Market Spotlight: Cash Flow in Kansas City, MO | PREI 013
In this episode we take a look at Kansas City, MO and why it’s such a great market for real estate investors. Most investors are not even aware of the incredible opportunities available to them there. So we’ll dive in and take a look at why it’s a great market and what you can expect to find for your real estate investment portfolio.
Kansas City is a largest city in Missouri made up of 147 constituent neighborhoods. With a population of over 463,000 people in the actual city, the greater metropolitan population is expected to grow to 2,200,000 by 2020.
The overall education level of Kansas City citizens is substantially higher than the typical US community, as 29.6% of adults in Kansas City have at least a bachelor’s degree.
Jobs are plenty with many large employers spread across a diverse range of industry sectors, and the cost of living is 15.3% below U.S. average.
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Market Spotlight: Cash Flow in Kansas City, MO
Welcome to Passive Real Estate Investing episode 13. I’m your host, Marco Santarelli. Today’s show is a market spotlight. Today we’re going to look at Kansas City. We’ve been in Kansas City for about eight years with tremendous success. There is so much opportunity there and you could pick up properties in a wide range of price ranges, from $50,000 on the low end to $150,000, $160,000 on the high end. That’s really not even the high end, you could get $200,000, $300,000 properties there, although I don’t recommend those as investment grade properties. The numbers don’t work out as well on those types of properties.
Kansas City has been growing year after year. It has a large growing population that is expected to increase to about 2.2 million by the year 2020. That’s only about six years away. Kansas City is a large city in the state of Missouri. It has a population of about 470,000 people. It’s made up of over 147 constituent neighborhoods. Kansas City has a very diverse economy. It’s neither blue collar nor white collar. It’s got a mixed workforce and it expands every sector, from healthcare to professionals, office workers, service providers, industrial, sales jobs, management type positions, administrative support, technology is a new big one.
Kansas City has more people living there that work with computers and math than 95% of places around the US. That’s an interesting statistic. Of the large cities around America, Kansas City is one of the most car oriented. 83% of the people in Kansas City drive to work in their own car every day, most often alone. Also, the overall education level of Kansas City people or citizens is substantially higher than the typical US community. About 29.5% of adults in Kansas City have at least a bachelor’s degree. The average American community has only 21.4%.
Also the per capita income in Kansas City back in 2010 was over $25,000 per person, which is actually wealthy relative to Missouri. It’s considered upper middle income relative to the rest of the United States. What this means is it equates to an annual income of about $103,000 for a family of four. Kansas City contains every type of person. Its demographic ranges from the very wealth to poor people as well. It’s not much different than any other metropolitan area.
We love Kansas City. We’ve been there for many years. We’ve had properties there from as little as $45,000 in B- neighborhoods all the way up to, like I said, $150,000 properties. Cap rates are very high so they’re attractive to investors. Population is growing, median home price has been going up year over year for a number of years but not crazy high, double digit appreciation rates. The cost of living is about 15% below the US average so it’s an affordable city, which makes it very attractive, not only to live but to invest.
Let’s talk to one of our local market specialists there and learn a little bit more about the Kansas City market and the investment opportunities that are available to you. We’ll get to that interview here in about 30 seconds.
It is my pleasure to welcome one of our local market specialists. His name is John. He’s based in Kansas City, Missouri, born and raised. John has been working with us for a number of years and he’s been buying, fixing and selling real estate since June of 2006. He’s been in this game for a long, long time. He has purchased and sold over 1800 homes since he started back in 2006. Today, he has rehabilitated and sold about 300 properties. Welcome to the show, John.
Marco, thank you for having me on the show. It’s a pleasure to be here in Kansas City talking to you personally online.
It’s great to have you here. We love working with you. Our investors are very happy. Kansas City is a perennial market. Before we dive into Kansas City, because we’re spotlighting that market here today, tell us a little bit about your background.
Marco, I went to school at the University of Missouri, Kansas City. Go Kangaroos. I’ve gotten to the real estate market and fell in love with it. We started off as a mortgage brokerage company and really had our pulse on the market, when we’d be able to forecast when the market was going to start and especially predict when it was going to fall. With being in the mortgage market, I knew I had to find a new job. When I started seeing prices of homes that I was purchasing or refinancing or getting for my clients at that 80 to $100,000 price point start to sink to 50 to $60,000, we could tell that was the recipe to start changing our business model and get inside the real estate.
I’ve never had a real job, I’m not a rags to riches story. My dad was an operations manager at Bank of America. I knew a little bit about banking because I had a good mentor in my father to help us get started in the real estate business and to help us with our accounting and processes and in setting up our business. We work as the father and son business, it’s a family business. I employ a lot of people in the Kansas City area and really have grown my company from our family roots perspective.
Nice. That’s great. Kansas City is a world famous for its influence on jazz and blues and barbecue of course. We’ve been in Kansas City for probably close to eight years. It’s what I call a perennial market. It’s always had investor interest. We’ve always had good investment opportunities there for investors. I love Kansas City. Now, I’m actually investing in Kansas City myself to continue building a portfolio there. I guess the real big question is why invest in Kansas City? Maybe take us from the big picture and we can work out way down. Why should an investor look at Kansas City as a market as opposed another market?
There’s a lot of different reasons why I believe we should invest in Kansas City and why it just makes sense for anyone to invest in Kansas City besides my opinion. The first and most important reason is our economy. Kansas City economy is attracting a lot of business. We were the first organization to launch, or first city to launch Google Fiber in our area, which knocked down a lot of companies from having huge expensive internet bills and telephone bills. The economy in Kansas City has continued to grow because of the low cost of wages. Of course it’s a lot easier when the home prices are lower and the work price or the average combined household income of a family is around $60,000 for large companies to come in and have affordable work areas.
We have attracted companies such as Cerner, a medical data software company. We’ve attracted and headquartered Sprint for a long time. H&R Block, Boeing, Kansas Southern Railroad, and as you said, we have the best barbecue and stock yards in town. Very good beef as well. We’re seeing a low unemployment rate. We’re seeing steady job markets and we’re seeing continual growth inside of our economy, which is making people not only want to move here but also wanting to stay and work as well.
There’s a lot of things going on there. Warren Buffett’s company, Berkshire Hathaway, invested close to $44 billion into the free transportation operations there, BNSF Railway. Kansas City being in the center of the United States is a major logistical hub. I think that’s a big driver. Other drivers are like what you mentioned, Cerner. They probably dumped in $4.5 billion if I remember correctly and they have a 290 acre campus. As an employer, they employ 16,000 people. There’s a lot going on there. I know that the population of downtown Kansas City has also quadrupled over the last ten years. We like to see that, we like to see population growth and in migration because these people need a place to live. If they need a place to live, then it’s good for investors like ourselves that can provide the housing for these people. The economy’s great. Is there anything else you want to add in terms of Kansas City’s economy?
I believe that Kansas City’s economy is definitely on its upswing as well. In the housing market alone and with the job market growing, we’re beginning to see … There’s becoming more renters than there are home owners inside of our rental market. The market has been changing with the jobs coming in. Of course people are wanting to get their feet wet, learn about Kansas City and once they are ready to purchase a home, they’re going to buy a home in the area. Taking advantage of this foreclosure type of environment that we’ve had, we’ve been able to see the market in Kansas City also become a great source of revenue not just for local investors like myself but for investors abroad as well. With our low purchase price, the average median purchase price in Kansas City, Missouri is $155,000.
We’re beginning to see a little bit of growth, but we’re not experiencing large roller coasters and dips in housing. We’re being able to pick up properties, get the properties rented, keeping them affordable for investors. It’s helping grow our economy from not only the explosion that happened in 2008, but we’re actually growing and making our economy better by putting people into houses they can afford, not just the fog and mirror type of mortgage that they used to be able to get and live in to a property that’s unaffordable for them. We’re seeing everyone starting to gear back from what I like to call the Humvee era. We’re not buying these huge gas guzzling vehicles that are sucking down our wallets and economy, but we’re buying now more economical, responsible type of investments, which has helped change our market for both investors and people living inside of our economy.
Prices have corrected theirselves now where we’re actually watching people spend more money. You can see inside of the holidays and the shopping and everywhere around town that consumer confidence has definitely got back into Kansas City. We’ve had clients fly in, Marco, from your organization. We had clients, Mr. and Mrs. Pendleton fly in of course from Australia last week. When they got to take a peek at what the suburbs were in Kansas City, Missouri, what the opportunities were to purchase properties, they fell in love with the area. It wasn’t because I had the fanciest rehabilitation or I had the fanciest house on the block. It was because our area is thriving, the properties are becoming market ready and up to standards. They’re no longer being distressed and they’re getting a heck of a lot of return on their investment by investing $100,000 into a property, getting $1200 back a month in rent. That’s pretty typical for our area. As you can tell, that’s going to be a great return for an investment.
Those numbers are fantastic. The rental market in Kansas City is about 44% of the population being renters, which is higher than the national average, which floats around 35% or so. You’ve got a very large base of tenants to occupy investment properties. Not only that, but the rents, from the numbers I’ve looked at over the last year, have gone up about eight to nine percent alone. That’s not sustainable year over year of course, but we’ve just seen a lot of growth over the last 12 to 24 months. I know you do property management, that’s why you were able to make some of the comments you just made. We can get into that too. What are you seeing from the property management side in terms of tenant quality, rents and rent increases?
Property management has definitely been a key success inside of a real estate brokerage. The property management industry that we’re finding is the quality of tenant now are becoming better and better and better. A lot of people foreclosed on their property due to an adjustable rate mortgage, that doesn’t mean that they lost their job. They’re still good qualified clients with good qualified job histories. A lot of them had strategic foreclosures. So we’re looking at a renter and we’re saying, “Why did you have this foreclosure? What happened inside your market?” “The price of the house just wasn’t worth what I paid for it. I wanted to restart over and move back into a property or an area that was more affordable now as a rental versus as purchasing the property as a homeowner.”
Property management, we’re doing a full screening process and going and seeing their credit report right now has not been the best scenario. But when you’re looking at reserves, verification of employment, how much money that they’re bringing in versus their debt to income ratio, we’re finding great solid families that are needing affordable housing. We’re really getting the cream of the crop. Because with my real estate brokerage and the property management business, I’m going to be with the investor for life. When I’m watching a tenant rehabilitate their credit, living inside of a property and their credit keeps going up, their job is still holding steady, if I have an investor that’s for cash flowing, has their tenant paying rent and the market has readjusted, as it’s had over the last couple of years, the investor can also sell their property to that client and flip that property or sell it. Both sides are happy, it makes a win-win scenario.
We’re seeing the renters become better qualified, we’re seeing them have the ability to pay and they’re having a bit of pride of ownership when maintaining the landlord’s property. The quality is just becoming better. The credit scores though are not inflictive of how good of a buyer they are or renter they are. Whenever you’re digging in and you look at the whole picture, we’re beginning to find people with money, jobs and availability to pay their rent. It’s making for successful renters or our investors here in Kansas City.
That’s all important. When we talked to clients, we always talk about a top down approach. Choose your market wisely, focus on what’s driving that market. Are there jobs? Is there job growth? Do you have an increasing population both organically as well as in migration? Kansas City has all those things. Once you’ve decided on a market, regardless of what that market is, then you start breaking that market up into regions or areas or even as granular as neighborhoods.
At that point, you can start choosing properties within those areas and neighborhoods that make sense. I’ve been there long enough to know a lot of these regions and areas and sub markets. You don’t need to get into a lot of detail about that. I think that’s a very important factor because you can get 30, $40,000 properties in Kansas City and you can also buy $300,000 properties. Neither one of those are ideal investments I think. Maybe just give us a flyover of the city and break it down into regions that you suggest are good for real estate investors and areas maybe that you should try to avoid.
Very correct statement, Marco. Areas that we are going to purchase in, in very very layman terms, are going to be surrounded by the 435 circle. The very middle of the 435 circle is going to be downtown Kansas City. Your 30 to $40,000 houses or your 10 to $40,000 houses are going to be located inside of the inner city pocket. The further you work yourself north, south, east and west, outside of the city, you’re going to become going into the suburb areas. We’re like picking the markets on the outskirts of the inner city. There’s still good properties in the inner city you could find. They’re going to be in the 50 to $100,000 range, that strike point that you’re looking for. It’s going to breed a better client.
But when you’re finding areas such as Independence with 133 population, it’s $133,000 population, you’re seeing people that are wanting to move into neighborhoods where they’re going to grow their families. We’re trying to predict and we would buy properties in areas that suburbs are starting to grow and, as you said, move in to those areas. The same is typical with most economies in most metropolitan areas. They’re going to start at the epicenter and they move their way out year by year, inch by inch, mile by mile. The higher the price property is generally when it starts moving outside of that inner circle of the city, we’re going to target areas in suburban properties, which are very affordable. Still, we can get outside of the urban area and see properties for 50 to $75,000. We’ll appraise, get a home loan, rent anywhere from $700 to $900 per month. It could be a little bit more, it could be a little bit less. Those are going to be your typical averages with those numbers.
Or you can move into more of a median priced property, 80 to $120,000 renting from $1200 all the way up to $1400 a month. Those type of properties are going to be the properties that starter families with good jobs and incomes will be locating and basically hunting nonstop for until they find a rental property that’s going to hit those standards. It’s depending upon what type of person we have. Some people, let’s say DINKs, dual income, no kids, they want to live downtown still. They make good tenants, they make good renters. We’re going to put them into good little projects, they’re going to be near the country club plaza, right downtown, it’s got to be in a nice desirable area for a young couple that is going to rent a property.
We’ll find properties for someone who just had their first, second child, needing to expand. We’re going to try to locate and put them into a property that they can grow and put their kids into a nice school district that’s accredited. They’re going to grow and keep in your investment for three to five years. That’s our plan. We want to keep those people in those properties for at least five years, three is what we’re hitting in average. Our goal over the next five years is going to keep our tenant longevity or our tenant history to stay for five years in those areas. It breeds for a great investment and it takes care of the investment needs when you’re looking at investment properties from abroad. Rental properties Marco, in your area, how much are they going for generally?
Probably the range is 80 to $120,000.
80 to $120,000. With an 80 and $120,000, it sure makes a lot more sense to bring your money to Kansas City to invest than it would be to spend what in California?
In California for a three bedroom, two bath home … Now of course it depends on what city, California is a state. Where I live, that’s probably a six to $900,000 house or more. If you go into the lower priced areas in California further inland, not necessarily the inland empire in Riverside. You’re probably still looking at 300, 400, $450,000 for a three bedroom home. I know where you’re going with this, because if you look at comfortable three and four bedroom homes in Kansas City that are around the 2000 square foot size, you’re talking about what, 140, $160,000?
It’s a big difference. Here’s another thing. The numbers you threw out before show a rent to value ratio of about 1.2%, which is very, very attractive when you give it that litmus test. It still will produce a very good cash on cash return. The cash flow in Kansas City, Mo will be very attractive. It really comes down to this, there’s something for everybody in Kansas City because if you are an investor looking for the higher rates of return, the higher cap rates, you might be looking at the 50 to 70 or 50 to $80,000 price range. They’re going to be in probably like a B class neighborhood and you’re going to get really good rates of return.
If you’re looking for something in a little more premium type area, you’re probably going to be in the 80 to maybe as high as the $150,000 price range. You’re going to be in a very solid stable area, better schools, more family oriented and you’re going to have maybe higher cash flow in dollar terms but your cap rates and your cash on cash returns are going to be a little bit lower. However, compared to many other options, you’re still seeing very high rates of return. Is that a fair assessment across the board?
Absolutely. You’re seeing a very good rate of return for the amount of dollars that you’re purchasing the property for. Probably one of the best in the whole nation.
Let’s look at this from a new investor’s perspective, someone who might call themselves a newbie or they just bought one property before. If they’re coming into the Kansas City market, what would you recommend to someone that is just getting started in the Kansas City market? What area should they look at? I know this is driven by their criteria and their goals, but in general terms?
The first thing I would suggest maybe would be for them to hop on a plane Marco, and come visit Kansas City. I think that’s always your best approach in purchasing something that you like and you’re going to invest your money into. The second thing I would invest some time into would stay into the Independence, Liberty, Sugar Creek, Blue Springs, those type of markets, which are just east of Kansas City, Missouri. Still fifteen miles away or a 30 minute commute from their job. We’d like to stay in that region that’s inside that 435 circle. People in our area, a rush hour is truly an hour. They don’t want to drive too far to work. I would stay in the regions that were not moving into rural communities. I could list off numerous cities that you might not know of, but looking at our properties you want to stay …
My favorite markets are Blue Springs, Missouri. It has a strong school system. One of the best football teams in the nation. Oak Grove, Lee Summit, Missouri, Independence as we’ve mentioned before. We’re trying to keep you guys out of Kansas. There’s too high of taxes that keeps you out. When you’re thinking of Kansas City, Missouri guys and girls, please do not think of Kansas City, Kansas. We want to stick on the Missouri side, and I think that’s a strong point to hit when you’re looking at investment properties in our area. Yes, there could be some good properties in Kansas but the laws, the evictions, there’s just a whole different gamut of reasons why we want to stick on the east, north and the south side of Kansas City from the very heart of downtown.
That’s good advice. We’ve been talking about great tenants and a good tenant pool to draw from. Every once in a while, you do get a tenant that you have to evict, something happens, regardless of what that is, but you have to go through an eviction. That’s a worst case scenario. Tell us about the eviction process in Missouri, which I happen to love. It’s probably second best to a state like Alabama. Tell us about the eviction process and how long that takes.
The eviction process inside our organization would go as such. On the 31st day of them becoming late on the property, or if there’s 31 days in a month, 32 days. The first day they’d become one month late on their property, we file for eviction with the local attorney. Within 30 days, the attorney will then file and get a default judgment on to the property or win the case inside of a court room. Once that happens, we have the ability to get a writ of possession and within 15 days, we could go out with the sheriff and put their stuff on the street and physically evict them outside the property. How fast we stay on top of it and how good we are with the property management services, it’s frequent with any company, anyone can file the paperwork.
On the 31st day you issue your pay or quit letter, you hire the attorney, attorneys in our neighborhood, the average range is about $350. They’ll serve that person up to 20 times. How you get the teeth in the eviction process, if you want to get a judgment, you have to personally serve them. You can issue them a court and a letter and you can get awarded the writ of possession but you won’t get awarded judgments. Does that make sense?
You want to make sure that you personally serve the person to be able to garnish their wages and effectively collect on your judgment. The only opportunity cost which can expand your time a little bit is of course the personal service. Being the landlords that we are, they’re already living inside the property. It’s pretty safe to say, we know where they live when they’re going to get sued and we know where they work to find them. We’ll get them served, we’ll generally have a court date within 30 days, we’ll get a judgment against them, we’ll work with the sheriff to use a writ of possession and kick them out within 15 days. Total process takes anywhere from 45 to 50 days maximum.
During that course of time Marco, we’re going to be negotiating with them to get out of the property. A lot of people, those that don’t think that you’re real or that you’re going to evict them just because you’ve sent them a nasty pay or quit letter when they’re 15 to 20 days late. What we’ll do is we’ll approach the tenant and once they’ve been served the paperwork showing that we’re going to go to court, what we’ll say, “We’ll give you some time to move out in the next week or two and we’ll make sure that we don’t evict you just as long as you make sure your bills are paid in full. We want you out of the property. We can’t deal with the tenant being late anymore.”
It’s great that you can do that in Missouri because a lot of times, if you’re in another state, they’re going to say, “All communications are stopped between the property management company and the landlord.” In Missouri, it’s open ended, the court rooms are busy, they do not want to have a court date. They’re willing to negotiate with you to get them out of the property without hitting a court room. The process can go even faster once you file for your eviction.
Great. Back to the theme of taking a top down approach, we’ve identified Kansas City as a great market, we start looking at certain sub markets and areas within Kansas City. Now, we start looking at properties. I’ve seen dozens and dozens of your properties and I’m always impressed with the renovation work. Let’s talk about the rehab that goes into producing an investment grade property that we sell to our investor clients. These are turnkey properties, they’re in like new condition, they’re not that way when they start necessarily. Tell us about what goes into renovating these properties and describe that for us.
Going into renovating the property, depending if it was built 2000 or depending if it was built in 1920, it’s the same process and procedure. We’re going to go in and find all the nooks and crannies, get inside of the attic and insulation and try to make that property as fine-tuned as possible. That means we’re going to put in new carpet, we’re going to paint the interior and exterior of the property. We found it’s a heck of a lot cheaper trying to mess around with old appliances to just get new appliances from Home Depot, new hot water tank, HVAC system. We’ll buy all of those items and just put those into the property. Unfortunately, I can’t get away with a $3000 rehabilitation any longer because the real way to attract and keep a tenant is make sure all their plumbing, electrical, appliances, heating and cooling are all brand new and work. We use that type of philosophy going in.
We’ve learned that through processes and errors over the years, that it’s easier just to buy new and inspect ourselves as well. We’ll go through, do a preliminary inspection on the property. Marco, you guys do a great job on educating your clients whether they purchase one property or ten properties. We look forward to the inspection that’s going to happen whenever your property owner or new investor is going to order an inspection in our properties because that’s going to give us the line in the sand and definitively define what has been put into the property and secondly, what is wrong with the property. We’re not perfect, we might miss an electrical switch, a fan might be put on that’s not working correctly or a toilet might flush incorrectly.
You’re educating them to do an inspection. We’re preparing for it, we’re looking forward to it and it gives us that clear line in the sand what needs to be done and finished to the property. Going into the property, you’ve dealt with me on scope of works before, Marco. They are very detailed, they’re down to the cover plates, how much insulation is going to be blown into the property. It gives a detailed description of what’s going to be repaired by square foot, room by room. It’s all inclusive to make sure that we do not miss a beat when rehabilitating the property.
Of course we’re just not going to rely on Marco says the property looks goods, look at the pictures. John the seller says the property looks great. We’re just going to hire a licensed third party inspector to come in and basically check our work. The list is extensive and the process is pretty smooth. It’s a flowchart that’s going to start the same way and finish the same way every time. It’s going to be checked out by a third party and made sure that your inspection is clear and is acceptable for your investor.
The inspection piece you mentioned is a big, big deal because we insist that our clients always order a third party inspection as part of their due diligence. It’s actually part of the purchase process. More often than not, they come back fairly clean. I’ll say fairly clean because there’s no red flags or major issues or things that should be done. Every inspector is going to put in their own small list or laundry list of minor items, scratches and dents and things that I call could be done stuff. That’s always going to be in an inspection report. It’s never going to be blank. If there ever is an issue or something was missed or there’s an oversight or something wasn’t reattached or there’s a minor problem with the property, you guys have always been great to jump back in there right away, get it fixed and repaired.
Investors love that. They like to know that they can rely on things being corrected or cured if they come up during their purchase. I think that’s a big, big deal. I know there are other companies out there, other rehabbers that I’ve worked with in years passed that were very reluctant to jump on that. They didn’t like the inspection process, when it came back. It was almost like it was an inconvenience because it was another checklist of things that needed to be done and money to be spent. We really appreciate that you jump on those things and take care of them before the tenant moves in.
I think it’s a process that you have implemented that’s great for success. For us also being their property manager, I just don’t want to move one problem from my desk and shove it over to somebody else’s desk. There’s no benefit in it for me to leave a stool or shortcut a few hundred dollars and blowing an insulation or putting in the right A coil, or just any numerous item that the inspector is going to miss because I’m just moving one problem from one side of my desk in the office to somebody else’s side of the desk. Guess what, I’m still going to have to deal with that problem if it’s now, in the future or later down the road. Making sure that property is handed off to a property manager or leasing agent is critical because now we have the property inspected, we move in.
Marco, here’s something else that always happens too. The inspector seems to miss items even on the inspection sometimes. Once you moved into a property, something still might not work correctly. We all actually do a property walkthrough inspection when we have the tenant move into the property. Let’s say the pool chain actually falls out of the fan, we’d go into the property three days before they move in, we do the walkthrough, we catch everything that the tenants going to see in there that might be wrong to them.
Minor items, a lot of things that let’s say an inspector misses or it’s not even his job to catch. The tenants brings in an electric stove versus a gas stove. Are we going to kick out the person or ask the new investor to buy a new 220 outlet so they can plug in their electric stove or put in a gas line? No, of course not. We’re going to make sure we have to accommodate the tenant and the owner so that way the people’s appliances, the tenant’s appliances work well. Happy tenants make happy investors. Nothing does better to watch our monthly reports get better and see our accounts receivables go out to the owners because we’re not a nonprofit organization. The more money that’s going out for our owners means the more money that our property management company is making. Watching that transition happen and watching it get smoother and smoother and perfect better and better over the years has just been a great ride to watch, Marco.
Back to a comment you made about getting on a plane and going out and coming out to see you guys, I love that idea. In fact, we recommend our clients get on a plane or get in a car and drive and meet our team on the ground and meet with the property manager, meet with our rehabbing crew, go out and kick the dirt, see some of the properties. Because you can describe this on a podcast or on the radio or anywhere else as much as you want. But when you’re actually standing in that property and looking at everything that was replaced and repaired and renovated and it’s got that new home look, feel and smell, it’s just a completely different experience.
Plus you can drive around the neighborhood to get a feel for how other people take care of their properties, that pride of ownership, the schools and employers that are nearby. Every client that we’ve had that has flown out to Kansas City has come back impressed and often they go out with the intention of investing in one property or potentially investing on one property, but they end up picking up two or three properties. This just happened with those Australians last week. They looked at one property, you showed them several, but they ended up choosing to pick up two of them because they were similar and extensively renovated.
Absolutely. I couldn’t suggest or I couldn’t applaud you more for making that decision to invite people. If someone’s not wanting you to come see the market, there’s probably a reason why. Once people dig in and say, “It’s too good to be true. A $100,000 house running for $1200?” Come on out and see it, watch it in action. Meet the team, you can visit, hopefully have some barbecue, we can have a steak, look at your investment properties, look at a property statement, watch how the property looks, feels and the area. Seeing those things are more valuable than a picture, profit and loss statement, anything else in the possible world because you’re going to actually get to touch, feel and see what you’re going to buy.
Looking at the Kansas City market, it’s becoming the best market in the area just because the prices are staying down low and the quality of homes is almost shocking and awful. When you get to be able to see the property and walk through it, look at the repairs and know, maybe you don’t need to come back after your third or fourth acquisition. You can start growing a real estate portfolio because you’ll know the team that you’re working with. You have Marco who’s working with you, keeping you educated, keeping his pulse on the market. You’ll have us being local, working, attentively catching you statements and sending back your funds.
Of course, Marco’s going to help sending you more investment properties that we have to offer and just work as one big team. Everybody’s team in this is to help everybody make more money. Kansas City has definitely been a pinpoint market for a lot of people’s radar. It’s not a secret anymore. Kansas City is a great place to invest. Google has found out it’s a great workplace and economy for people. Warren Buffett’s found it to be a good place to be investing his money into property. Population growth, as you’ve explained, in the area is growing and moving up substantially. With the number of renters hitting the market and the prices staying where they’re at, it’s just a recipe for a storm that’s creating a good opportunity.
Marco, we have and enjoy working with you and your clients. We’ve had fun when they’ve came out. I’ve had fun coming out to meet you as well. I really believe Kansas City’s economy and market will stay this way for the next three to seven years. Hopefully, at the end of the third and seventh year, we’ll all be hitting the cash out button and the properties have gone up in value. Or we’ve had such great success in the properties, you can sit back, take your cash flow, decide this is something that’s going to make my retirement. Take that passive income, keep it, you’re buying the property right. We all believe the storm is about over.
If it does happen again, you bought at the right time. Timing is very critical. In Kansas City, we’re seeing that time in our market is here, it’s now. We’re watching it on a daily basis as we’re buying actively daily inside the real estate market. We’re renting inside of the real estate market. We’re dealing with investors flying in on a weekly investment opportunities, taking them on property tours. It’s just been a fun ride with the Kansas City real estate market. I hope I’m here for a long time. I’ve been here my whole life and I don’t plan on moving. Growing my family, we’re looking forward to staying here our whole entire life and we’ll go visit everywhere we want to go live or go see.
It’s like my saying, live where you want, invest where it makes sense.
I think that’s the best saying.
I’m going to add two quick things to what you just said. First of all, there are a lot of investors that can’t get on a plane or in a car and drive and take the time to come out and see you and the team and the properties that we have out there. In fact, I think statistically, maybe only 5% or 1 in 20 or our clients will actually do that, which sounds like a very, very small number. Because we have systems in place and a very clearly defined purchase process to help them navigate and do their due diligence, they can literally be arm chair investors and get the same thing accomplished as coming out there. It’s just a different experience coming out there.
That’s the nice thing about turnkey investing with turnkey properties, is they’re geared towards people who have limited time and limited resources to do it on their own. They do want to invest and build a portfolio. They’ve got their job, their family, sports on the weekend and everything else they do. They just can’t get on a plane and come out there. That’s fine. We post all the properties up on our website with a fair amount of detail and then investors can look at those properties. The ones that interest them, we can send them a ton of information, scopes of work, neighborhood demographics and profiles and the list goes on.
I don’t want listeners to feel that they have to go out to a particular market. We love it when they do, but they don’t have to do that. The second comment I was going to say is you got a perfect storm going on in Kansas City. This is actually happening in multiple cities right now. Kansas City is especially attractive because it’s a linear market. It’s not a cyclical market. It doesn’t gyrate and go up and down like a roller coaster in terms of property values. When we went through 2007 to 2009 and we’ve seen the housing market come down, when I say housing market, I’m referring to housing markets around the country.
When we’ve seen property values come sliding down considerably in many other markets, places like Kansas City didn’t actually get affected all that much. There was a decline in property values but when you measure that and compare it to other markets, it’s been relatively flat. This is why I like that market as a long term buy and hold market. Sure, if property values go up and you have lots of equity, you don’t have to sell your properties and move to another market. You can stay there, pull out some equity through a refinance and invest in more property in other markets. We can help you do that through, whether it’s a refinance or a 1031 tax deferred exchange. There’s a lot of things going on in Kansas City that I really really like. Any other comments you want to make about Kansas City, the economy, the rental market, investment opportunities or anything I didn’t ask you?
No, I think that you hit one point. That you can invest in Kansas City from abroad. I think Norada has put the correct safety nets, inspection periods, third party inspectors, appraisers, on ground local market specialists like myself that you have worked with the through years. You can purchase properties from Kansas City from abroad and just use the correct tools that Marco and his team has given you. I think that you’ll have great success in our market. Take a peek at some of the investments on your website. Other than that Marco, I think you’ve covered every base. Of course, we might have missed some in Kansas City’s economy or Kansas City’s market but our real goal today is to help educate people and make them understand about our area and why our area’s good. The main point, what we’re seeing is the purchase price is relatively low into the rest of the nation, the returns are high. Pretty simple math equation. I think you could help guide them through that for 30 years and help them through their acquisitions.
Definitely. Investors can contact our office anytime for a consultation, a free strategy session. We have investment counselors to help them. That’s not a problem. I guess that really brings us to the end or full circle, if you will. If any of our listeners want to find out more about the investment opportunities in Kansas City, we post them up all on our website, but they can contact us for more information about what you have available. Even if they’re not up on our website, we can let them know what might be coming up. We’re pretty open about that information. John, is there anything else you want to add? I think we’ve pretty much wrapped up this episode on Kansas City as a spotlight.
Absolutely. I think we’re all good. Have a great rest of the week, Marco. Thank you for having me on the call.
I appreciate your time, John. We’ll talk to you soon.
All right, thank you. Bye.
We hope you enjoyed this episode on Kansas City. We thought it was a good market to start with in terms of doing market spotlight. We love the opportunity there. If you’d like more information, contact one of our investment counselors through our website, NoradaRealEstate.com. You can check the show notes for that link and the phone number. If you haven’t subscribed to our podcast and you’re listening for the first time, we encourage you to subscribe. We will put out content every week for you that will hopefully enlighten and educate you. If you can, we of course appreciate a rating and review on iTunes. That does help us out. We thank you for listening. Love having you here. We will see you on the next episode. Continued success.
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