Helping Global Investors Successfully Invest in U.S. Residential Real Estate

by Shawn Bandick

 
Hello Everyone. As we come into the home stretch of 2013 I want to share with all of you some interesting things we have learned recently and over the past years. Most of you know we have been focusing on the Kansas City market.
When we really started building our real estate investment business we found several, make or break, points that needed to be gotten over in order to grow; from financing, to property management, relationship building and sustaining, and knowing when inexpensive is too inexpensive and will ultimately affect your exit strategy. We found as we built a successful model to address these areas it became possible to help others get over these hurdles as well.
We all know without access to funds we may not be able to sustain the growth required to stay ahead of and profit from the market. This area requires a lot of work. Once we qualified for access to larger funds we put together our own financing program to help our clients buy their properties using owner financing from us. Now we continue to add more options for larger projects. Offering our clients a 65% loan to value has been hugely successful for those people who have already used their own line of credit etc. It’s simply a tool for our clients to take advantage of today’s market before they become priced out of the market.
There are plenty of moving parts required to provide this service to others. We need inspections in the front end then after we rehab a property we need to pass all city inspections and be up to code. Then we need to go through a lender inspection before we can get the property qualified for financing to our client.
That is just some of the steps we go through to provide this service to our clients. It is not for everyone, and contrary to some opinions it is not and cannot be free money. We have taken out all the junk fees and made it as user friendly as possible. It’s a tool which will allow our clients to hold more assets in a positive cash flow position while they work their plan to find other financing. If you have your own funds your monthly cash flow will be higher, even better!
Property management is a continuous roller coaster. You have all had your interesting experience in this area. Let’s just look at some of the obvious conflicts of interest built in to this relationship. First the property manager is a licensed realtor, second he makes more money with the more things he suggest needs fixing at your house.
Always think about what motivates the man across the table from you. Once you start using these points as a filter you can start to control your expenses and increase your cash flow. As you build your business and have clients who buy properties from you, your clients become your property manager’s contacts too and you could find your property manager positioning himself to sell your client their next properties.
It is very easy for the property manager to make the seller of the home look bad. At the same time it is also easy for the property manager to make everyone happy and take a positive position with you, your investors and their tenants. Here is where you just listen to your property manager and note if he is constantly complaining about the property or neighborhood and using that as an excuse for not having rented the property out. He may have another motive. I think it is better to have two property managers in case one is slow at placing tenants the other one gets your new property.
Always know your prices. How much does it really cost to have maintenance done on your house and what upgrades are really necessary; will they improve the value of your property and most importantly will it increase your rent return? We are all in this for cash flow and we need to know where to draw the line in order to maximize and control the cash flow.
As an example we recently had a bill for over 500 dollars from a property manager for a simple maintenance call which if we had of taken care of having it done the cost would have been just over 200 dollars. If your property manager warranties the tenant placement simply ask if there is any technicality that you need to know about that will void that clause, you will be surprised. So keep your eye on your team members and make sure they know your expectations.
What about inexpensive properties – don’t you love them?
The question is when is inexpensive too inexpensive?
We have lots of homes in KC that are really inexpensive. We all know why they are so inexpensive, the location is the worst and the crime is the highest, so what will happen when the market turns around and prices go up.
Well it will still be the worst area with the highest crime and it will not increase in value like other areas so you miss the equity play. Think exit strategy.
But look at it on paper; it is a cash cow, right?
Well what is the largest expense that is going to kill your cash flow? Tenant turn over and vandalism.
I guess some people enjoy the roll of the dice. We look at it differently, and don’t get me wrong if you like the least expensive  properties – go get them.
We feel it is much better money spent, in the front end, buying in a better neighborhood with established owner occupants. We get better tenants, who stay longer and we don’t have vandalism, and on top of the positive cash flow we enjoy great equity as the market rises. Sometimes buyers want the great area but want us to rehab and sell them the houses cheap. Be careful if you are thinking this way you can find yourself disappointed.
The only thing your contractor can do to sell it cheaper to you is start to cut corners. I have had clients ask us if we can put a less expensive 15 year shingle on the roof… No we cannot. We use 30 year shingles and good quality products throughout, and we warranty our properties for our buyers. Plus as the acquisition team we look for ways to add a bedroom or bathroom and force the equity for our clients. We have a very low risk tolerance and we love to see our clients happy and cash flowing!
Finally, the relationship building part:
This is so interesting if you love people and all the fun you can have working with them. I really enjoy building a team and putting together a sustainable relationship that benefits everyone. Unfortunately I was a little disappointed when talking to several commercial brokers in KC this past week. We are well known around town and we make a point of seeing our contacts as regularly as possible. Lately our broker friends have derogatory comments about Canadian clients.
Global Real Estate Investment Pro Shawn Bandick
First I was disappointed because I know many of those clients and second I too am a Canadian and it gave me a twinge of shame. It is so easy to be respectful of your broker’s time and to be sure not to leave them hanging and looking bad to their counterpart the selling agent. It seems there have been lots of offers around town that have not been completed due to lack of financing.
This is part of the business, everyone understands that, but the way it’s handled is going to reflect on your reputation. The little niceties and courtesies will go so far, you will find yourself being first on the list to receive that great deal you have been looking for.
That’s it for me and I look forward to hearing all your successes in the coming year, let me know if we can help in any way.

Shawn Bandick is originally from Canada, a published author, and a partner owner of InLaw Investments and IN-US1 at InLawInvestments.com