Property Management Blog

Yes. Investment Loans Still Happen

Chris Lengquist - Friday, June 12, 2009
I have probably received 11 emails in the last 10 days asking if there is any money out there for people looking for investment mortgages.  You know, so that you can buy a rental house or two.  The answer is yes. Now, you need 720 or better.  You need a minimum of 20% down.  25% is better.  But yes, there are loans for the real estate investor.

Kansas City, Kansas Duplex For Sale

Chris Lengquist - Tuesday, June 9, 2009

Kansas City, Kansas Duplex For Sale - Price Reduced $10,000

Out of state owner says SELL this Kansas City, Kansas duplex.  The owner's priorities have changed over the years and now he is moving on.  That means he's held on to this duplex for sale too long and just wants to move on.  His loss is your gain.  Each side rents at $695.  One side is currently occupied and the other side is getting some minor renovation done before new tenants are placed.  It's had a good occupancy history and has been professionally managed. Attention Real Estate Investors: As of 7.2.2009 the owner has dropped the price to $87,500.  He wants to move on.  Now how would the numbers look?  Do the math. You buy at $95,000.  Each side is bringing in $695 you are at $16,680/yr.  Follow?  Look below. Estimated ExpensesKansas City Kansas duplex for sale $1,668   Property management $1,400   Vacancy $   500  Utilities $2,300   Taxes $1,500   Repairs/maintenance $   900   Insurance $   500   Misc Total Expenses equal $8,768 Net Operating Income is appox $7,912 Your mortgage payments add up to $505.63/mo.  (That's 20% down leaving a mortgage of $76,000 at 7.0% interest since it's an investment property loan.) NOI - Debt Service = Cash Flow $7,912 - $6,068 = $1,844 /yr cash flow Your Principal Reduction = $715 (approx 1st year) Your Tax Benes = (NOI - interest - depreciation) $85 (approx 1st year) Total 1st year benefits (approx) = $2,644 Cash invested (down payment, closing costs, etc) = $22,300 (approx) First year return as a percentage = 11.9% Now what would the numbers be if you managed the property yourself?  All numbers are of course estimates and this is not a guarantee of performance.  Just trying to use all the numbers I know.

Worried About Inflation? Think Deflation

Chris Lengquist - Sunday, June 7, 2009
handmark_logoWhile perusing my Pocket Express by Handmark the other day I came across Scott Burns' article concering the future of our economy titled High Debt Means Deflation, Not Inflation.  It's worth the time to jump on over and read. Interestingly enough it seems to be a growing train of thought as not too long ago I read something of a similar vain in I think the Wall Street Journal.  (Can't remember as I read all the time.)  I just remember the author talking about how we are basically resetting our economy.  A re-boot if you will.  That good times won't come back simply just because Bush and Obama want it to and pour literally trillions and trillions of dollars into a bucket wherein they hope a stimulus will be born. The most interesting item from the Burns article: “When you have major debt events, it changes our behavior for a long time. We’ve had a record decline in wealth. But the income effects are far larger. Payrolls have seen the largest drop since 1948. We’re at a six-decade low in factory utilization. The output gap (the difference between what we could produce and what we are actually producing) is the largest in history.” That means rising demand, if it occurs, won’t cause rising prices.

Home Sellers Should Wise Up

Chris Lengquist - Wednesday, June 3, 2009
You know, here in Kansas City the real estate market is not as bad as everywhere else, thank you God.  But still, I'm a little amazed at what I'm running into of late.  Keep in mind I have been selling real estate since May of 2002.  Never before have I run into so many sellers re-arranging the showing times I call for or asking me to call them when we're done...giving the impression that it's annoying and inconvenient for me to even bring buyers to look at their home. And their weak real estate agents are on board with this?  Yes, because some of them are the ones calling me. Listen, selling your house sucks.  Leaving when people want to see it IS inconvenient and it can be annoying.  Just another reason to price your house where it should sell to begin with that way you don't spend four, five or eight months leaving your home to let someone else look at it. But by all means, keep making the buyers feel uncomfortable to visit your home.  Keep asking top dollar when your house isn't in the condition as the one for sale that sold down the street.  Keep offering small two hour windows per day that buyers are "allowed" to view your home.  (Loved the days on market on that one...322.  Surprised?)

Things To Do While I'm Away

Chris Lengquist - Friday, May 29, 2009
austin 1I'm going to take my wife down to Austin, TX for a few days beginning tomorrow morning.  No big exciting real estate deals though we will be meeting for lunch with Benn and Lani of AgentGenius.  And I will be getting some docs signed by a client who currently lives in Austin but is closing on a house in Kansas City here in about three weeks.  So I may not post for more than a couple days. Watch the BawldGuy Jeff Brown over at BawldGuy.com has promised to talk about figuring expenses.  He did a teaser last evening that I commented on.  Can't wait to see what he comes up with.  If you are a real estate investor you will definitely need to see what Jeff has to say.  Jeff may root for the wrong baseball team.  But he knows his numbers.  Calculate Your Principal Reduction I've said many, many times before that my favorite of the 4 Benefits of Real Estate Investing is Principal Reduction.  If you own rental property you need to know what this benefit is to you this year.  It will cheer you up knowing that someone else is helping you to pay down your loan.  Trust me.  Just get out your amortization chart and figure out how much of each payment is going towards principal reduction.  It's free money!  Or at least I like to think of it that way.  :) header_r1_c2_f2Smoke Some Ribs Here's what I like to do.  Get some K&M Barbeque dry rub from the Kansas City BBQ Store and rub a healthy dose into a slab of ribs.  Set up your grill/smoker to about 225-250 degrees of indirect heat with plenty of hickory chips or cherry chips for flavoring.  Smoke for about 2 hours.  Then pull the ribs, wrap in foil and continue to cook at 325-350 degrees for the next 3 hours...or so.  You'll have to check them to be sure they're done.  Usually by this time I've quit paying attention to the time and I've had a couple beers while shooting the breeze with friends and family or listening to the baseball game.  When you can bend the slab in half while the meat begins to pull from the bone you're done!  Slather on your favorite bbq sauce ( I like to go with Zarada's, Gates or whatever I'm experimenting with at the time) and smoke an additional 10-15 minutes or so uncovered.   Now, it's time to eat.

$8,000 First-Time Home Buyer Tax Credit: Need Some Questions Answered?

Chris Lengquist - Wednesday, May 27, 2009
cashI hear a lot of misinformation about the $8,000 First-Time Home Buyer Tax Credit.  A lot.  There are a couple things I'd like to clear up.  First,  a first time home buyer is not necessarily a first time home buyer.  If you have not owned a home in the last three years then you may qualify as a first time home buyer.  Weird, I know.  But remember your federal government is involved. Second, there are many limitations.  Simply the best website I can find on the First-Time Home Buyer Tax Credit answers most/all of your questions on the FAQ's page.   I'm not going to sit here and bang out a regurgitated webpage when they do it so nicely.  Click the link. Third, a Tax Credit is real money folks.  Listen, I'm not your tax advisor nor am I a trained CPA.  But if you owe $4,957 in federal taxes in 2009 and you buy a house and you qualify, not only will you get back all of your $4,957 in taxes but you'll get an additional $3,043.  If that's not redistributing wealth I simply do not know what is.  But heck, if you qualify for it you simply must take it.  I would. Visit the link above.  Then give me a call at 913.568.1579 to help you find a house.  Then close by December 1, 2009.  Then do your taxes next year.  It's as simple as that.

Net Operating Income: Nothing Has Changed

Chris Lengquist - Tuesday, May 26, 2009
learn to crawlI promised last week to hit some of the very basics of real estate investing here in Kansas City...or anywhere, for that matter.  And while spending a little time on this real estate investing blog  over the weekend I noticed that my messages really don't change.  Good market.  Didn't change.  Bad market?  Didn't change.  Basics are the basics. On January 29, 2007 I wrote a post titled Net Operating Income - Formula For Success.  It's a short, sweet post about figuring your Net Operating Income.  Almost every way imaginable to figuring out whether or not an investment property will make you money or make you lose money is based on a realistic NOI.  What is the real income?  What are the real (and sometimes un-thought of) expenses to the ownership and operation of the said rental property? Before we do anything we just need to know what the Net Operating Income of the proposed rental property is going to be.  Got it? Income - expenses = NOI Income includes rent, parking space rent, coin-operated laundry money, etc.  Expenses include lawn maintenance, vacancies, utilities, etc.  But expenses does not include debt service.  Debt service is something different and will vary from investor to investor making a house affordable for one but not affordable for another.  We'll talk more about that this week.

Thank You

Chris Lengquist - Friday, May 22, 2009

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The Basics of Real Estate Investing in Kansas City

Chris Lengquist - Thursday, May 21, 2009
It seems it's been a while since I discussed, or re-discussed more-rather, the basics  of real estate investing in Kansas City.  Maybe it's because the market has been so darned fluid this last year.  But a funny thing has happened on the way to the Great Kansas City Real Estate Collapse.  It just never happened.

JRW Pyramid Laminate 07

Now to be sure, as I write this, our market is still very fluid and quite weird.  On the one hand the market is red-hot.  My clients have been out-bid on 5 of the last 7 offers we've written.  Now these are all properties at the $135,000 price point or below.  And the lower you go the hotter the market.  And when markets heat up, real estate investor usually make bad decisions. The point of ALL real estate investing, it seems to me, is to have more at the end than you did at the beginning.  And that "more" needs to be more than you could have gotten in other investment vehicles.  Why?  Because owning rental property, even when you use a property manager, is much more labor intensive than owning stocks/bonds/mutual funds.  Your capital isn't as liquid.  Your ongoing need for reinvestment more possible and real. When I speak of invesing in real estate I'm thinking of the following;
  • Buy & Live - A great way to start especially with limited capital.  You buy a home to live in that would also be suitable for rental later down the road.  you live there a year or two and then buy another home.  You keep this home and rent it out.  Now you have two homes, one a rental, and both on owner-occupied mortgages and their corresponding down payments.  If you are in your twenties, this is a fabulous way to start.
  • Buy & Hold...appropriately - Buy a house that will be a rental property.  If you have a good solid income, 20% to 25% to put down ( a necessary in this currently lending environment) and enough reserves so that I can sleep at night this is the way to go.  When I say Hold I don't necessarily mean for the rest of your life.  In KC I think 5-8 years is about the sweet spot.  That's taken on a case by case basis.  Then you turn that property in for one or two other properties to start the cycle over again.
  • Buy, Rehab & Rent - This can be very lucrative if you have two things; 1) Cash to make the down payment, cash for reserves and cash for repairs (construction loans are few and far between right now) and 2) Time on your hands.  Someone has to supervise the rehab.  True, you can farm it out but then profits are slashed further and you really have to find the rare property that meets the financial requirements.  But through this method you can end up with the most sweat-equity.
Through the years I've written about the 4 Benefits To Real Estate Investing and if you go over to the Categories section of this blog you can search and click on that subject to bring up literally years of posts and comments on the subjects.  Over the next week I promise to re-visit how to pencil a house to see if the numbers work. Keeping in mind the "numbers working" is a subjective value that can change from investor to investor. tortiseFor those of you who are considering house flipping as real estate investment I suggest you walk on over to BawldGuy's Treadmill post.  There you can read his excellent dissertation on the subject and my comments, as well.  You do need to be forewarned that you may not like what you read.  And anyone that considers house flipping in Kansas City had really better know what they are doing.  Our numbers in KC are much tougher than other regions because of the lack of explosive appreciation that is possible in other places. Kansas City real estate investing is for those that can live with and/or like a "slow and steady wins the race" philosophy.  I've never advocated that an out-of-state real estate investor should have all of his/her portfolio here.  But I do very much believe that a portion of your real estate investment holdings should be here.  You'll see why if you poke around this blog.

Will You Be My Friend? Facebook & Twitter

Chris Lengquist - Wednesday, May 20, 2009
facebook-logoWriting 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-logoTwitter 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!

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2011 E Crossroads Lane #305
Olathe, KS 66062

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