twitter for months now.  People I like and respect tell me it’s a great tool.  I just haven’t been able to emerse myself in it.  On the one hand I think it’s really cool.  On the other hand, not so much.  But let’s be clear, if it’s a tool that will help me to better get the word out to help my clients and would be clients then I need to embrace it.  And would do so willingly.  To find me on Twitter you’ll need to search for me as kcinvestments.  Don’t know why I picked that but I did.

Twitter is mostly a business tool for me.  At least that’s how I see it developing. Facebook is a place where I mix my business and personal life. I’d love to hear what some of you think about all of this.  I will say that I’ve been real estate blogging since January of 2006.  That makes me an old man at this by blogging standards.  I’ve just been so much slower to wrap my arms around the Facebook and Twittering.  Is it even manly to say you “tweet?”

By the way, anyone see that Kansas City Royals comeback in the 9th last night?  Wow!

CPA Who Is Dishonest Or Unknowledgable: Either Way Not Good

An agent in our office was tryingto sell an investment property in Kansas City to her client.  Now this agent isn’t up to speed with investment analysis but that is a whole other topic that I’ve ranted on before.  What caught my attention was that she took an 8% cash on cash deal to her client who then took it to her CPA.  The CPA said that he had another investment (not real estate) that returned 10% and the lady went with that and not the real estate.

Apparently the main argument was that 10% was better than 8%.  And I guess that is true.  But as my friend Jeff Brown at BawldGuy likes to say it’s what you don’t know that kills you.  For the newby real estate investor to not know that apples were being compared to raisins is one thing.  For a licensed CPA to simply ignore the other three benefits of real estate investing and the working in of those calculations into the return is either ignorance or dishonesty (since he had a stake in the other investment vehicle). 

Now, when you add 8% cash on cash onto your return for depreciation and principal reduction and, well yes, appreciation, the returns aren’t even comparable.  But heck, throw out the appreciation and you still have a real estate return of 15%-18% over the 10% the CPA was tallking about.

You may very well determine that the extra return is not worth the additional risk of credit or commitment of time.  That’s a decision only you can make.  But you can only make that informed decision if you know what to ask or if you actually work with someone who is knowledgable and will lay out ALL OF THE OPTIONS. 

There is my five minute rant for the day.  😉

This Correction Is Good For America

We all know that pruned bushes grow fuller.  That’s all great…unless you are one of the branches pruned.  That’s what we see all across America today.  A lot of trimmed branches.  But we are also seeing how the branches left un-snipped are reacting.

Allow me to digress for a moment.  I was walking though my house today.  Two of my children had their music cd’s laying on the carpet, the dresser or wherever.  Why does this matter?  It shows a lack of care and understanding that those cost money. 

Me?  I tend to throw things away knowing I can just buy more if I actually need it.  Though I still have tendencies to go cheap.  I’m 43.  That will matter in a minute.

Some say I’m a Gen Xer.  Some say a Baby Boomer.  Personally, I associate myself more with X.  But let’s be clear, I firmly believe anyone under 40 years old has a hard time dealing with what the economy is doing right now.  Think about the crash of ’87 (was it ’87?).  Or the oil bust of the mid ’80s.  Or high inflation of in the late ’70s.  Anyone younger than 40 will have a hard time remembering that.

Especially the 20-somethings of today.  Imagine.  If you grew up middle class in America you believe it’s your God-given right to big screen televisions, 6% interest rates, huge vehicles and stainless steel on every appliance in the kitchen. 

I was watching tv the other night and I was struck by how spartan the kitchen was.  This was a 1970-something re-run.  I can’t imagine what the average family’s reaction to such a simple kitchen would be today.

Chris. Chris. Chris.  What pray-tell does this have to do with real estate investing in Kansas City?  You are always going off on these tangents!

I don’t really know.  I’ve seen many of my real estate friend disappear both locally and nationally.  I see the trimming taking a toll on everyday people here in the Kansas City area.  Yet, we are insulated from the carnage I see in other cities. 

Maybe we can take this moment in time to grow stronger.  That is what nature says we shall do.  Re-evaluate your goals and daily habits.  Make a few tweaks.  Dig in.  Analyze.  Go for it. 

I Have To Laugh

For those of you that saw my last post (scroll down) about how I think Fannie/Freddie sucks, well, I have to laugh.  Please laugh along with me.  Turns out that MY lender dudes (and dudette) tell me that the underwriting stip mentioned only has to do with when you are moving from primary to primary. 

This just goes to show you a few things;

1. That the information both my client and I received was erroneous.  Make sure you work with a lender that knows the details of his stuff before talking.
2. That I found it believable shows how fluid the whole investment property lending environment is right now.  I really feel like I’m spending too much time trying to figure out what the lastest regulations are.
3. That I can be a little reactionary.  But longtime readers already knew that, right?

Now, I’m still not ready to retract my statement about my thoughts of F/F.  I’m only willing to say I was wrong and probably shouldn’t have written that post.  Sure I could just delete the post.  But I won’t.  I don’t want to pretend it didn’t happen.