Kansas City Real Estate Investing Expenses: How To Know The Truth

Understanding the expenses of your Kansas City real estate investment property is a good idea. It's a terrific idea if you understand what they will be before you buy!

There are a few expenses that you can gather and estimate before you buy rather easily.

- Insurance.
- Property Management.
- Taxes.

But there are also a lot of expenses that can be very fluid.

- Utilities.
- Repairs.
- Vacancies.
- Legal costs.

And this is by no means a comprehensive list of expenses. But you know where you can find one?

I do.

Every landlord in America is required to fill out a Schedule E for their taxes. It's the form used to list all income and expenses. It's a form that is very black and white and should tell you a lot about the property you are about to purchase. It is a far better indicator of that property's profit potential than the pro forma.

Pro forma is seller speak for "Boy, I wish this was the case."

Of course, when you ask (nay, require) a copy of the Schedule E be made available you may hear all sorts of things. My favorite is the "Well, those are inflated expenses."

Stop for a second. If a guy will lie to the IRS in writing, what makes you think he's telling you the truth?

Not The End All, Be All

Asking for and obtaining a Schedule E is not the end all be all you may have hoped. If they seller has 10 properties all grouped into one Schedule E it's going to be difficult to break that out. And if the Schedule E shows $24,300 in repairs/improvements and you are looking at a remodeled investment home, then you know that's probably not going to be an every year expense.

You still need savvy eyes and experience when evaluating your Kansas City real estate investment property. This is just another tool to help you do so.