Kansas City Area Real Estate Investment Training
Investing In the Kansas City Real Estate Market
Day One Monday, July 30, 2007
9:00 Arrived at Kelley’s home (agreed upon meeting place). We discussed the week ahead and went over the mentor binder to discuss what he had completed prior to my arrival. As it turns out, he had only sent out 25 letters the prior Friday, and had not contacted any realtors, mortgage brokers, hard money lender or title companies. We immediately got to work working on putting together another 100 letters to NOD off of ForeclosureListingService.com and PreForeclosure.com. We spent a good 2 hours working on this and getting them ready to mail out.
11:00 With the letters now completed, I pulled up the online sites for the Kansas City Investment Group and showed Kelley several listing for realtors, hard money, lenders, and title companies. We spent the next hour making phone calls and setting up appointments for later in the week on Tuesday and Wednesday to help put together his team. We were able to schedule appointments with two of each.
12:00 Mailed NOD letters and went to lunch. Kelly had several questions about some of the different marketing techniques that were in the binder. I answered him the pros and cons of each and we discussed what might work best for him as he was looking more for immediate cash flow and not looking to complete rehabs himself. We decided that it would be good for him to compile a buyers list that he could wholesale properties to once he got them under contract.
1:00 Arrived back at Kelley’s house and found two messages from people in foreclosure that called in response to the letters that he had sent out on Friday. We called both back and I helped prompt Kelley with questions and getting the information that we needed. Kelley was able to set an appointment with one of the phone calls for Tuesday morning and the other later in the week. After we got off the phone with both of the prospects, we discussed numbers and how to proceed. I went through the numbers on the first one (Robert and Garyel) and explained why it would be a short sale (client owed $79,000 and approximate value was around $78,000 with auction being in two weeks). The other client did not know all of her information on the phone and would have it when we met later in the week. Kelley was obviously excited after getting results so quickly.
2:00 Kelley and I walked through finding information online via the county recorders office. In Jackson County (which includes Kansas City and Lee’s Summit), foreclosures take place daily and at both county courthouses (one in KC, and the other in Independence which is 15 minutes north of Lee’s Summit). We called the county clerks office and found out that they published a daily paper that included the foreclosures and the tax sales. In Missouri, tax sales take place once a year, and the upcoming tax sale was scheduled for August 20th in Independence and August 27th in Kansas City. I explained to Kelley why tax sales are such a bargain and that we needed to head to the county courthouse to obtain the publication. We immediately headed out towards Independence.
3:30 Arrived at the courthouse and purchased the foreclosure listing publication named “The Pulse.” One of the ladies at the annex office answered several questions that we had about where the auctions were held and also gave us some insight on some of the counties recording procedures and how to use their website more efficiently. Kelley and I also spent around 30 minutes reviewing the paper at the courthouse and discovered that several of the trustee’s had listed websites and phone numbers to contact them directly. We also visited the county zoning and planning office. Unfortunately, the office was empty. We headed back to Kelley’s home, and I made several phone calls to the trustee’s whom didn’t list a website. Several of them had websites, and others did not. Fortunately, those that didn’t supplied me with direct numbers to the lenders that they serviced. When we arrived at the house, we jumped online and were able to complete lists that were updated weekly on several of the trustee’s homepages. We discussed how Kelley could use these to find deals. Kelley then asked me if we could look at a few properties that he had come across. We left his house to go look at properties in his area.
5:00 We spent several hours driving around Lee’s Summit looking at potential deals. We took the list of foreclosures with us. We knocked on several doors of homeowners who were on the list, but we did not get an answer. We left a yellow letter at the homes. We also uncovered around 15 “ugly houses” where the home was obviously empty and the city had just placed weed liens on the properties. Kelley was excited to find these and was curious on how to track down these clients. I explained that we could use the tax appraisal district to find mailing addresses of home owners or do a skip trace. Kelley brought up a website that called TheUltimates.com that utilized all the normal yellow and white page search engines to find up to date information and maximized your search. I helped Kelley find a few of the owners online, and we spend some time locating the other owners via the website. We also discussed him calling some of the FSBO’s listed in the paper and role played on how those telephones could go.
7:00 Discussed homework for the evening on phone calls and getting some yellow letters out to the ugly house and absentee owners. We also created a couple of Craigslist adds to potentially find wholesalers for his potential deals.
7:30 Broke for the evening.
Day Two Tuesday, July 31, 2007
8:30 I arrived at Kelley’s home. He had received two more calls from his letters and had also received two emails from potential wholesalers as well. I went through the Five Goal Close that we use. We outlined the day and headed out to meet with the potential short sale deal (Robert and Garyel). We arrived at their home (2/1 around 900 square feet). They were in foreclosure and we spent around 20 minutes visiting, and then we used the Five Goal Close. We were able to get them to sign an authorization form and a sales contract and we left them with a list of items that we would need to collect from them to get things started. We left the appointment to head to our interviews.
10:00 We met first with Isaac Perez, Realtor with Keller Williams. Isaac had been an investor for six plus years before becoming a realtor. He was a rehabber and worked a lot within the investment community with foreclosures and short sales. He was willing to work with Kelley on helping to either buy some of his wholesale properties or helping him by partnering with him on the deals. He seemed very knowledgeable, but was more interested in what deals Kelley could find versus helping as an agent. He was also willing to refer us to a title company that worked with investors. He gave us their info and told us to tell them that he was referring us and that they would take care. We thanked him for his time and headed out to meet with Carrie Pflug-Anderson, Realtor with Reece & Nichols. As it turned out, the title company that Isaac recommended, Accurate Title, was nearby, so we dropped in to speak quickly with Tina Wagner, closing agent. Tina was extremely busy with it being near the end of the month, but took a few minutes to visit with us. When we mentioned Isaac, she immediately perked up and volunteered HUD-1’s and Preliminary Title reports at no cost. She also stated that she was willing to help Kelley with anything that she could do to help him along. We thanked her for her time and headed out to meet Carrie.
11:30 We met Carrie at her office and spent some time finding out what market she was working in. She was familiar with working with some investors to find products, but wasn’t that knowledgeable with short sales. She interested in helping and seemed like a good fit for Kelley. She mentioned that another realtor had approached her with a problem property and would call us later on to discuss showing it. We thanked her for her time and left.
1:30 We arrived back at Kelley’s home and called the lender on Robert and Garyl’s loan. We were able to get a hold of First Franklin’s loss mitigation department and speak to someone who gave us a complete list of what they required. They also emailed Kelley a workout package so that we could get that filled out by Robert and Garyl. We got off the phone and I explained what exactly went into a complete short sale package. I pulled out the short sale package that Carrie Moore had put together for us and explained every item. We immediately sent an email to Tina Wagner at Accurate Title to request a PR and Hud-1. Kelley didn’t have a fax machine at his house and our 3:00 appointment with Cindy Seely, Loan Officer, was creeping up, so we headed out to meet her.
2:30 We stopped by my hotel on the way to meet Cindy Seely, and had them fax the authorization form to First Franklin.
3:00 We met Cindy at the nearby Starbucks and had a great meeting with her. She was working almost exclusively with investors and had been a loan officer for over 13 years. She was familiar with several banks in the area that lent out on rehab loan at after repair value at very competitive rates. She was also the vice-president with the Kansas City Investment Group, so we spent a few minutes discussing some of the groups strengths and weaknesses. We also discussed some of the upcoming meetings that the group was having and she promised to add Kelley to the groups list and save him a seat for the next meeting the following week. Cindy also went through several programs that she had available via several local hard money lenders and that she also had a list of wholesalers who were looking for properties locally. We thanked Cindy for her time and left the meeting with a very good feeling about Kelley possibly working with her in the long run on properties. Kelley also mentioned to me that he needed to refinance his home out of ARM and into something more permanent. I suggested that we take a look at his stuff when we arrived back at his home.
4:30 We arrived back at his home, and called First Franklin to make sure that they received the fax. They did and stated that they had a 24 hour turn time to update their systems to allow us access to Robert and Garyl’s file. We spent the rest of the day roll playing with the Five Goal Close, and phone calls on his yellow letters, and helping him to determine what was a deal and how to double check his numbers. Kelley brought up that he had a friend who had been trying to sell her home for over eight months. We spend some time discussing some ways that he could help her out and I discussed the merits of her offering owner financing and how we could structure the deal and find a potential buyer. We tried to get her on the phone, but Megan was busy and didn’t have time to talk as she was in Disneyland.
7:30 Broke for the day. We discussed him calling more FSBO’s and calling some of the NOD homeowners.
Day Three Wednesday, August 1, 2007
9:00 I arrived at Kelley’s home and we reviewed his progress from the night before. Kelley hadn’t made any phone calls so we discussed why that was important. We called First Franklin, and were able to get in contact with the agent handling the guy’s foreclosure. The agent listed exactly what we would need and we got off the phone with her and called Robert and Garyl to see where they were on the process of getting us their tax returns, bank statements and everything else. They stated that they should have everything by the end of the day. We left Kelley’s house and headed out to meet with Jeff Williams, hard money lender with Fortress Lending, LLC
11:00 We met with Jeff Williams in Kansas City. He discussed their programs and what they needed to approve a loan. He was the primary underwriter on the loans and he gave us some ideas on what they would approve and what they wouldn’t. He volunteered up his list of investors as potential leads for Kelley to sell his deals to and volunteered up a property repair and inspection report that he used to determine for costs for repairs. Jeff also stated that they looked to close in seven day and that they had closed close to 130 loans year to date. We had a great visit with him and thanked him for his time. We spent the next 30-45 minutes driving around downtown Kansas City looking and finding around 20 houses that needed repairs in areas where there was some obvious regentrification taking place. We also came across a couple of investors who were rehabbing homes. We discussed the market with them and headed to lunch.
1:30 We met with Marked Edmondson with Bridge Financial and H & E Group. Mark had been a hard money lender for several years and we spent a good 20-30 minutes discussing some of the different loans that they offered and what he looked for in a loan. He explained that he offered a six month line of credit for a $5,000 fee every six months. He would initially start the line out at $100,000, but would increase that as they developed a relationship with the borrower. Mark also offered up his list of investors to Kelley to help him wholesale his properties. He also gave Kelley a property inspection and repair sheet that was very similar to what Fortress Lending offered. Mark stated that he was also the primary underwriter and that they could closing in 2-3 days depending on the deal. Mark gave us a loan package and we thanked him for his time.
2:30 We spent some more time driving around the downtown area and found around another 20 potential properties for Kelley to mail yellow letters to.
3:30 Arrived back at Kelley’s house and spent the next couple of hours working on finding names and addresses of owners on the ugly houses in Kansas City that we had found that day. We also emailed Tina Wagner to check the status of the PR and HUD-1. Kelley also asked me about database companies. I pulled up MelissaData.com, which is a database company that is a tool to find area foreclosures, absentee owners, and other useful information lists that he could use. We found out that Lee’s Summit had 1700 out of state owners, and that Kansas City had 17,000 absentee owners. Kelley brought up that he thought that he might be able to sell this list for above what he could pay for it. I stated that he could, but that he would only would want to sell part of a list to other investors and for not much beyond what he was paying for each name. Since each name would cost .15, he brought up that he could probably sell the list for .16-.20. I stated that he probably could, but to be careful and check the accuracy of the list before trying to sell it.
6:00-8:00 We headed out to dinner at Longhorn Steakhouse.
Day Four Thursday, August 2, 2007
9:00 I arrived at Kelley’s home. We then headed up to Independence to attend the daily foreclosure auction. Kelley also stated that Carrie Anderson had called to tell him that she had two properties for us to look at later in the day. We asked her to have some comps available for us to review them. We headed out to the foreclosure auction.
10:00 Arrived at courthouse. We found out that the first trustee had delayed the morning auction, so we spent the next hour looking at properties in the downtown area. We identified several properties that were nearby that could easily be rezoned into commercial properties along with several tri and fourplexes. We arrived back at the courthouse steps and caught the 11:00 trustee auctioning off three properties. There were only three investors present. We spoke briefly with the trustee and found out that the majority of the auctions took place at the Kansas City courthouse location.
12:30 We decided to head out back to Lee’s Summit. We did stop by and look at one address that Carrie had given us. We weren’t able to get inside, but we were able to walk around the property. We discussed repairs, costs, time frame, and other elements of the property. We found a house across the street that was newly rehabbed, and called the listing agent which turned out to be the owner selling the property. We quizzed her for a few minutes on the property that she was selling and how she came to her value. She gave us an idea of what properties were selling for in the area ($70-80K). We drove around some of the surround blocks and then headed back to Lee’s Summit.
1:30 Robert and Garyl called us to inform us that they had collected all of the documents that we requested. We swung by their house and visited with them for a few minutes and we outlined what the procedure was with them for negotiating a short sale. They had spoken to a bankruptcy attorney who had informed them that they would need to move out of their property the day before the auction. We informed them that that was not correct at all and that if they did file bankruptcy that it would by them a couple of months as well, along with us buying them some time while we negotiated the short sale. We headed out from their home and dropped by Kinko’s to copy all of their documents and to put together a complete package. When we got back to Kelley’s, we emailed Tina with Accurate title to get a copy of the HUD-1. She apologized for not getting it back to us sooner, and emailed it over to us. I went through the HUD with Kelley and explained what and why it needed to show what it did. I explained to him that he would need to always supply this and to not and confuse the sellers. Kelley asked me to outline the complete process. I sat down and went with him through Carrie Moore’s complete short sale package again and wrote up a loose action step and procedure for him to follow. Kelley was a bit nervous as he is still working full-time and he didn’t think that he would have a lot of time to focus on the follow up. I explained that he might want to focus on equity deals, but that as the year progressed lenders would be looking to remove unperforming assets from their books. I explained why this was, and Kelly thought that he could squeeze some time into his Friday’s that he worked from home to market and follow up.
4:00 We headed out to meet Carrie Anderson to look at two properties. The first one was a 3/1 REO property that was on a ½ acre lot. The house needed a new roof, sheetrock throughout, a new bathroom, a new kitchen, and some TLC. Carrie informed us that the property had been on the market for over a year and a half and that the REO agent had it listed at $52,000. She told us that she told the agent that she was crazy and told Kelley that if he made an offer at around $20K, that the bank would probably accept it. While the house needed some serious work, I thought that even with the repairs, the house was in a nice area and was the ugly house on a nice block. Carrie asked us a bunch of questions as to what we thought and we were honest with her and told her that as Kelley was new, we would probably look to assign it to an investor or wholesale. She thought that was a great strategy and she was glad to see that Kelley wasn’t looking to get in over his head on his first few deals.
5:00 We met the owner of the second property (which we had reviewed earlier in the day) and he let us in. This house had not been lived in it for over two years and it showed it. The inside of the house was worse than the outside and the basement was in horrible shape with the floor falling in and black mold all around. Kelley and I both came to the conclusion that it wasn’t something that fit his immediate profile. We talked with Carrie about it and she also agreed that the home was more of a teardown than anything else.
6:00 Kelley wanted to drive around the area some and look at some other properties. We found several others, along with one home that looked like it had been rehabbed, but the doors and windows were covered with plywood. We called the number posted on the handmade sign and visited with the owner. Kelley was able to get the owner to give us a number as to what he would let it go for. Kelley really did a great job on the phone negotiating, and scheduled to have the seller meet him on Friday. Kelley also received two phone calls from others in foreclosure. He got their information and would call them back once he got back to the house.
7:00 We arrived back at Kelley’s house. We went back through the binder and covered everything again quickly. I created a simple marketing and action plan for him to follow on a weekly basis, with specific action items. Kelley stated that he was nervous with things coming in and me leaving, but he felt pretty confident on the phone and with some of the people that we had met this week. We wrapped up the week with him calling the two leads and helping him plan their meetings.
8:30 Headed back to the hotel.
Lee’s Summit, MO
Lee’s Summit is located about twelve miles south east of Kansas City, Missouri. There are a lot of homes for sale in the market ranging from a price range of $75,000 to $160,000. It is definitely a buyer’s market as homes are averaging 90-180 days on the market. There are also a ton of foreclosures and ugly houses available to investors. Homes are quite a bit older than other parts of the country, increasing repair and upgrade costs. There are areas of Kansas City, Lee’s Summit, Independence, and Overland Park that have attracted outside investors to buy delapitated homes, rehab them and sell them below full market values. The county that holds Kansas City (JacksonCounty) is a non-judicial county has daily foreclosure auctions. There are many small, local lenders who are experiencing high foreclosures due to the mortgage industry and the perils of the sub-prime market. JacksonCounty also holds its tax foreclosures only once a year at both courthouses (Independence and Kansas City) the last week of August annually. Foreclosures are published by each county daily.
The Kansas City area is composed of a 52 mile radius and does have quite a bit of commercial growth taking place. The county and city governments of Kansas City have been combined into one municipality government which according to some investors, has made some areas of investment easier, but others such as larger developments that much more difficult. Large companies such as Sprint, Fidelity Investments, and Raymond James Financial call the area home, which leads to a highly diverse workforce. There is quite a bit of older homes that need repair in the area and when you combine it with the number of foreclosures, there are a number of bargains to be found with conservative numbers. I spoke with several hard money lenders who are seeing an increase in investors from outside of the area buying and selling properties taking advantage of the depressed market. There does not seem to be that many home owners or investors offering owner financing or lease options in the area, which would be a prime exit strategy that I would employ in this market. The number of small lenders also makes it a prime target to snag or buy pools of defaulted paper and using the paper to control a large number of properties. The area does boast six real estate investment groups with memberships ranging from 60 to 200 and a relatively inexpensive membership dues from $20-$60 annually. There are deals and support to merit investing in this market.
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