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

BLOG:  http://activerain.com/blogs/reedy6799

First meet with them at the job site so that you can look over the job and see what they would do. 

Ask “What would YOU do?” questions about the houses.  Ask them what they would take out or put in. Base off of bathroom, kitchen, flooring and would they put new windows in. Each place will be different, what you are looking for is are they going to be on the same page as you. So you can feel comfortable with them making decisions without you there.

Ask to see pictures of past jobs.  You’re going to need at least three references.  When you call the references find out what kind of work they did, how long it took them and if they are clean workers. Do they pick up after them selves or is the job site always a mess. What hours did they work i.e. came to the job site early or were they coming at different hours. This will tell you how dependable they are.

How many people are in there crew and how many do they have. This will let you know if you have more than one job going on they can handle it.  Do they have their own equipment.  This is an important one, do they have the money to buy the materials. You do not want to give them money up front to go buy the materials, I repeat DO NOT give any one money up front to do a job. What you’re looking for is a contractor to buy all materials and labor for the first week. So they will give you the bill for the work they have done and you pay it then.  Ask them what kind of work they do i.e. paint, dry wall, windows, bath rooms, you get the picture. For the things they don’t do, will they contract them out for you?  Find out what their time frame is on an average job i.e. can they be in and out in a month on a normal job.

You want a contractor that’s going to bid the whole job not just labor.

This should get you headed in the right direction when it comes to hiring a contractor.

Sean Marmoy

MOKSRealEstate.com

MAO simply stands for Maximum Allowable Offer.  To come up with MAO we first have to know what the property will be worth when all repairs and updates are done.

ARV (After Repaired Value) – There are a few websites you can use such a www.Zillow.com or you can become good friends with a realtor and have them pull comps for you on the MLS.  A comp is at least 3 comparable sales no more than 6 months old within a mile without crossing any major landmarks.

Rehabber Finished Costs – The Rehabber will usually want to have invested 60% – 70% of the ARV into the property.  This gives room for unexpected costs as well as profits.  This also allows the rehabber to lower the sale price of the house for a quick sale.

Holding and Loan Fees – 5% of the ARV should allow for any financing costs involved in the rehab process.

Rehab Costs – This is the total materials and labor costs involved.  If you are not an experienced rehabber I would recommend getting an estimate from a reputable contractor.

Wholesalers Costs – This is the amount that you will charge if you are wholesaling the property.  If you are the rehabber and did not find this property through a wholesaler then you can omit this from the calculation.

Once you have figured out all of your costs involved you can get the MAO.  Simply subtract your Holding and Loan Fees, Rehab Costs and Wholesalers costs from your Rehabber Finished Costs to get your MAO.  Your negotiations should go much easier when you have a hard MAO number rather than a “gut” or roughly estimated value.  Your Rehabber’s and Investors will keep coming back for more when they are finishing their properties at 65% to 70% of ARV.
The Math:

Retail Value –                                   $100,000
X 70%
Rehabber Finished Costs –                $70,000

Holding and Loan Fees -                     $5,000
Rehab Costs (Will Vary) -                  $20,000
Wholesaler’s Costs ($2500-$5000)-   $5,000

MAO                                                  $40,000

Good Luck and Happy House Hunting,

Sean Marmoy
MOKSRealEstate.com (Under Construction)