National Appreciation of Real Estate

From Keller Williams’ Mega Camp Gary Keller discussed this slide. I, too, have many thoughts around this. Knowing the market is power. If you are a current or future real estate investor looking at Kansas City, please reach out. We are here to help.

Chris Lengquist
Ad Astra Realty, Inc.
1127 W Dennis Ave
Olathe, KS 66061
913-839-2953 o
913-568-1579 m

Paying Too Much For Rental Property

Are you thinking of buying Kansas City area real estate investment property? Are you wondering;

• How do I keep from paying too much?
• What part of town should I buy in?
• How do I go about managing the property, setting the rent, screening the tenants?

These are some of the questions, and more, that you are asking yourself right now.

Paying Too Much
Look, let me make this simple. If you are a first time reader here it may take you a while to understand that I don’t mince words nor do I speak in absolutes. Here it is; It is really, really, really, really difficult to get the “bargains” all the books, tapes and seminars keep telling you about.

Real estate is on an 11 year climb. Yes, I said eleven. Sooner or later we KNOW there will be a correction to the market. There has to be. History demands it. Having said that, if you buy “at market” and you rent “at market” and you allow time to be on your side, there are precious few ways you can actually lose money.

Real estate investing isn’t easy. It is not rocket science, either.

Let’s just say you buy “at market” a 3 bedroom 2 bath home in Olathe, Kansas. Most likely, you’ll buy in the $220,000 – $260,000 window. I’ll assume you’ll put down 25% (the best way to get the best interest rates) and that you will amortize the loan over 30 years.

$260,000 purchase price with 25% down ($65,000)
Principal and Interest Payment $842
Insurance and Taxes $465
Total payment $1,307

In Olathe, this house would rent between $1,675 and $1,775 depending on the time of year, location, etc. So your Cash Flow Before Taxes would be somewhere in the $372 – $400/mo range, before property management.

This return doesn’t even take into account the other 4 Ways You Make Money Owning a Rental Property.

If you’d like to know more about our real estate services, reach out to us. We can go into depth on this conversation. I’d love to hear from you. Send me an email to Chris(at)AdAstraKC.com

You know to use the at symbol. I’m just keeping the bots from harvesting my email everyday.

Kansas Rental House

While I’m in the process of purchasing a home for my son and his family to live in for an equity sharing agreement we’ve come up with I thought I would share the numbers with you so that you can have good awareness of what a quality Kansas rental houses looks like from a real estate investor’s perspective. So here we go..

The home is located in Olathe, Kansas in a decidedly non-rental neighborhood.  It’s your standard split entry, raised ranch sort of house with 3 bedrooms, 2.5 baths and in very nice condition.  Good school districts.  Furnace and water heater updated within the last seven years, the roof has about 5-8 years of life left though it appears in good shape.  There has been foundation work done in the past though it is hardly noticeable.  Fenced yard, great deck, updated kitchen and tasteful carpet/paint throughout.

Price asked was $210,000 and I have it under contract at $200,780…that is with me waiving my 3.0% buyer’s agent commission.  So for most income property buyers the price would be $207,000….on the market for less than a week.

I’m putting 25% down and buying .25% of the rate down to 4.625 which means my monthly payment will be $774.26/mo for P&I only.  Throw in taxes of $223.92/mo and homeowner’s insurance of $80.92/mo and you end up with a monthly nut of $1,079.10/mo.

Now, to put this in perspective, the home is about 600 sq. ft. larger than the apartment they were living in at $1,105/mo.  So right away, we’ve got a win going on for my son…and yet we are going to keep this strictly about being a Kansas City area landlord.

It is my belief I can rent this home out at $1,295-$1,325 all day long.  So we use $1,300/mo.

Immediately, if self managed, revenues exceed PITI by about $2,400/yr.  Then, there is the principal reduction.  And lest we forget tax benefits and appreciation.

For a complete and more detailed analysis of this and other properties you may be interested in purchasing, reach out to me.  I’m happy to help.

Kansas City Real Estate Market Report

I thought some of you may enjoy catching up on the Kansas City real estate market report.  Simply click here to be taken to YouTube.

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.

Real Estate: Highest and Best Use in Overland Park

One of the first things a potential real estate agent learns in class is that real estate is about Highest and Best Use.  You can see that happening in Overland Park, Kansas right now in this story in today’s Kansas City Star.

Most people do not like change.  Me?  I love it when our cities become better utilized. Bringing life to communities through proper zoning and use creates a better living experience and uses our resources (land, gas, utilities, infrastructure) in a more economical way. Mixing living quarters with offices and retail allows a building and all its infrastructure to be utilized 24 hours a day, rather than 9 or 10.  An added benefit is that residents don’t necessarily have to get in a car and drive a mile just to get our of their subdivision and then another mile, or two or three, to their destination for a gallon of milk or a quick meal.

Anyone remember downtown Kansas City in the 1970’s and 1980’s and well in to the late 1990’s?  It was a concrete ghost-land after 5:30 pm before apartments and lofts began to trickle in.  Later that trickle became a tsunami.   This is the reality of our cities across America.  And I for one am all for it.

Working With Real Estate Investors

I have to admit, I’m kind of excited to be putting my “old clothes” on today and teaching about real estate investing.  I love where my life has taken me…  And this his how it all started.

There is just something about helping people secure a “Retirement worth having.” that gets my juices flowing.