Category Archives: Uncategorized

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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Return on Investment for a Rental Property

Here is an email I sent to an owner regarding a property he purchased back in the fall of 2012.  He was trying to get an idea of how he had done on his property.  What do you think?

Hello Bill,

Please find attached a report from 10/1/2012 – 7/1/2013.  The tenant moved in on July 1, 2013, so that income shows.

It shows your total expenses to that point of $60,517.73.  Your purchase price was $81,000 on 10/12/2012.

You paid some closing costs but I don’t have the Settlement Statement with that amount readily available.  I can dig that up if you like but it wouldn’t have been too awful since you paid cash.  Probably around the $900 range.

That means your “all in” expenses on the house before it was set in to service are $142,400, more or less.

Hope that helps.

Now, let us have some fun.

From Day 1 through Today you have spent $66,541 on expenses plus your purchase with closings costs of $81,900 totaling $148,441.  You do not have the property leveraged so that is all your money in.

From Day 1 through Today you have earned income of $50,100.

Today’s estimated value is between $175.000 to $188,000 depending on a few things.  Let’s say $175,000 to be conservative.

I’m going to go ahead and subtract sales costs of 7.5% (for commissions, closings costs, etc) to figure our real return…which would add up to $13,125.  Plus you’ve paid your own home owner’s insurance and property taxes. I don’t have those exact numbers.  But let’s say since October of 2012 those have added up to $12,500 ( a rough guess).

Therefore, your true value is $161,875.

Your “all in” minus the income you’ve earned is $110,841.

You have invested $110,841.
Your current market value is $161,875.

That is a 46.0% increase in your monies.

Kinda fund to figure all that, right?


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Overland Park Has Lost Their Mind: HELP

The City of Overland Park has lost their minds on their proposed new city licensing of rental properties.  Their new legislation would make property managers responsible, financially, for deferred maintenance of properties under their care.

Now, as an owner you may think this is great.  I can tell you will not have any property manager taking part in that program…at least at their current rates.  Simply put, for all Overland Park rental properties I would have to re-evaluate my management agreements and raise hefty reserves and cost mitigation strategies.  Who ultimately pays? The owner. Then the tenant.

Here is the link to what they are proposing for rental properties;

Here is the snippet of concern in 5.75.060 A5;

The Owner’s Agent shall be jointly and severablly liable with the Owner for;

Are you kidding me? How can a city of any stature make me responsible for a property I do not own? What is going on here? This is still America, right?

To express your thoughts on this go immediately to;

This must be corrected or property management in Overland Park will get much worse or much more expensive.  Either way it doesn’t serve the public interest.




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Seller’s Markets and the Real Estate Investor

I have been blogging about real estate investing in Kansas City since 2006 and during that passage of time I have seen seller’s markets, buyer’s markets and have lived through the Great Recession.  Sometimes these markets have lasted months to years and sometimes it seems that they have oscillated back and forth with the seasons.

But I believe it is safe to say that Kansas City, especially on the Kansas side, has been in a seller’s market for quite some time now (a solid year, at least) and so we need to think about the effect that has on the real estate investor.

  1. Adding inventory to your portfolio is more costly and therefore returns are lower.
  2. You current inventory is worth substantially more than when you purchased it as supply and demand has increased the base price of housing stock.

Should you wait, therefore, to add additional inventory to your rental property portfolio?  Well, when will the economy change?  We know that it will.  History proves that.  But when? And how drastic will the change be?  How long can you stand to have your money in a stock market that is now solidly under-performing?  What alternatives do you have to the stock market and real estate?

Should you sell the inventory you have while prices are still high?  Could be.  Especially on the Kansas side.  But are you looking to 1031 exchange? If so, will you be able to find suitable replacement property that will give you equal or better returns be that here in Kansas City or elsewhere?  Is it time to sell, pay the capital gains and depreciation recapture and move on?

There are no easy answers, as usual.  Your choices must be carefully considered. I can tell you that as a owner of Ad Astra Realty’s KC Property Manager that vacancies on the Kansas side have not begun to rise and on the Missouri side of KC they are only up slightly, say 2-4%.

If you’d like to set up a time to discuss your income property portfolio to see what your options may be, feel free to contact myself or Jimmy Geisler.  We’d love to help.

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When Owners Don’t Make Money

As an investment property owner sometimes you have to hear things that you are not going to like.  And worse?  Things that will cost you money even though, truly, it shouldn’t be your responsibility.  Let me give you an example.

A rental property owner who had been using the services of a competing property management firm here in Kansas City came to me with their story.  Boiled down, the property manager moved in a tenant after screening that the owner believed to be pretty good. After a month the tenant started screaming about not paying rent and wanting out of the lease because they believed that the popcorn ceiling on their 60+ year old house had asbestos.

Asbestos scares people.  I’m not going to tell you it is safe or not safe.  You can look that up.  From my understanding, however, if it is not disturbed it is of no problem.  But if disturbed it can be potentially deadly over the long term.  Feel free to follow this Google search for more research on the subject.

Anywho, the rental property owner was a bit disturbed that his property manager seemed, at least in his eyes, to be working more for the tenant than for him, the owner.  Why?  Because the manager told him it would be better to just get the tenant out as soon as possible and get someone new in to the property.  Let them go (break the lease) and forgive them the 10 days of rent they still owed.

Well, both of those actions will cost the income property owner money, right?  Yes. But, the owner wasn’t collecting any money because the tenant wasn’t paying and apparently had no intention of paying. The owner and manager could have held to the letter of the lease but if they don’t pay now you have to initiate eviction which will cost for a lawyer, court costs, more missed rents and possibly damages.

On the other hand, if you can get them out by the weekend and re-lease the property at no charge you will lose about 45-60 days of rent and, probably, utilities.  In either case, you need that property back as quickly as possible to minimize damages, right?

After you get the tenant out then you may decide to pursue damages.  But, in my opinion, I support the actions of the first property manager.  Get the crazy tenants out.  I mean, who moves in and decides then that popcorn ceilings (which are on the ceilings of literally hundreds of thousands of homes across America) are all the sudden a danger?

Yes, I know it’s inconvenient and probably costly.  But this is property management.  This is what happens when you own income property.  This is why owning investment houses isn’t for everyone.  This highlights that literally every transaction with a tenant is different than the last.


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