My name is Idan, and I am new to real estate investing. Did my research and decided to invest in Kansas city, MO.
My plan is to start out by purchasing SFHs, in a C class (and above) areas with a budget of 60K-80K (All in) and continue with that tactic after completing the first deal safely.
Does anyone have some tips for me?
- Any special or unusual RE rules that I should be aware of, for Kansas city/ MO ?
- What are the best neighborhoods to invest in for buy&hold?
- What are the worst areas that I should stay away from ?
- I found this info https://www.roadsnacks.net/worst-neighborhoods-in-kansas-city-mo/ , would you consider it correct?
Thank you for your help!
@Idan Narotzki You live in a good place to invest. Learn your city and understand the different areas.
1. Check your local city’s websites for each locales requirements for landlords and rentals.
2. Wherever you can learn, know, understand, and make money.
3. The urban core is rough. However, it can vary from block to block. There are plenty of C and D areas there. I have found that the Trulia crime map more or less shows the really bad areas. There are plenty of challenges being an investor in these areas and not everyone can handle it. You need a very good knowledge of the areas and where you must stay away from, and, you need a very good property manager with experience in theses areas.
4. Pretty much. Although, see #3 above.
This all said, you might look in the Independence-Raytown-Grandview-Belton areas. With some effort, you can find some deals in you price range. Another tip would be understand how property taxes can vary between municipalities, that will affect your bottom line.
I completely agree with @Brett G. on his reply above. @Idan Narotzki while the C/D areas are going to look better on paper with higher CAP rates, we have found that they have overall lower returns. With the cost of vacancies, maintenance, and repairs - it wipes away our returns. We like to focus on areas that have at a minimum schools rated 4/10 on https://www.greatschools.org/ Using this barometer so to speak has kept our investors happy because of the quality of tenant we attract. I am not saying you can't make money in the urban core, I am saying that if you want to be truly passive and receive "mailbox" money - you might want to raise your price point a bit and focus on some better neighborhoods. I am happy to help point you in the right direction, matter of fact I have attached to this post a breakdown of the schools in the area according to their ratings as well as our view of how we look at the different property classes here in KC. Hope this help!
How you going to fund this... 60-80k house likely going to rent 500-800 mo maybe you'll get an odd ball one at 900. They're all going to be older too with some kind of maintenance needed likely with in the first year.
Now look at the numbers, figure 80k with 25% down at 5% rate. You'll be around 450 mo with note, tax, insurance.
Let's be realistic, rent most likely going to be 6-800 for something like a 3/1. If you already have tenant in place it'll probably be like 550-650... If not probably 650-800 depending how fast you want it rented.
So at worst your looking at 100-200 mo at best 350 mo. Now this is before what everyone will want you to take a flat % for capex maintenance vacancy. But I take a different approach
Let's just say you need a new water heater 3 mo into owning this. That's 1200, that is anywhere from a year to 4 mo of your cashflow. I can all but promise an old house like that will have another issue before you make up the water heater... Then you are cash flow negative.
Get a nicer place with higher rents at least that way you can get some more money in to cover em.
Hey, Idan, one of the #1 things that we tell our investor-clients is to get their butts in the city where they plan on investing. At least for a visit or two; get to know the team or individuals who'd be assisting you and essentially handling your investments. Kansas City is unlike any other place when it comes to real estate investing, especially in the urban core areas.
We're here on, the ground, making moves, helping clients, and putting deals together virtually every single day. I work with a team that handles sales, maintenance & property management, investments, and we specialize in SFH, Buy & Hold deals. If you ever want a fresh perspective of what goes on and what's been going on in KC then you can send me a message. :)
For the price points you're talking about, I would look in Grandview, Raytown and near the new Cerner complex (north of 470, east of 435). Here's a good thread on KC zip codes to avoid: https://www.biggerpockets.com/forums/48/topics/276800-kansas-city-missouri-zip-codes
@Idan Narotzki At the low end of your price range, you will be in lower C class areas which can get challenging due to a higher rate of tenant issues. Personally, I would recommend areas that will command rents of a minimum of $850-$900. You should avoid the inner city and urban core areas. We focus on the suburbs outside of the 435 loop in areas like Independence, Raytown, South Kansas City and Grandview. With the exception of a couple of pockets, these areas don't have any really bad parts. They are typically working class neighborhoods. Feel free to reach out if you'd like more insight.