First real estate invesment in Kansas City

29 Replies

I am new to these forums and to real estate investing. I will soon get a hold of 250k of cash from selling my home. I would like to invest some of this into real estate.

I am thinking of investing in a single apartment complex in Kansas City for my first investment. I have a full time job as an engineer making good pay, with busy hours. I am willing to put in early effort to building a team, choosing a location and handling the purchase, but I am hoping once the property is being managed and collecting rent it would be more hands off.

Is this a good approach for a first investment? I could also use the 250k to buy many SFR or smaller properties (duplexes etc) but the time investment for buying multiple smaller properties doesn't sound as appealing as spending a lot of time choosing one single apartment complex.

Thanks in advance!

I don't know anything about buying larger MFRs, but it scares me that you're putting all your eggs in 1 basket, since you have so many eggs (but not millions of extra eggs).  But that's me.  No doubt there are people on here who will say, "GO FOR IT!"

I see you're not a Pro member.  You might want to become one since the tools would be really helpful to you to decide if you should buy something or not...and at what price.  BP has some great webinars on YouTube to help if you don't become Pro, but unless you love math, I encourage you to be able to use the tools.  Otherwise you can only use them 5x.  That's not enough to find a really good deal.  Plus, if you go back to recalculate a deal to see if it will work out if you plug in a lower purchase price, I'm not sure if that counts as a 2nd time.  I'd hope not, but maybe.

If you're using the tools, Brandon on here says you are looking for at least 12% cash on cash ROI and MAYBE $100 per door for larger properties, but for smaller, at least $200/door...at maybe $200 for larger ones. I don't know because it's not what I invest in.

That's all the help I can give--besides network both on here and in the KC area (in real life).  Networking is huge, especially for newbies.  

Good luck!

Multi Family is expensive and popular right now.... and that def applies to KC. I hope you're planning on leveraging that 250 because it's probably not going as far as you think. 

Also, since you're busy and make good money... do yourself a favor and get quality properties, not 30-40k warzone houses....

@Matt K. would definitely leverage it through financing. Would probably look to getting a 1mill apartment complex and put 20% down. Would definitely target B class properties (or A if I could get a good deal). 

@Jody Schnurrenberger I was thinking the same thing, but I am fairly diversified outside of real estate (with stocks). Managing multiple properties would be too time consuming and I would have to focus on too may deals to spread out this 250k; while I could also just buy a 1 mill apartment complex and reap similar returns with less overall management. At least thats why I have been leaning towards a single apartment.

Aamir,

Welcome to BP. Amen on the war zone in any city. There are some great prices here in the KC, MO area for houses but you will be in Sec8 or at least crime infested D neighborhoods.   You can probably still get 2% houses if you go that route. I have a friend with 20 doors. He is constantly backing a dumpster up. Tough way to go and not hands off. 

I saw some wholesalers in the BP Marketplace with better properties in east KC and Independence.  They had some passive MF units as well.

*R

Aamir:

A couple of thoughts on your posts.

firstly, never put your "last nickel" into a deal. If you have 250K, then don't try and buy 1M in real estate. You'll need reserves, and depending on what you buy, rehab costs. If you have other liquid assets, or a high income to cover reserves, that's a different story, but in general, you don't want to have to default on your asset because you had a bad month in vacancies. :)

with regards to SFR vs MFR: I've done a bunch of SFR, and only a little MFR. My MFR experience is too early to draw any major conclusions from, but I will say this: breaking into commercial MFR (5+ units) is WAY harder than people make it sound.

Firstly is finding deals: brokers control all of the good inventory, and they don't share it with outsiders. You'll need to break your way into the inner circle, or you'll have to be content to pick through the left-overs on loopnet.  Being OOS, you probably can't drive for dollars. Not sure if a mail campaign would be cost effective or not, but it's still a lot of work.

2-4 plexes are easier: many of those go to the MLS, so you can still pick some up there.

Secondly, financing: for deals under $1.5M, you won't qualify for freddie (i.e. government-backed) loans. You'll need to find a lender yourself that lends on your type of deal to OOS investors. It will most likely end up being local banks, so either find and pay a broker to shop around for you, or try to source them directly by calling all of them up and getting someone on the phone.

If you go with 2-4 plexes or SFR, then you just go to zillow and search the mortgages, and choose the one you like best.

Thirdly: experience - you don't necessarily need experience to be a good operator just like you don't need experience to fix a car: it definitely helps, but if you have time, money and energy you can figure it out as you go. However, lenders will require you to have experience. They vet both the deal AND the sponsor (you.) 

Finally team: you need to put together a good team. This is actually not that hard, but it is time consuming.

I don't write all of this to discourage you, but to give you a realistic view if what you'll likely experience. I sincerely hope you have an easier time of it than I did, but I have heard of people who worked on it for a year before they landed a deal.

In commercial MFR, acquisitions requires a big hill to climb initially with the hope of a payoff after you get over the hump. If you're looking for something truly passive, there's no such thing as a "turnkey apartment provider," or at least I haven't seen one. If your 250K deal is the last deal you ever want to do, then paying all of that upfront cost may not make sense.

With SFR, you just kinda pay as you go. :)

Hope that helps!

James

I'm in KC and was looking to possibly get started in apartment investing over the summer. I didn't take that route, but one thing I'm very happy I did was take a multi-day course on apartment investing. Find one local in your city. They're expensive, but money well spent if your considering this route. 

Originally posted by @Aamir Shah :

I am new to these forums and to real estate investing. I will soon get a hold of 250k of cash from selling my home. I would like to invest some of this into real estate.

I am thinking of investing in a single apartment complex in Kansas City for my first investment. I have a full time job as an engineer making good pay, with busy hours. I am willing to put in early effort to building a team, choosing a location and handling the purchase, but I am hoping once the property is being managed and collecting rent it would be more hands off.

Is this a good approach for a first investment? I could also use the 250k to buy many SFR or smaller properties (duplexes etc) but the time investment for buying multiple smaller properties doesn't sound as appealing as spending a lot of time choosing one single apartment complex.

Thanks in advance!

Welcome to the world of REI! Best of luck to you!

If you're Interested, we have a 4-plex currently for sale in Belton, Mo, 20-30 minutes south of downtown Kansas City. It is not listed on the mls. Let me know if you'd like more info.

Thanks @James Kojo you have definitely made me reconsider going multifamily 4+ units for my first investment. Great advice. 

@Aamir Shah - go with your gut. Multi-family/apartments are better than SFR. Both have learning curves. I would start off with a fourplex or a smaller apartment complex (eight units max). Learn that process. Then move on to something bigger. I can tell you that the learning curve will exponentially decrease from deal one to deal two. Deal two to deal three, etc... until about deal five. While you will always be learning and improving you shouldn't be making major mistakes by deal five.

Best of luck to you. To reiterate, many people pass off SFH and start directly int he multifamily /apartment realm.

@Aamir Shah -- thanks for asking the question!  So much great insight coming out of it. 

@James Kojo - extra Kudos for the epic educational answer. 

@Mark Boek - I saw your marketplace post tonight!  That's a super exciting possibility.  My honey and I are still, I'd guess, 3-6 weeks away from ready to pull the trigger on our first property, but that looks a lot like what we're looking for.   I just got myself on your mailing list via your website. 

@Heidi Neilson - Thanks! Hope we have something that's a good fit when you're ready to move ahead.

Great thread.  @James Kojo , can you comment further on how to find good MFH listings?  You mentioned commercial brokers hold the cards and that many listings are not publicly searchable.  This has certainly been my experience so far.  

Is it just a matter of calling brokers and asking them to send you what they have? Will they show you listings held by other brokers, the way a buyer's agent would if you were buying your primary home, or just their own listings?  That is, does the buyer's representative/seller's representative model still hold?  I'm thinking that it's a little different in the world of MFH.   

Thanks for the info, all!

Kansas City is a great place in invest in multi-family homes, all you need is a pro account and ask all the questions you can as people on here will help you as much as possible.  Use the calculators , view the webinars, read the articles etc.. Good luck!!!

Hope you're getting off market deals for MFH... because a lot of them aren't priced very well and owners don't seem to care. SFH sellers seem to be much more motivated to sell...

Any advice on how to find off market deals and connect with brokers who have the premium MFH listings. Is everyone MFH investor in Kansas City using the same few brokers?

@Aamir Shah - It's your money and your life but I would always recommend to start from your back yard and see how far your money and REI education/experience takes you. Don't start 1000 - 2000 miles away.

Good Luck

Vivek

@Vivek Khoche the big problem here in Orange County is my cash will not take me too far; I would be relying on appreciation which I would prefer to avoid (most of my capital is already invested in the stock market and I want to diversify out of appreciation based investments)

@Aamir Shah - I don't agree but I certainly know that OOS will take you too far from your cash. With respect to stock market this is not the forum but I had been a merchant banker in my past life and would be happy to take it offline. I certainly know successful investors in your market and they are on BP. 

Good Luck

Vivek

@Aamir Shah Where did you end up with this? Are are you still doing research? Reading your post, I feel like it's essentially the same position I'm in. I'm in an expensive market (NYC) where there appears to be little opportunity for novice investors. The more I read, the more I'm leaning towards Midwest investing where 200-300K could go a long way. However, OOS seems very risky for a new investor without connections to the area. That has led me to look at turnkey properties, however it's hard to find many positive posts/success stories on the BP forums.

Connections are easy to an extent.... BP is a great place for referrals.... and warnings of who not to use haha,

@Matt S. yep still doing research at this point. Looking into KC, Dayton,  syndication and even local California investing. Looked into a few turnkey companies, and so far there hasnt been a deal that has been really good. When you start to factor in capex, the fact that you have to pay a months rent every time a new tenant comes in on top of the property management fee, plus vacancy, property taxes, etc etc the numbers just dont look appealing. 

@Aamir Shah If you are planning on continuing to work full time, have you considered just passive investing?   I see that you are considering syndication as a strategy, which you can certainly do as a passive investor or as a syndicator yourself (finding the deals, putting together the business plan, & raising money from investors).  Make sure you understand the rules associated with raising money so that you don't take on any unnecessary risks with the SEC.  There are also specific documents to learn about when doing a syndication. 

Also, my husband and I have taught "How to go big, without starting small in Apartment Investing."   We started small 23 years ago, with 1-4 units at a time.  We were landlords while working full time, which included fixing toilets, hanging drywall, collecting rent from unwilling tenants, eviction, and more.  We wish that someone would have told us that there was a way to go BIG right out of the gate!  For us, 100 units or more makes sense for full-time management.  We have a 64 unit in Dallas that we just cut back the full-time staff member to part-time. It just didn't make sense for her to be there full-time.  We also have 2 8-units in Dallas.  If we were to have a management company manage those places, they would charge 10% + an hourly fee for staff/maintenance/leasing/etc.  In comparison, our 200-400 unit complexes are 3.5% management fees + payroll for the staff.

If you choose to invest in a syndication, especially as a passive investor, I would encourage you to invest the money in at least 2 different deals.  AND...Do your research on your syndicator!

Good Luck!

I like the KC market, just make sure you study the good and bad areas to buy. 

For the $250k, I would say at best you will be able to buy $900k asset, but I would stick closer to $850k unless you have other reserves to back you up. 

You may also consider partnering to get you dollar to go farther. 

For finding brokers, first understand the language. You should know and understand market caps in the areas you're looking and you should know what you're looking for. You should also know what the terms T-12, P&L, rent roll, K-1, cap rate, cash on cash, IRR, etc. After you know the language, then call them and tell them exactly what you're looking for (and be realistic)

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