As some of you may remember the Housing and Economic Recovery Act signed earlier this year included a provision to give the states a combined total of roughly $4 billion to combat foreclosures. The state of Missouri received just over $42 million of this money and Kansas City is slated to receive $7 million of Missouri’s portion. The funds are expected to be available in the next 30 to 90 days and the jurisdictions will have 18 months to use the funds. While I would love to believe that Kansas City will be positively affected by this influx of money I do foresee a few problems.
First, how does this help struggling homewners? It seems to me that if the city now has $7 million to buy up, renovate and then resell property they would benefit from having more foreclosures on the market. With more foreclosures available the city will have a greater choice when selecting which properties they wish to invest in. This creates quite a conflict of interest for the city wouldn’t you say? I mean if a family stays in their home and pays their taxes the city might make $1,800 a year off that property but if the family is foreclosed on and the city buys, renovates and then flips the property they stand to make $10k+ right now, plus the taxes, depending on property values in the area and how quickly the property sells.
Secondly, whose going to get the contracts to do the renovations on the properties the city is purchasing? It only seems fair that the city should use local contractors. I personally know several quality, qualified, hard working contractors who are starving for work. Not to mention the Vizion crews who while by no means are starving would always appreciate more work.
It would be a real shame if the city decided to bring in crews from another city to do this work when so many contractors in Kansas City are going weeks without a job. Sadly if outside crews were brought in to do the renovations this wouldn’t be the first time. The construction currently being done on Bannister road (95th in Kansas) is being done by Chester Bros. Construction of Hannibal, MO. Not a Kansas City company.
Third, $7 million dollars won’t even make a dent in the foreclosure problem here in Kansas City. Especially when you take into account that the $7 million also has to pay for the materials and the labor involved in the house flipping business. I figure at least 20% of this money will be lost in operating expenses before a single home is even purchased. Just thinking about all the additional office personal necessary to run this operation is making my head spin. Accountants, Contractors, Realtors, Office Managers, Inspectors and the list just keeps on going. Then of course you’ve got to count in all the office supplies needed pens, paper clips, staplers, computer, printers, desks, office space, etc. We could lose half a million dollars just getting the supplies necessary to set up the operation.
Fourth, where exactly in the city is this money going to be invested and how are the profits going to be used? If the city even plans on making a profit they are not going to make any money by investing in the urban core unless their planning on implementing a buy an hold strategy with section 8 rentals. Is the city even aware of profitable real estate investment strategies or have they just seen a few episodes of Flip This House and figured they can do it too?
If the city really wants to make money flipping houses they should seriously consider working with an established real estate investment company such as The Vizion Group. With our help and our proven system of investing in real estate we could actually help the city more than the city could help itself. Listed below are just a few ways Vizion could assist Kansas City with its investment needs.
1. We would make sure that the city would make an incredible return on its investment infact they would probably end up at least doubling their money every year.
2. All of our crews and the additional crews we would bring on would be based in Kansas City thus we would actually be increasing the number of jobs in the city while positively impacting the local economy I call that a win win.
3. If the city invested this money with The Vizion Group it would significantly reduce the expenditures necessary to set up this operation. Vizion already has the office space and the personal needed to run an operation of this magnitude and in the event we need to bring on additional personal that cost would be on the company not on the tax payers.
The city should be forewarned that flipping houses can be very rewarding but more often than not its stressful, time consuming, and labor intensive not to mention it also has a costly learning curve, just ask any seasoned investor. Our proven system of investing would put the city in a passive position away from the day to day stresses of flipping houses and most importantly would make the city a lot of money. If any city officials or member of HUD would be interested in discussing this further I can be reached by email at justin@vizionkc.com or by phone at 816-437-8386. I hope to hear from you soon.
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