Urban Core Properties

I am going to relate a story, you may see yourself in this story or a similarity.  But if you live in say California and are investing in - say - Kansas City Missouri Urban Core Properties, this might be you.

On Wednesday I received a call from suzie seller from out of state, she had a lovely home to sell at 33rd and Askew (not the real address).  She was selling because she "needed the cash" .  Home was worth about $77,000 in todays market, she only wanted $35,000 for it and the home was in excellent condition.

Great, but being a smart investor, I wanted to do a bit of due dilegence on this deal.  (not a good deal at all by the way)

So I went to MLS and looked up this property to see it had been listed as a short sale in MLS and that listing had just expired 4 days ago.  From the photos on mls it appeared to be a 2 story home, that was boarded up, and looks like it had been roughed up a bit and probably needed repair.  And knowing vacant urban core properties, it probably had its plumbing and HVAC ripped out by vandals.

I related this information to the out of state seller.

I received back today that out of state seller had just purchased it 2 weeks ago and she was "told" it was in excellent condition and was rent ready.  She only wanted $28,000 for it today.  She was unaware that anyone had it listed in mls in the past.  Being the good samaritan that I was, I decided to send a copy of the mls listing with the interior photos so she could see what she had purchased 2 weeks ago.

Lo and behold the MLS listing had been relisted at $9,500 by the same listing agent who had it listed a few days ago, same boarded up 2 story home in the photos and the listing now states that the home is  in overall decent condition but that it does need interior and exterior repairs and the HVAC system is missing.

My offer on the house was if I had to buy it, I would pay maybe $1000, but not a house I would want to buy.  The highes price sold with in a 1/4 of a mile was $6,000 on one house and $9,000 on the other - in the past 200 days.   There were active listings for less.

For our out of state buyers, buying in the urban core - before you plop down your hard earned cash on a clunker, get a dis interested third party go look at it and take photos and get you some comparables of houses around the area.  Hire a buyer's agent or just hire someone to do comps and go look at it for you.  Don't buy sight unseen and don't trust the seller or seller's agent - even if it's me.

Even the most honest of seller or agent can miss things.  So for example when I sell a house I try to send photos to my out of state buyers and give them a good list of what needs fixed, I still miss things.

Sorry guys had to vent, I have had about 10 out of state sellers trying to sell me some beautiful $5,000 house in our lovely urban core for $50k, $40k, $30k, $20k and going down.  Our standard offer if we buy it is $5,000 or less and on some, we would need to be paid to take it.  There is someone in Kansas City or some bulk reo seller selling houses for way too much money with really big stories of values. 

The true value right now in our urban core for the most part is in the cash flow in the property.  So for a fully renovated, with all it's working parts, AND a paying seasoned tenant in place, you can expect to pay between $30,000 ($600 month rent), $40,000 ($700 month rent), or $50,000 ($800 month rent) on average.  These values might go up a bit in revival areas where there are a lot of nice, clean, owner occupied homes.

And this is probably going to be fairly standard in other midwestern urban core properties, not just Kansas City Investment Properties.

Kim