All Forum Posts by: Cliff Harrison

Hi Joshua - yes I own/partially own 67 units today in south KC, grandview, Raytown, Belton, and Lee's Summit.

In order to recommend an area, I'd need to know more about what 'class' of rentals you prefer to invest in? More expensive, nicer areas (ARV $90-120k) with lower cashflows, higher rents ($1000 and up), better tenants, less headaches, and possibly some appreciation potential? Blue collar working class neighborhoods with less expensive properties (ARV $60-75k), lower rents ($850-1000) more tenant demand, more cashflow, no appreciation, lower class tenants? Cash flow kings you can pick up for very cheap, rent for $650, and just plan on tenant issues, turnover, maintenance, crime but you can acquire the house for $35,000 ready to rent. Do you want single family or multi-family?

I personally prefer the C & B class areas of Grandview and South KC which I find to offer good returns, strong rental demand, and not too much tenant drama.  

If you are interested, I have done some inexpensive paid mentoring in the past where I open my books and mind to you.  We can meet somewhere or take a field trip to look at property, mine or something you are considering.  I don't have any secret sauce to sell, just my personal experience and opinions.  PM me if you are interested.

Good luck.

Cliff

Agreed you will find PM to take a single unit.  

Many investors underestimate expenses.

Regarding how much cashflow, assuming your estimated are good, look at it in terms of how much money you invested to get the cashflow.  If you can spend $5k out of pocket for $100 per month, that is a great return.  If you spend $50000 out of pocket its not. 

Finally, with one unit, realize you will have month to month variances. Your property will not nicely produce $100 each month

You might have months of big negative results so be sure you have adequate reserves or credit. With many units things average out quicker.

 Hi Jason,

It's 40 units.  20 Duplex buildings, 2 units each.  

Lee's Summit is well above most of the typical investment areas of KCMO in every way, including property value. 

Current rent averages a bit over $600 but market rent is approx $750 average (for the mix - 30 2 bedroom and 10 3 bedroom units.

Cliff

 Laura,

They are located off Chipman road, about a mile east of View High Drive, and a little west of the shopping center with Best Buy, Lowes, etc.

The average rent (and they range from $510 to $775 - crazy) is $605.  I expect to have that up to $725 in two years.  

Congrats on your first deal!!

I'm excited about LS - all my prop is in Grandview and South KC this is a nicer area I was fortunate to find something affordable and to find investors at the right time.  At least, I hope this is good fortunate and I don't think otherwise in future hindsight! 

Cliff

After three months of pursuit, I finally closed this deal in Lee's Summit for 20 duplex buildings in a nice park-like community. Lee's Summit is a one of the nicer suburbs of Kansas City, MO with highly rated schools. The deal is my first 'investor group' MF purchase I have put together and gotten to close (came close a few months ago on an 80 unit complex but bailed after inspections). I am the LLC manager and the other investors are passive. As the manager and minor investor, I have 39% equity. The investor shares have IRR of 17.5% annualized forecasting a 10 year hold. In addition to my equity and corresponding share of future cash flows, I also took a 1% acquisition fee. The purchase price was a little under $2MM.

An unsolicited props to Michael Blank and his syndicated deal analyzer which saved time and helped tell the story to my investors - definitely worth the purchase price (to me).  Interested?  Just search for it.

Today began the tenant transition process to new property management.  I am excited but feel the responsibility of delivering (or over-delivering) returns to the investors who placed their trust.  Then I will be able to use this track record to attract more investors for larger deals in future. That was and is extra motivation to do my best.

Good luck on all of your deals!

I like your SHF metric! I look at CoC as not inclusive of equity accumulation. That is something, but it isn't cash.

Regarding your numbers, in my opinion..

1. 5% is to low for maintenance/repair budget.  Use 10% (or $100 per month minimum).  

2. CapEx looks too low to me. Use $125 on a standard SFR. (I created an amortization spreadsheet of all the replacement items in the home to arrive at this number. If you are going to hold long term, you can use this number capex will eventually catch up to you)

3. 5% vacancy?  In the long run, it's too low.  You have to keep in mind expenses for paying evictions, time when tenant is in house and not paying rent (credit losses), good tenant applicants that can't move in for three more weeks, paying for utilities when house is vacant and making ready, etc.  Even if you think demand is high, you still have these problems from time to time.  You may be fortunate, but I recommend being conservative.

4. The taxes are kind of high - it's over twice what I usually pay for a $950 rental house.  That is a serious cashflow headwind, is it fairly assessed or is the mil rate just very high in this area?

Good luck, I think it's a great idea to post your numbers and get feedback.  If this is a good investment for you will depend on your situation and goals.  At the most basic level, $70,000 for $950 rent is not too bad in my areas but the taxes are much less than you are looking at here.  That also assumes you don't have immediate repairs like new roof you have to do right off, those need to be added to your 'all-in' price.

Hi Lee - it's unlikely to cash flow $500-$550 on most SFR investment deal in KS, MO unless you are not taking mortgages and even then it is not easy to find especially as a Turnkey purchase. If you put the deal numbers in the post we can give opinions about where the variances are.

The duplex is one year old?  To me, that would be extremely attractive assuming it went through the permit/inspection process.  For Sec 8, I am sometimes open to it depending on location and quality of the property.  I target sec 8 tenants that also have full time jobs, and have had good luck with them.

The duplex is one year old?  To me, that would be extremely attractive assuming it went through the permit/inspection process.  For Sec 8, I am sometimes open to it depending on location and quality of the property.  I target sec 8 tenants that also have full time jobs, and have had good luck with them.

@Powell Chee - if you have experience with other rentals and have estimated your own expenses and have a reasonable reserve fund, then I would pull out as much cash as you can and still have positive cash flow.  If that is not the case, you are more than likely underestimating your long term expenses, and I recommend you be more conservative.  If you are using a turnkey provider's estimated cash flow directly, it is VERY LIKELY your actual expenses over the long run will be higher than they have estimated.