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A large part of what I do on a daily basis is scouring the local market for good opportunities to invest in real estate. I am looking for individuals and groups, who give me criteria for a new addition to their real estate portfolio. That includes residential 1-4 units, 5-10+ units and commercial properties. You can imagine that a big metropolitan area can produce quite a few opportunities. The challenge then comes in the due diligence of running the numbers, verifying the city records, getting to know the owners and so on.
My latest challenge has been navigating a declining market, lending requirements and the economy. We are trying hard to correct overindulgence in available money that led to the current recession. Gas prices are what they are and everyone seems to be stuffing their mattresses before they invest in the stock market or elsewhere. The cruel saying of “Buy when there is blood in the streets”can be read in many headlines trying to spur the investors to buy in what historically can be coined as a “low point”. I am observing many real estate professionals concentrating on the backlash of the proverbial slap on the wrist for business practices and a declining number of transactions putting them in the same spot many of their over-leveraged customers are. Unfortunately that spells foreclosure for many.
If we step back and plot where the low points have been in our economic history over the past 100 years, we would all point to the obvious places and say “if only I would have bought at that point”. Many investors time their investment according to unemployment rate, gas prices (or price per barrel of oil), the value of the dollar, election years, etc. When all indicators align to point to a “low point” they put their money down and find a way to buy in the best market conditions imaginable.
I am not Tony Robbins and I will not continue with the motivational speeches. It has become clear that this is not a time to let the conditions pass until we get into safer waters.
The next challenge in this line of reasoning is what the right buy in this market is.
Foreclosures are hurting many owners. They bring all the values down and that taints the pool of properties currently available. Rob, my maintenance guy performs what they call “trash outs” on foreclosed properties for some local Realtors and banks when people have lost their homes and literally walk away from their homes. He claims that 1 of 10 homes are in good condition. That means 1 of 10 has not been stripped of all fixtures/appliances and has all the walls in tact while being left in a respectable condition. Banks are desperate to get rid of these headaches and if you are looking to upgrade your personal residence, buy low enough to make money on renting it out, have plenty of cash for fixing it up or are able to negotiate a loan option with a lender…. then this is the route for you. Many of these opportunities are in overbuilt communities where there are plenty of foreclosures to choose from. If you are interested in these, let me know and I can send you plenty of choices. Remember the median home price in Kansas City is $175k. (even that is debatable since many properties change hands for undisclosed amounts)
Rehab projects can put you into a great scenario if you can find the right place to rent and hold for the next 5-10+ years. With the availability of rehab loans declining these typically mean spending cash to purchase and improve. The last five projects I have done range from $70k-$140k+ in cash to get into these projects. Once the properties are rented you can refinance the property and put yourself in a great equity position. The guidelines for refinancing are constantly changing and I can recommend a couple of the best loan officers around to fill in the current details if you are interested. The best opportunities here are gone within 48 hours usually and being ready to pull the trigger is key to lock in an opportunity is essential.
Conventional Investments are still the best bet. They require the least amount of cash out of pocket (erase 0-10% down loan programs from your mind, they don’t exist anymore) and provide you with safe investments that provide passive income, tax benefits, the least amount of investment risk, long-term financial freedom, appreciation, and a great vessel for a little one’s college education and/or your retirement. (obligatory disclaimer, I am not a C.P.A. or an attorney, consult both of these before you make any investment) With a majority of the focus on foreclosures, many of these really sound investment properties are in great shape are ready to be purchased. I have come across quite a few these past weeks that I would be excited about being a part of. Renters that actually pay on time and properties that have been upgraded and really define “turn-key” are ideal in this Kansas City market. I would be excited to show you these if you are interested.
Whether you are ready to jump in or thinking of an investment down the road I am excited to help in every step of the process and assist at any capacity. You are always welcome to visit us here in Kansas City for a first account of all the opportunities and personality that makes Kansas City unique.
I appreciate the few minutes you took to read through this and I would like to continue the conversation with you once you have finished your contemplative coffee.