Thinking your buyers agent is working for you?

Kansas City Investment Property is fraught with deceit, corruption and liars. How are you to know what the truth is.

Here are a few suggestions.

The first thing you need to know is that in Missouri and Kansas Realtors are still compensated by the antiquated method of commission. That means the more you spend the more they make, that also means that if you don't buy.... they don't get paid. So buyers agency is a joke!

I'm not real popular when I expose these truths, but I get really sick of investors coming to me after being sold something and told it would rent for some ridiculous amount of money, and as a property manager having to break the bad news to them. 

There have been several outfits in KC that have been busted and some plead guilty to mortgage fraud. The scary thing is that in the case of some of them like Jonathan Jennings and Nathan Brinkle  Jennings kept his real estate licenses and just kept on doing business. Amazing but true!

Another outfit BMC rehabs property in the inner city and sells it to unsuspecting West Coast investors using comps that don't even come close to the property in question.

Here's an article I penned several years ago, still pertinent today! Investment 101.

The basics are still the same. If it seems to good to be true, If they are guaranteeing rent, if you get in without anything invested.... Your probably getting screwed!

Some things have changed since I wrote this, most importantly I used to sell property to investors often using the 1% rule. If a renter paid $600 a month then it was a good buy at $60,000. Those days are GONE!

I have property listed now with rent at $500 advertised at $32,000 and the phone ain't ringing.  Times have changed!

Here's the basics: 

1) Location, Location, Location. That is pretty simple and the most over-used quote in real estate history. We wish we had a patent on it!

2) Value is not based on current or past income, but income potential. We cannot stress this enough... DO NOT buy a property based on the current rent roll figures.
a) Were these figures consistent throughout the history of the property?
b) Are these figures realistic in the immediate future? Has the market changed?
c) Do you know the market, and does your agent know the market?

3) Do not believe the Pro-Forma!
Do Your Homework:
a) What are the local community, civic and economic forecast for this properties location? (Developments, TIF's, Improvements, Changes in the Neighborhood)
b) Are the expense histories based on real figures and current facts?
ie: Did they just rent the entire property up, and now the utilities will be 40% higher than they were last year with a comparable vacancy rate?
c) How long has each tenant been there? This is vital!

4) Get professional help! If you do not know this market ask someone who does? If you are represented by a buyers agent ask yourself... "Just who is this person working for?" If he is getting paid a percentage of what you spend... and the more you spend the more he makes.....? Ask a local property manager for advice and information on what realistic rental rates would be!

5) Inspections! If you don't know what to look for, get someone who does!

6) Maintenance: If the previous owner did some, or all of his own maintenance You will likely find that your numbers will be nearly double the ones they provided if you cannot do the work yourself.

7) Agent:  If you are buying an investment property don't rely on a residential agent to represent you! Buying and selling investment property is a whole new ballgame! If your using a buyers agent and they don't request the deposits and pro-rated rents, guess what, the seller isn't going to volunteer to give them up. Residential agents sell pretty kitchens to soccer mom's. We sell investment property!

8) Investment Scams: Are rampant! We have had many clients who were nearly bankrupted by mortgage scandals and scams.

If the same guy who is selling the house hooked you up with the appraiser and the inspector and the lender.... And you are getting anything guaranteed your screwed. There are no guarantees in this business. 

9) Charity: If for some crazy reason you are buying property to "give back to the community" or "help out the less fortunate" you will be bankrupt in a few months!

Seriously, give the money to Big Brothers or the Salvation Army. Save yourself the headache!

If they say they are not making a dime, and all the money goes to a church...... RUN!

10) Cash Flow, NOI, CAP Rate... Know the terms! If you just finished reading Charlton's book or stayed up last night watching late night TV. You have an unrealistic perspective! Distressed sellers are not selling cash-flow property no-money-down at 20-50% under market. Some of those schemes worked in the early 90's. That's when those guy's wrote those books!

I hope we can help you, call us at 816-313-8876 or visit us Kansas City Investment Property.