DAN REEDY

With the huge interest in Cash Flowing Rentals in Kansas City from investors nationwide, I thought it would be interesting to compare it to another rental market I have been seeing promoted on many blogs and websites as a cash flowing market.

I have also included info about the area from which many of our investors come from.

This information is according to Yahoo Real Estate neighborhood profiles.

Kansas City Detroit Los Angeles

Population 450,375 916,952 3,834,340

Population Growth 1.9% -3% 3.5%

Population Density 1424 6265 8388

(residents per sq mile)

Median Age 36 33 34

Medium Income $43,574 $32,426 $42,529

Median Home Age 42 yrs 57 yrs 34 yrs

Median Home Value $146,400 $32,426 $606,375

Ownership % 51.45% 46.05% 36.4%

Rental % 37.04% 38.54% 60.36%

High School Grad 82.9% 69.6% 66%

Unemployment Rate 7.8% 17.7% 7.8%

Returns of 20%-40%, stable economy, availability of affordable housing and an average price of $57,500 for Postive Cash Flowing Properties makes Kansas City a FANTASTIC market to invest in.

Kansas City Investment Properties & Cash Flowing Rentals

Missouri Real Estate Exchange

11333 Hickman Mills Drive

Kansas City, Mo. 64134

Office(816) 761-9400 Fax(816) 761-9401 Toll Free (866) 451-MORE Email: danreedy@morekc.com

Lately I have been getting bombarded with calls from across the country from novice investors asking about the foreclosure market in Kansas City.

Is it really true we can buy properties in Kansas City for $5000 -$10,000?

Is it really true we can get hard money loans with no money down?

Is it really true there are lenders in Kansas City that will sell rented foreclosures in their portfolio and owner finance them with almost nothing down?

I have to admit to them that the answer to their questions is yes, it is true.

My problem comes when they ask me to facilitate these deals for them.

My answer is No.

Don’t get me wrong. Selling investment properties is my passion. I am very good at it. It puts food on my table and allows me to enjoy a comfortable lifestyle. It allows me to sleep well at night.

I have to tell them no because most of the deals that sound too good to be true are just that.

Too good to be true.

Typically, the above mentioned scenarios are high risk properties in high risk areas.

The amount of rehab needed is hard to calculate due to the vandalism and theft that can occur the minute the workers leave for the day.

The cash flow is hard to calculate due to the undesirability of the area for the majority of tenants leaving you wondering if the property will be occupied more than it is vacant.

The true return is hard to calculate because the hard money loans must be refinanced in 6 months and because there are no good comps, most conventional lenders won’t touch these properties.

The owner financed scenario is worse because they are letting you assume the note of some other uninformed investor that owed 200-300% of actual value and wasn’t able to refinance and let the property go back. The tenant only looks good on paper and hasn’t paid in months, the rehab was a cosmetic Band-Aid, and you don’t have any better chance of refinancing than the last guy.

The last issue is this.

There are good reasons conventional financing is tough right now. Close to half of the foreclosures in our market are investor properties.

Investors with good intentions and lots of enthusiasm.

They only thing they lacked was proper guidance and cash reserves.

Proper guidance to make wise decisions on the properties and the areas they were investing in.

Cash reserves to cover the “Oh Crap” factor.

Oh Crap, My tenant moved out and it took me 3 months to replace them.

Oh Crap, The furnace went out. Its $2500 to fix it.

Oh Crap, My hard money note is due and I can’t refinance.

This is truly a snapshot in time to make lots of money in Real Estate. There are some great deals available right now.

Be a Conscientious Objector and help your client say No when it matters most.

I bet I talk to 4 or 5 potential investors per month who have spent CRAZY money to learn real estate investing.

They spend their hard earned money to go to seminars, buy tapes, and read books just to get MORE excited about spending MORE money to go to MORE seminars so they can buy MORE tapes and books.

Don't get me wrong, education is a beautiful thing. I wish I had more.

But... when I see regular people spending $3000, $7000, as much as $30,000 dollars on so called GURU MENTORING, and still have yet to purchase a property, or receive a dime in cash flow it makes me wonder WHAT THE HELL ARE YOU THINKING!

They all know the proper terminology like CASH FLOW, CAP RATE, and POWER TEAM but are still in danger of making bad purchases in bad neighborhoods due to unbridled enthusiasm and unscrupulous property sellers.

WHAT'S THE ANSWER? I am glad you asked!

Join an investor networking group.

Share thoughts, hear about mistakes, and ask questions from your peers. You will learn a lot.

Spend $20 on Real Estate Investing for Dummies. I have been involved in hundreds of transactions in the past 4 years and I still have a copy on my desk right now.

Read it.

Learning the terminology is OK but the most important things you need to know are;

WHAT AM I TRYING TO ACCOMPLISH?

Is it long term wealth building with cash flow properties? Relatively low risk.

HOW MUCH RISK AM I WILLING TO TAKE?

Do I need a quicker cash injection with flipping? Higher risk

HOW AM I GOING TO PAY FOR IT?

Cash, Credit Line, IRA or Hard Money?

Once you determine these 3 things you now need to find someone you can trust with your future to help you accomplish this. This is where it gets tricky.

There is a very qualified group of people in every market that consists of Realtors, Wholesalers and Property Managers that are intimately aware of their market, trends, good and bad neighborhoods etc... that will spend time consulting with you, giving you multiple references and referrals and help you to accomplish what YOU want to accomplish. More than likely, they will present you with multiple options and give you the positive and negative possibilities of each opportunity. What they won't do is try to pressure or slam dunk you into what they need to sell.

Take your time.

Partner with the right people.

Put your money into your future, not the Guru's.