Kansas City Real Estate & Investing Blog

Kansas City Rehab & Rent versus Flipping

Chris Lengquist, RIPS (Keller Williams Realty) — Thu, 14 Aug 2008 13:40:48 -0500

Why am I teaching a class next Saturday about Rehabbing and Renting Kansas City investment property versus flipping homes? Two main reasons;

Finding a home that has the numbers to flip aren't nearly as numerous (or in as good of neighborhoods) as finding homes to Rehab & Rent.
Flipping real estate is simply an income replacement...or supplement. Rehabbing and Renting is a method of generating a little extra cash flow while building equity for your future. Really just a more hands on way of becoming a "passive" real estate investor.

The Numbers Of Rehabbing & Renting
Right off the bat when you are looking for a home to Rehab & Rent vs Flip you can find a house that sells for 6% - 8% more and still make money! Now, that may not sound like a lot but have you tried to buy houses at the prices needed to flip? It's inside that last 10% where people make and lose money. And it's also inside that last 10% where sellers seldom go.

The 6% - 8% savings comes from you not having to sell the property when you are done rehabbing. You save the real estate agent's costs and the closing costs. And before you tell me "I can sell it myself" you had better pay attention to what market we are in.

And think about this, rehabbing to a rental standard is much different than rehabbing to a resale standard. If I know I'm going to rent this investment property I'm far more likely to downgrade the carpet a little, downgrade the paint a little, downgrade several things...a little. I don't want to go cheap. I do want it inhabitable, desirable and functional. I just don't need it to "Wow!" a prospective buyer. Therefore, cost savings here that I can spend later when it's time to sell...when I have even more equity in the house.

Negotiating The Purchase Of An Investment Property
It doesn't take a genius to know that most people don't wish to give their homes away. You can negotiate them down based on cost of improvements necessary, equity they may have in the home and a whole host of other factors.

But too many "flippers" bought homes that were priced too high. Flippers get frustrated working with me because I won't let them buy homes they are going to lose money on.

"But if I can make $8,000-$10,000 on this I'll be fine."

Ah, have you ever flipped a house? How about more than one? You can go through your "profit" of $8,000-$10,000 in extra, unexpected repairs and price reductions in a heart beat.

In flipping you need to buy a house as follows: ARV - Quick Sales Discount (5%-10%) - Cost of Repair - Holding Cost - Sales Costs - Expected profit (15% - 20%) = Purchase Cost.

When you are rehabbing a house and then holding it as an investment property for rental purposes you can add back into your purchase price the Quick Sales Discount (or at least some of it) and the Sales Costs. This will immediately include a whole lot of homes you didn't necessarily have access to before.

So how would you like to own a home for rental purposes that you purchased and rehabbed and still saved 15% - 20% below the actual value of the home? You'd have all that as equity for your future. Buying an income property can be done so many different ways. This is but one. If you ‘d like to learn more about Rehab & Rent just see the all the details of an upcoming workshop I've got going on.

Originally posted on Kansas City Real Estate Investing.

Rehab and Rent Workshop for the Kansas City Real Estate Investor

Chris Lengquist, RIPS (Keller Williams Realty) — Sat, 02 Aug 2008 19:44:46 -0500

There will be a Rehab & Rent Workshop put on by Chris Lengquist of Keller Williams Realty in Olathe on Saturday August 23, 2008 at 9:00 am and ending about noon. Space is limited so you must register to attend this workshop designed to teach you the numbers and philosophy of buying a home under market, rehabbing it to rental standards and then renting the home for cash flow. The location will be at Keller Williams Realty Olathe located at 801 N MurLen Rd, Olathe, KS.

Guest speaker Ryan Dusenberry will also be in attendance to share his own personal experiences with this technique that has allowed him to build his investment property portfolio to 9 properties...and he's still in his mid-twenties. And of course Chris Lengquist will be there to teach the fundamentals of how to evaluate these properties to choose between the winners and the losers.

*** *** *** *** ***

Have you ever wanted to own rental property in the Kansas City area?
Have you ever wanted to rehab a house for the profit?
Have you ever been frustrated with the available inventory of rental property and rehab property?
Have you ever wanted to know how to evaluate rental property before you buy?
Have you ever wanted to hear from someone actually doing it?
Have you ever wanted to hear from a lender on the subject of rehabbing and renting?

*** *** *** *** ***

There is no charge for this Rehab & Rent Workshop. But you must register. Simply click on the register highlights and fill out the form and indicate that you are registering for this workshop. There will be no books to buy, no seminars to sign up for at outrageous fees and no tapes proclaiming any get rich quick schemes.

This is a hands on workshop so feel free to bring a calculator, pencil and paper. Bring your questions and a good attitude.

*** *** *** *** ***

What if you could buy a home or duplex that was for sale significantly under market? Maybe not enough under market to flip the house but enough to rehab and then rent. You'd have great cash flow and a fair amount of equity just sitting in the property waiting for your next move later down the line.

More of this strategy will be discussed in detail at the Rehab & Rent Workshop. Register now.

Originally posted on Kansas City Real Estate Investing.

Kansas City First Time Home Buyers

Chris Lengquist, RIPS (Keller Williams Realty) — Thu, 24 Jul 2008 10:06:37 -0500

Attention first time home buyers in Kansas City. And yes, that includes Overland Park, Olathe and a dozen other cities. The current mortgage crisis will now benefit you!

The House has passed a bill that will likely become law within the week. It's a bill that no one wants to stand in the way of so it's pretty much a done deal. How will this help the first time home buyer in the Kansas City area? Well, if you;

Are a first time home buyer
Have purchased or will purchase a home between April 9, 2008 and July 1, 2009
Have individual income of less than $75,000 or as a couple earn less than $150,000

If you meet those 3 standards you are eligible for a $7,500 tax credit.

Now, you will be expected to pay that back over the course of the next 15 years interest free. So it's not free money. But it's discounted money. If inflation ends up being 5% this year, well...hopefully you get the picture. I'll work out the math for you a little later today but you will be saving hundreds and possible a couple thousand in interest over the course of that 15 years.

(Further details will be announced as I dig deeper into this Housing Rescue Bill.)

So if you are a first time home buyer and looking to purchase a home in the Kansas City area you need to contact me today. Regardless of where you are looking be it Olathe, Overland Park, Blue Springs, Lee's Summit, Shawnee or a host of other suburban cities or Kansas City. If I am not knowledgeable about the area of town you are looking I'll hook you up with someone who is.

With a FHA loan, 3% of the purchase price and good credit this makes it easier and more economically feasible to be a first time home buyer than ever before!

Buy & Hold Real Estate Investing Works In Kansas City

Chris Lengquist, RIPS (Keller Williams Realty) — Fri, 11 Jul 2008 11:11:21 -0500

It's Called Buy & Hold Real Estate Investing

Yesterday I addressed those of you who may be stuck in the "No Sell Zone" of real estate investing. I'm not gonna recap it here other than to say that we were looking at what happens if you are actually losing money on your real estate investments today. By losing money I mean your yearly outgo is exceeding your yearly income.

I've worked up a scenario below to show you that it's not all that bad. You can and will survive. You may not make as much money as you hoped. But it's called investing. Nothing is guaranteed. (Keeping in mind that you probably bought on quasi-fundamentals to begin with.)

The Ground Rules
Below is just a worksheet example. Obviously, you should not misconstrue this to be advice aimed at you or your situation without the competent advice of a real estate investment adviser familiar with your situation, your CPA or your attorney.

Also, we are gonna say that this buyer was thrilled to buy a $170,000 duplex in January of 2006 with 10% down at 6.5%. His PITI works out to be roughly $1239/mo and he's thrilled because he collects $1,350/mo in scheduled rents. (I said scheduled.) But he nor his REALTOR ever took into account vacancies, utilities when vacant, repairs, cost of handyman, advertising and other miscellaneous costs of owning investment property that totals up to about $2,800/yr.

We are NOT figuring any rent increases for 5 years and then we lock it in at a 5% increase for the remainder of time. (Are you still with me? I'm trying to be ridiculously fair to the most pessimistic of our readers.)

And even though there is still appreciable growth in many areas of KC (no, I'm not kidding) I'm taking a "nuclear winter" approach here. You'll note the decrease in values followed by modest growth potential in the last few years of 3% and then 4%. (Historically KC goes about 4.8%-5% a year. Do the math.)

Lastly, we are NOT even going to take into account depreciation. Or the additional tax benefits of owning rental property.

Value Of Sample Investor's Duplex
2006          $170,000
2007          $170,000
2008          $166,000
2009          $165,000
2010          $169,000
2011          $174,000
2012          $179,000
2013          $186,000

His year 1 through 5's expenses run $17,668/yr. ($14,868 in PITI and $2,800 in misc. expenses) and his income is $16,200/yr resulting in a net loss of $1,468/yr. That's a net loss of $7,340 over the 5 years. Remember that.

Now in 2011 his rents increase 5% limiting his losses to $658/yr. Over the 3 years that totals $1,974 and when added to the $7,340 totals $9,314.

And since I generally recommend (case by case basis, people) in Kansas City exchanging your real estate investments every 5-8 years lets say sales costs are gonna run 6.5% off the 186,000. So what do we have?

Sales Price             $186,000
Cost of sale           $ 12,090
Total of losses      $ 9,314
Remaining loan balance $135,645
Original equity       $17,000

Capital Gains $11,951

See. It wasn't all that bad. If you had taken that original $17,000 and put it in a CD at your local bank at 5% per year you would have avoided a lot of trouble and headaches and risk but also only incurred a capital gain of about $8,117.

Keep in mind we didn't figure all the tax benefits along that way that would more than compensate you for your trouble.

Do I know when this correction period will end? No. Can I tell the future? No. But I've laid out a fairly bleak projection here and you still came out ahead. And that's if you bought too high. What if you bought now when you have some leverage?

Olathe, Kansas Housing Market

Chris Lengquist, RIPS (Keller Williams Realty) — Wed, 11 Jun 2008 11:04:20 -0500

Olathe, Kansas: Spotlight On Why I Like This Market

Olathe, Kansas has been mentioned by me time and time again as a market that I am enamored with. Sure, I live here. But there is much more to it. For real estate investors and Joe & Mary Homebuyer alike Olathe offers the opportunity for solid appreciation even in these tougher times. If it's alright with you I'm going to take a minute and show you (and link you) to what I'm talking about.

Top 15 City in America
As recently as 2006 when CNNMoney ranked the Top 100 Cities in America, Olathe finished #13. Neighboring Overland Park finished #6. Olathe currently has a population hovering around 114,500 (up 2,400 since 2006) and a Median Family Income right around $79,100.

Olathe Housing Stats
The Kansas City Star's zip code appreciation map shows the two predominant Olathe zip codes with appreciation over the last year. 66061 came in at 4.3% while 66062 came in at 7.6%. And as you can see by clicking on the image for Olathe Housing Stats for the last six months that we are still selling homes at a pretty good pace. I showed here on our Olathe Real Estate blog that inventory for single family homes is at about a four months. Technically, still a Seller's Market even though people got spoiled by the markets of past years where you would sell a house in 45 days or less, sometimes.

Olathe Job Growth
Olathe is really doing well in the Job Growth category, as well. I've written here before how Ft. Dodge Animal Health has moved in. Along with Farmer's Insurance. A multitude of call centers are relocating to Olathe, too. US Bank has a large tech center here in Olathe now. And we haven't even mentioned that the world headquarters of Garmin is located right here in Olathe.

Jobs seem to be coming to Olathe every month. To keep up with the growth of jobs in and around Olathe I would encourage you to visit the Olathe Chamber of Commerce's Breaking Newspage. I think you'll find the website by the Olathe Chamber to be very easy to navigate and one of the most informative Chamber sites I've ever visited.

Olathe's Quality of Life
Want to know the reason I live in Olathe? The Olathe School District. Period. As a father of four (two with special needs) I needed a school district that could work with my children. We interviewed the three predominant school districts in Johnson County, Kansas and felt strongly Olathe was where we could be best served. Because in addition to the two special needs kids we have one that is on an Advanced Placement path. And as we enter his high school years he is going to get to take advantage of the Olathe School District's 21st Century Program. He'll be taking part in Olathe Northwest High School's e-Communications Program. We can hardly wait.

In addition, Olathe is easy to navigate. Has quite a few parks for your enjoyment including Heritage Park, the Indian Creek Trailway and Frontier Park where the City hosts a series of free concerts every year. I'm usually in attendance.

Olathe's Potential For Real Estate Investment
Olathe is not a "cash flow" city. At least in my mind. It will usually take you about 20% down to break-even on a duplex here or about 25%-30% to break-even on a single family house. But having said that, there are few areas around Kansas City...or the Midwest for that matter...that you are going to get better long term, steady growth.

So for my investors I will usually recommend they have only part of their portfolio parked in Olathe. If you own five investment properties I might recommend two be in Olathe and the other three be in cities where you will be able to leverage your money more in the 90% LTV range. Because just like it's nice to diversify your investment holdings it's nice to diversify your real estate investments.

A for instance would be of a "pocket listing" I have. It's a duplex with 2 bedrooms and 2 baths per side. Rents are a steady $750 with vacancies nearly non-existent. So you have a Gross Scheduled Income of $18,000. Asking price is $191,000. Your Gross Rent Multiplier is 10.61. Not too shabby.

Closing Thoughts on Olathe
I hope you have enjoyed our little tour of Olathe. If you are thinking of moving to Olathe take some real time to follow the links and explore our city. Give myself or our team a call or contact us if you need help selecting housing that is suitable for you and your family.

If you are a real estate investor be sure to ask for specific examples if you are looking to add a rental property or two to your investment portfolio.

For Rent in Blue Springs, Missouri - Newer Duplex w/ Rent Incentives

Chris Lengquist, RIPS (Keller Williams Realty) — Thu, 05 Jun 2008 18:16:28 -0500

This newer duplex for rent in Blue Springs, Missouri is an excellent value at $850/mo. Featuring 3 bedrooms, 2 full bathrooms and a 1 car attached garage with a private deck for those summer barbeques.

Just a block or so off Adams Dairy Pkwy and within only a few minutes walk to the schools and YMCA on the southeast side of Blue Springs this duplex for rent is perfect for almost anyone.

Large rooms. Clean carpeting. Refigerator included. Dishwasher and so much more.

I am NOT the property manager for this duplex but the owners have asked if I would help them advertise.

To find out more about this rental property in Blue Springs contact Beth at epg@nusports.com or call her on her mobile phone at 847.271.4865. Don't let the area code fool you. She's a local here in the Kansas City area.

You might want to hurry though. The rent incentives will not last long! Click here to find out more about this Blue Springs, Missouri duplex for rent.

Olathe - Kansas City Real Estate Homes For Sale Has A New Resource

Chris Lengquist, RIPS (Keller Williams Realty) — Thu, 05 Jun 2008 08:00:05 -0500

Olathe Kansas City real estate homes for sale has a new resource. If you are looking for a resource to help you locate homes for sale in the Olathe or Kansas City market areas then you will want to visit the our newest website at www.OlatheKansasCityRealEstate.com.

With easy to use buttons to help you conduct your free MLS style home search by either map, zip code or school district.

You can either use the system to search for real estate for sale or you can register and save your searches. The choice is yours and yours alone.

And if you are a home seller in the Olathe or Kansas City areas you'll find resources to help you stage your home, price your home and market your home. And of course, should you want to hire real estate professionals to get the job done we, I, hope that you will consider interviewing us.

Did you know that in Kansas we had year on year appreciation of 2.7%...according to the US Government's index on housing. Yes, we were one of only seven states last year with positive appreciation. Missouri was too with 1.7%. The Kansas City area was up just over 1%. My guess is that would be much higher if not for a couple areas I warned real estate investors to stay out of, any way.

Go ahead and jump on over to www.olathekansascityrealestate.com and let us know what you think!

Chris Lengquist
Keller Williams Realty
Diamond Partners, Inc
Olathe, Kansas
913.322.7515

Kansas City, Kansas Duplex For Sale - Cash Flow!

Chris Lengquist, RIPS (Keller Williams Realty) — Mon, 14 Apr 2008 12:16:51 -0500

1542-44 N 63rd Terrace
Kansas City, KS

This duplex for sale has cash flow!

Located in Kansas City, Kansas this duplex for sale features 2 bedrooms, 1 full bath, 1 half bath and 1 car garage for each side. Priced at $119,999 with rents bringing between $665 & $685 per side. One side is currently occupied with tenant and the other side has someone moving out very soon that we will be renting. Vacancy in the area is low as I saw only one "For Rent" sign on the entire street filled with duplexes.

This property has been managed professionally and if interested I can put you in touch with the property manager. The Wyandotte County, Kansas tax appraisal says this income property is worth $130,700 but the out-of-state seller says SELL! So we've priced it to sell. Inspections are welcome but this home will be sold "as is" due to the favorable pricing.

Do not hesitate to contact me if you have any questions about this duplex for sale with good cash flow in Kansas City.

Offered for sale by Chris Lengquist of Keller Williams Realty in Olathe, Kansas. For all real estate investing needs please feel free to call Chris at 913.322.7515.

The Fallacy of Depending on Cash On Cash Returns

Chris Lengquist, RIPS (Keller Williams Realty) — Thu, 10 Apr 2008 12:44:36 -0500

Cash On Cash And Why You May Not Wish To Worry About It

10% Cash On Cash is the Holy Grail to a lot of real estate investors. I just had the conversation again with someone in their very early thirties telling me why they needed a 10% Cash On Cash return. That's what his father had said he absolutely had to be sure of before buying an income property. And if I was his father's counselor I may or may not agree depending on his situation. But for this younger man with great income, a solid future and a desire to build assets, I couldn't disagree more strongly.

REALTOR DISCLAIMER
Remember, as a professional real estate agent that works everyday with real estate investment property I have access to not only my own personal experiences but the personal experiences of people that, in total, own hundreds of rental homes. I make it my business to talk to them and to tap their wisdom. From those experiences I offer my advice after getting knowledgeable with each individual's situation. But ultimately, your decision is your decision. I work for you. Not the other way around. Now, I may have you sign a disclaimer....

Listen to this very carefully. To the extent that you chase Cash on Cash returns you retard your capital growth. It's really that simple. Why?

Cash flow investment property with little to nothing down, at least here in the Kansas City area, tends to be in areas and neighborhoods that don't appreciate very well in relationship to their surrounding communities.
For income properties that will appreciate at par or above, you will need to put more money down, i.e. 20% versus 10%, to get the higher Cash Flow Before Taxes to benefit your Cash On Cash returns.

Take for example a Blue Springs, MO duplex I've been keeping my eye on. This particular rental property is about 40 years old (give or take) but has been nicely cared for, has a brick exterior with a newer roof, windows, carpeting, ceramic tile and more. I'm sure the purchase price will be somewhere around $136,500 with the seller's paying 2% closing costs. Rents are $1,175/mo and it's 100% occupied in a nice little quiet neighborhood that stays rented with quality tenants.

Without showing you all my calculations here I can tell you that with 10% down on this property your cash flow is about $53 a year after all expenses calculated. (And yes, I mean all.) That translates to a 0.4% Cash On Cash return. That's right there with having a passbook savings account at Capitol Federal Savings. Not good. But wait, there's more! (Apologies to Ronco.) When you calculate Cash Flow Before Taxes, Principal Reduction and Depreciation your capital growth on your investment is 13.9%.

Using the same income and expenses with 20% down, the corresponding lower interests rates and no PMI the Cash Flow Before Taxes jumps to $1,457 a year. That's a Cash On Cash return of 5.2%. Now we're getting better, right? Well, no. Not really. Because your capital growth has dropped from 13.9% with 10% down to this scenario at 10.6% capital growth.

Note: No appreciation was used in the work-up of these numbers. But what if it had?

Well, not only would your capital growth be better but you'd have two rental properties working for you where as before, with 20% down and better Cash On Cash you only have one rental property working for you.

Are you following me here?

Heck, even if you are not believe me! Or call me, come in an we'll sit down and work-up a real property and by the time we're done you'll be able to teach me all about it. Again, depending on your stage in life, investment goals, long term plans and available cash reserves this may not be the best strategy. But for many, many, many people this argument will hold very true.

Lawrence, Kansas Condo For Sale

Chris Lengquist, RIPS (Keller Williams Realty) — Mon, 31 Mar 2008 13:11:12 -0500

Lawrence Condo For Sale

A very good friend of mine wants to sell his condo he bought for his kid when she was going to school at the University of Kansas. It's about 1/2 mile off campus on the west side, has two bedrooms, two full baths, a living room with a fire place, a separate dining room, laundry room and a lanai.

Now, the lanai has also been known to be used as a bedroom. Your likely tenants are college kids, after all.

All appliances including a new oven/range, older washer and dryer, and an older refrigerator all stay with the property. There is also newer carpeting and vinyl flooring, less than a year old. New windows and new paint, as well.

We're getting together this evening to discuss price. But I would say about $84,500. Rents should be about $695-$725. And of course as close to campus as it is I'm sure renting is not a huge issue. (Photos are yet to come. I'm just getting the word out early.)

So if you are looking for a rental property as an investment in Lawrence, Kansas do not hesitate to drop me a line. Or it could make a great place for your student to live while you are paying tuition.

Kansas City Power & Light District

Chris Lengquist, RIPS (Keller Williams Realty) — Sat, 15 Mar 2008 14:18:05 -0500

Kansas City Power & Light District: Two Thumbs Up

The Kansas City Power & Light District gets a thumbs up from me and an another from by buddy. We spent the day there yesterday hanging out in KC Live with all the festivities for the Big XII Tournament. As you can see from the photo, there was not only a sold out Sprint Center but literally tens of thousands more came down to drink beer or sodas, hang out with friends and watch the game on the 12-15 foot television screen that you can see in the upper right hand corner of the photo.

I have no idea on whether or not this will be a long term economic success. I can tell you from a civic pride perspective that I felt like I was in a real city, again. The whole atmosphere reminded me very much of Baltimore's Inner Harbor area. (Yes, I know there isn't any water within 3/4 of a mile of the place.)

We grabbed a bite to eat at the Gordon-Biersch brewery. Food was great and their own brews were good. I loved the Marzen. GB describes it as "Our most popular beer which is a smooth, mildly sweet, auburn colored lager."

The crowd was very midwestern. Well-behaved and friendly. We spoke with people from Iowa, Missouri, Kansas, Texas and Oklahoma. I even saw that Colorado brought their fan!

Chris, what does this have to do with real estate investing in Kansas City? Well, nothing really. Or everything. See, I believe cities will tell you whether they are moving forward or backwards. And that will have a determination on the desireability of a city for future work-forces and employers. And this bodes well.

Despite many fears, parking was not too difficult to find so long as you don't mind a 5-10 minute walk. And really, if you are going down to eat and drink all day, I don't think the walk will hurt you.

So the next time you are looking for something to do I would love to encourage you to go on down to the Kansas City Power & Light District. Eat dinner. Listen to one of the many live shows they have planned. Catch an event at the Sprint Center or visit the College Basketball Experience.

Reprinted with permission from BBQCapital.com - A Kansas City real estate investing website.

Selling Your Rental Property In A Buyer's Market

Chris Lengquist, RIPS (Keller Williams Realty) — Sun, 24 Feb 2008 11:04:35 -0600

Selling Your Rental Property In A Buyer's Market

Kansas City is currently experiencing a buyer's market. Investment property is a little better off. Certain areas of the city are better than others. Let me give you a picture of what the investment market in Kansas City currently looks like.

Below will be a couple sets of numbers for you to take a look at. One is for Johnson County, Kansas duplexes and the other is for Jackson County, MO duplexes. Now, the numbers only include duplexes priced for sale between $100,000 and $300,000. I just figured below $100,000 isn't usually what my clients are looking for and above $300,000 just isn't going to be profitable within the parameters I use.

Johnson County, Kansas Duplex Activity
current as of 2.21.2008

Active =    34
Pending =   3
Sold =        52 (within previous 12 months)

Jackson County, Missouri Duplex Activity
current as of 2.21.2008

Active =   147
Pending =    5
Sold =      100 (within previous 12 months)

Right away you should be able to see the market within the market. Johnson County has about a 7.5 month supply of homes while Jackson County has about a 16.5 month supply of homes. Further emphasizing that all real estate is local. And local can be broken down into cities from country, zip codes within the city and sudivision from the zip code.

As a seller of residential investment property in Kansas City you need to know that you are in for some fierce competition. And while some sellers may think they know that what I see on the market is usually overpriced, under cared for and have crappy tenants.

Why, I know of a duplex in Overland Park that has been on the market for quite some time and the real estate agent has "motivated seller" on her comments. Further inquiry discovers that one side has a tenant that isn't paying any rent because they made improvements to the property and don't feel they owe rent for some time to come. The other side unilaterally decided their rent was too high and cut their payment by $200 a month.

And the seller still wants retail for this Overland Park duplex!!!???!!!

There is no question I could find an investor to take this headache off their hands. But not at retail. So what can you do to be sure you can move your Kansas City are investment property if you need to cash out?

Investment Property Selling Tips

Price it right. Know where the price point is for your particular class of investment property (and location) that the next would-be real estate investor will pull the trigger. This is not the market to "test" the waters.
100% occupancy with quality tenants. I said quality tenants. Tenants with good payment history. Tenants with security deposits. Tenants with time left on their leases. Tenants that don't trash their rentals.
Deferred maintenance accounted for in the pricing or repaired before marketing. Remember, if you milked the property dry by collecting rent and not fixing a thing you will pay for it on your sales price! You might be able to get away with that crap during a seller's market. But guess what? This isn't a seller's market.
Choose the right real estate agent. I'm not the only one in Kansas City that knows and understand real estate investment property. (I am, however, the best. :) - Sorry for the ego trip.) There are several good agents around the city. But that number doesn't exceed 10-12 out of the 10,000+ licensed real estate agents around KC.
Be prepared to assist with closing costs. Investors, and that is who will be in the market for your duplex, like to get in with as little cash as possible to maximize their equitable returns.
Be patient. Do all of this correctly and you should sell inside 4-6 months. In fact, if you do all this correctly we should sell inside 4-6 weeks going into spring. But the real estate investor's credit standards have changed drastically over the last year. You don't have to like it. But it means fewer people are qualified to buy your rental property.

I've used duplexes as the prime examples here. But the same is true for all investment class real estate whether it be single family homes, apartments or four-plexes.

You can definitely sell your investment property in this market. In fact there is a need for quality inventory. Feel free to give me a call, write me an email or leave a comment if you have any questions or comments.

Reprinted by Chris Lengquist of Keller Williams Realty, Diamond Partners, Inc of Olathe, Kansas from BBQCapital. BBQCapital is a blog devoted to Kansas City real estate investing.

Real Estate Investing Class at UMKC

Chris Lengquist, RIPS (Keller Williams Realty) — Wed, 20 Feb 2008 19:39:06 -0600

Real Estate Investing Class at UMKC

Once again I will be teaching at UMKC on March 1 and the topic will be The Basics of Real Estate Investing. If you are a neophyte trying to decide to whom you should listen to I would encourage you to come on out.

You'll need to put in your reservation with UMKC's Communiversity. Just follow the link or give them a call at 816.235.1448.

As always I try to make it at least a little bit of fun. We'll see you there!

Kansas City Real Estate Bloggers Social Event

Chris Lengquist, RIPS (Keller Williams Realty) — Mon, 18 Feb 2008 18:59:35 -0600

Networking is key for real estate agents everywhere. And while there have been blogger get-togethers that I know of in San Diego, and Los Angeles and Clearwater I have yet to see one here in Kansas City. So unilaterally I am setting up a get-together.

Kansas City Real Estate Bloggers Event

When: Thursday, February 28th 6:30-8:30 pm
Where: 810 Zone on The Plaza (I live in Olathe, but I thought this would be central. We'll move it around in the future.

While everyone may not be in to sports, it's a large bar that has a lot of fun things to do. If you want to eat, there are eats. If you are a drinker, there are drinks. If you just want a Coke or a coffee, they have that, too.

I read everybody's work. Now I'd like to meet you in person. Especially you Fran! Thanks for the referrals!!!!

Leave a response in the comments section or send me an email. Either way, I'd love to know if you can make it or not!

Oh! And by the way. This is not exclusive to active|rain bloggers. If you know of a real estate blogger on a different forum, invite them! We should all meet...at least once.

New Zip Code Appreciation (Depreciation) Map for Kansas City Real Estate

Chris Lengquist, RIPS (Keller Williams Realty) — Sun, 17 Feb 2008 12:37:35 -0600

New Zip Code Appreciation (Depreciation) Map for Kansas City Real Estate

Last year I linked to the the Kansas City's Star's report on housing appreciation in the Kansas City metro area. By in large there was modest appreciation and some depreciation...but not enough to worry about in most places.

This year's interactive map shows a different story. Read the entire story here. (NOTE:If the Kansas City Star holds true they will not have this map up indefinitely. So it's possible the link will lead you to nowhere after a couple weeks. If they do you can purchase a zip code map for Kansas City by clicking Zip Code Map.) Now let's put the numbers under the microscope and see what we see. Especially for those out-of-staters that read this Kansas City real estate investing blog. You need to have the full story interpreted.

Everyday I get would be real estate investors calling from around the country. Especially California. They are always wanting to flip houses and/or buy the lower priced houses in the city so they can get "good cash flow."

The houses they like to target are generally located in the following zip codes:

64130 -23.4% -19.6%
64132 -12.8% -12.4%
64134 -14.6% - 9.3%

Next to the zip codes above is the "appreciation" rate for those areas in the last year, followed by the Kansas City Star's explanation of the appreciation rates for all years dating back to 2003.

Now lets look at the zip codes where I've had my last 10 transactions since December:

66204 + 1.4% +11.7% (1 unit)
64083 + 6.0% N/A (3 units)
66106 -10.5% +0.7% (We got a steal on a rehab)
64064 + 6.0% +17.4% (2 units)
Gardner - not listed though I suspect close to Olathe's 66062 at +7.6% +43.2%

Hey, out-of-state investors. Do you see what I've been talking about for the last 3 years?

While much of the country suffers through a housing correction not seen in many's recent memory here in Kansas City the real estate investor can still find opportunity. Yes, we have areas that are suffering greatly. They are not areas that I've endorsed anyway. Successful real estate investing takes study, analysis and local knowledge.

And that is true whether you are investing in real estate around Los Angeles, Sacramento, Washington, DC, New York or right here in ole KC.

Reprinted with permission from BBQ Capital.

Street View From Google: A Time-Saving Tool

Chris Lengquist, RIPS (Keller Williams Realty) — Thu, 14 Feb 2008 15:31:55 -0600

Ever get a call from a listing prospect and you want to have an idea of what the house looks like before you get there? Or wonder if the home has good curb appeal?

Well, now there is Google Street View. Simply type in an address on the Google search box and a map will appear. If your home's street is highlighted in blue then there should be a photo box that you can click on. Click on that photo and you'll get Street View.

It's pretty handy. And pretty cool. But a couple warnings;

Not every street is available.
Not every view is accurate.

For instance, the photo up top is of one of my rental properties in Olathe, Kansas. When I typed in the address it actually had me almost 1/4 of a mile off to the west. So I just moved the photo on down the street until I got there. But it would be harder if I didn't know that the house pictured wasn't my house. But like I said, this is an income property of mine, so I figured it out pretty quickly.

Play with it and have fun. It's pretty easy to use.

An Example of Using Proper Leverage For Your Kansas City Real Estate Investments

Chris Lengquist, RIPS (Keller Williams Realty) — Tue, 05 Feb 2008 18:42:16 -0600

Using leverage properly when you are investing in real estate is the key to economic success. Recently I wrote two different blog posts revolving around a duplex in Olathe that I know was purchased in 1997 for $106,000.

The two posts that were written show exactly how the leverage could have been used and the drastically two different results each produced. I would really urge you, the Kansas City area real estate investor, to take a few minute and read through each of the posts.

Real Life Olathe Investment Property Story: Part I

Real Life Olathe Investment Property Story: Part II

Now what I want you to realize is that any investing is good for your retirement. And owning a rental property that you buy and hold forever is better than not owning any income property at all. But you really need to examine the two posts to see what the possibilities hold.

And I'd love you to come back and let me know your thoughts.

Chris Lengquist
Keller Williams Realty
Olathe, Kansas
913.568.1579
listwithchris@kw.com
www.BBQCapital.com

Please Don't Sue Me For $25,000,000

Chris Lengquist, RIPS (Keller Williams Realty) — Tue, 29 Jan 2008 21:33:38 -0600

Please Don't Sue Me For $25,000,000

Dear Attorneys & Possible Plaintiffs,

This is an open letter to all of our great nation's attorneys and possible plaintiffs to not sue me for $25,000,000 as you are doing with a fellow real estate blogger in Florida. (Read about it here in the Miami Herald.) Within this blog you will find both statements of fact and those of opinion. Sometimes even I'm not sure which is which. :)

It is important for you to know that I use this blog to communicate my ideals, principles and real estate investment theories to my clients, customers and casual readers. I'm usually right. But there may be times when your opinion differs from mine.

So here's what I would rather you do...simply write a rebuttal. Tell me I'm wrong. So long as the argument is rational and polite I'll listen. Heck, I'll even publish it. But enough of the screaming "I'll Sue!"

Of course, I also realize that people are always looking for a buck. And they might think I have it. Well, enjoy trying to find it. My wife has been looking for years! Let me know what you find because it's quite possible VISA would also like to know.

Anyway, you know where to find me. But please, please, please just leave me alone!

Best regards,

Chris Lengquist

p.s. I also had nothing to do with you over-paying for your home.

(Reprinted from BBQ Capital.)

Video: Why Real Estate Investing in Kansas City

Chris Lengquist, RIPS (Keller Williams Realty) — Sun, 27 Jan 2008 23:02:10 -0600

Using Leverage for your Kansas City Real Estate Investment Property

Chris Lengquist, RIPS (Keller Williams Realty) — Mon, 14 Jan 2008 12:59:09 -0600

Watch $105,000 Turn Into $1,037,072

Wednesday I wrote a post regarding your real estate investing goal setting for 2008. In there I referenced that most of you would be blown away if you would actually sit down and do the math on what 10 rental properties would do to change your financial life.

So I thought I would take a few minutes and just work through what only 5 properties would do. Now before I put up the spreadsheet let's set some ground rules.

We're saying you are 40 years old and want to retire in 20 years. You have about $25,000 a year over each of the next five years to invest in real estate.
You'll be buying income property with only 10% down.
I've also calculated in as an expense $5,000 towards closing costs for each house.
The properties will "break even" meaning after you put the 10% down they will pay for themselves. You will NOT be receiving the benefit of Cash Flow Before Taxes.
I will NOT calculate depreciation which is a major benefit of owning real estate investment property.

Therefore, the only two benefits in play here are principal reduction and appreciation.

Chris! What appreciation? Haven't you been reading the papers?

I can't believe I have to cover this each and every time. But I will, once again. Here in Kansas City we still have pockets of appreciation. And historically, we're at about 5% year in year out, on average. However, for you skeptics, I'm only figuring 3% appreciation for the first 5 years of each property and 4.5% after that. Remember, we're only buying one property a year and therefore some properties might be getting 4.5% while the newer rental properties are still at 3%.

And besides, if the market really is down shouldn't you be able to find some values out there that you could buy 3%-10% under market? Thought so.

Are you following me so far? Good. Take a look at the spreadsheet, ignoring the 6th year where I got bored and quit.

Now you can break it all down if you like. You are welcome to. But the key thing to note here are that I already took out 7% for sales costs down the road. So after 5 years of investing a total of $105,000 of your hard-earned money (and that includes some closing costs) you now have $1,037,072 in equity just waiting on you!

Yeah. But Chris. I could have taken that $105,000 and dropped it into some stocks, bonds, hedge funds, IRA's or anything else. Right?

Of course you could. And nobody is stopping you. In fact, I might recommend taking some extra cash and doing so. But what if we had taken that whole $105,000 in year one and invested it with a solid 8% a year return and let it percolate for 20 years?

Then your investment would be worth between $489,000 and $511,000 depending on how many times a year the interest was compounded. Either way, is $511,000 better than $1,000,000?

That's as obvious as asking a 23 year old male whether he'd rather have a date with Bea Arthur (with all due respect) or Keira Knightly.

Now, in the interest of time and space I haven't discussed every possibility, tax implication or excluded benefit. But this should help to give you the picture. Naturally, all of this is what if's and not expressed as a guarantee that real estate will always go up, blah, blah, blah.

Your comments, pro or con, are welcome here.

***

Kansas City Rental Property Registration Program

Chris Lengquist, RIPS (Keller Williams Realty) — Thu, 03 Jan 2008 10:47:14 -0600

Kansas City Rental Property Registration Program

Effective today, January 1, 2008, it is MANDATORY that all owners of rental property within Kansas City, Missouri limits register their income homes. Registration runs through January 2008 without penalty. Penalty for non-registration on and after February 1, 2008, will be $50 per unit.

To get all of the details you will need to follow this link. From this link you will be able to download the proper forms to take care of this task.

Again, Kansas City now requires rental property to be registered with the city. Hopefully, this is as far as the law will go. Based on how they've mismanaged just about every other program under their care and supervision we can only hope they don't go to mandatory yearly inspections with fees.

Previously posted at BBQ Capital.

Choosing The Right Representation For Your Real Estate Investment Property

Chris Lengquist, RIPS (Keller Williams Realty) — Thu, 13 Dec 2007 13:01:36 -0600

Let's face it. You, the public, think all real estate agents are the same. And that is simply not true. Of course, real estate agents help you with that stereotype every chance they get. After all, when is the last time you talked to an agent that wasn't the #1 expert in Kansas City...or anywhere else, for that matter.

You, the public, need to realize that not all real estate agents are created equally. Some have more experience. Some more eager to get their hands dirty. Some are better suited for expensive properties. Others more the entry level home category. And a few, very few, are real estate agents that specialize in working with the real estate investor.

But even within the field of real estate investing you have agent specialization. For instance, I'm not big on working with investors looking to "flip" homes here in the Kansas City area. No, my specialty is more geared towards helping investors secure income property priced between $100,000 and $1,000,000 that they can hold for 5-7 years and then sell either through a 1031 tax deferred exchange or otherwise depending on their individual situation.

How To Interview Your Prospective Real Estate Agent

If you are a real estate investor here are some questions you can ask your prospective real estate agent whether you are looking to buy or sell your next rental property:

Do you own, or have you owned, real estate investment property?
How many real estate investors have you worked with in the last 24 months?
Tell me what you know about IRC Section 1031 Tax Deferred Exchanges.
How do you help me measure returns on income property?
Where are the best neighborhoods for cash flow?
Where are the best neighborhoods for appreciation?
How do you calculate expenses?
Do you have an attorney, or estate planner, or accountant that you can refer me to?

As you can see these questions vary greatly from Joe & Mary Homebuyer's questions about where to raise their children. To work with the professional real estate investor takes study, commitment and a whole different skill set than it takes to work with the primary home-buyer side of real estate.

Be wary of the real estate agent that says they do both.

My advice; When looking for a personal home find the best real estate agent for that neighborhood or part of town. When looking to buy or sell a real estate investment property you may want to find an agent that knows his or her stuff. Wherever you live.

Updating My "Real" Blog

Chris Lengquist, RIPS (Keller Williams Realty) — Mon, 26 Nov 2007 14:34:20 -0600

For those of you that find this blog you should know that it isn't my main blog concerning real estate investing. That can be found over at http://kcinvestmentproperty.wordpress.com/. Otherwise known as www.bbqcapital.com. Either URL will take you there.

It's a blog devoted to Kansas City real estate investing, BBQ and real estate in general. Though there is a heavy, heavy emphasis on real estate investing.

So stop by and let me know what you think!

Belton, Missouri Fourplex: A Good Real Estate Investment

Chris Lengquist, RIPS (Keller Williams Realty) — Wed, 21 Nov 2007 21:34:43 -0600

I've located a good quality real estate investment property in Belton, Missouri. It's not my listing so I will not give you all the details here. But I will say that this income fourplex has a brick front and smaller, one bedroom units. They appear to be clean and updated. Asking price around $145,000 to $160,000 and rents around $1,600/mo.

If you are looking for a quality investment property in Belton or the Greater Kansas City area including Jackson, Cass, Clay and Platte counties in Missouri or Johnson and Wyandotte Counties in Kansas I am sure that we can help.

To get the details on this Belton fourplex or to give us your criteria for the perfect investment property in Kansas City just drop us an email or give us a call.

Chris Lengquist, RIPS
Keller Williams Realty
Olathe, Kansas
913.568.1579
listwithchris@kw.com

Real Estate Investing Returns Calculations

Chris Lengquist, RIPS (Keller Williams Realty) — Mon, 19 Nov 2007 14:36:08 -0600

Real Estate Investing Returns Calculations for Kansas City

Calculating projected returns can be of paramount importance when deciding on whether or not to pull the trigger on any particular investment property whether it be here in Kansas City or elsewhere. After all, real estate investing is about securing a return. Without that return your money would do better to be somewhere else.
So before buying that next "income" property you need to know whether there will be any income. (That's why I get paid the big dollars.)

Of course how you calculate that return is completely up to you. Jeff Brown recently discussed his Einsteinian theory over at BawldGuy. See the post here. And a nice little Q&A session happened in the comments section so be sure to read those, as well.
Let me just say that I prefer to know what the equity return on any investment property will be before I buy it. What is equity return? Quite simply it's how much I am receiving in benefits divided by how much I have invested.

Remember the 4 Benefits of real estate investing?

Cash flow before taxes.
Principal reduction.
Depreciation.
Appreciation.

Let's take the calculation of these step by step.

#1 was cash flow before taxes. Simple enough. Just take the amount the property is actually bringing in and subtract the amount the investment property is actually costing you. What's left over is your cash flow before taxes.

#2 was principal reduction. Again, quite simple to figure out based on the loan you have taken out. If you took out an interest only loan (you're welcome, Jeff) then you won't have any. If you have taken out almost any other kind of loan you can just look at your amortization table and figure out how much principal reduction there should be in any given year for your rental home.

#3 is depreciation. Okay, I could do an entire post here. Or two. If you are breaking down your depreciation between land and building only then you depreciate the building over 27.5 years. Rather simple to calculate and all you have to do to figure out the number is to refer to a depreciation table as to when you put your rental property into service.

If you choose to accelerate your depreciation through cost segregation then you will need to do some more figuring. But it's really only a few more steps. Although, that may be over simplifying things.

#4 is appreciation. Wow! Have you ever tried to predict appreciation? How did that work out for you? Listen, you can guess at what it will be and be awfully darn sure of what it was. But when figuring out if an investment property will be a good buy RIGHT NOW you are going to want to buy a rental property that will make sense based on the previous 3 benefits of real estate investing. Then appreciation is icing on the cake! And you wouldn't buy a cake unless you knew it would have icing, right? (I know, there's pineapple upside down cake. But let's move on.)

Again, before buying your next Kansas City real estate investment property you need to know before you buy whether or not that was a good idea. Take the time to work through your calculations to see if the rental property will be a good buy or a drain on your current resources. After knowing you are making a good investment then you can go back to planning your retirement worth having.