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Pros & Cons of Working with a Kansas City Real Estate Cash Investor

Pros & Cons of Working with a Kansas City Real Estate Cash Investor

Live from the KC Property Guys and KC Pier Studio in beautiful Kansas City. Over 200 fountains and more barbecue restaurants per capita than anywhere in the nation. It’s the Kansas City Real Estate Industry Leaders Show. A show about industry leaders from the local Kansas City Metro Market for Kansas City real estate related professionals and enthusiasts like you. And now here’s your host, Eric and Lucas Scheele.

Lucas Scheele:
How’s it going everybody? And welcome back to the Kansas City real estate industry leaders podcast. My name is Lucas Scheele and I’m here with my co-host Eric Scheele. How are you doing today?

Eric Scheele:
Good, how are you?

Lucas Scheele:
I’m doing all right. It’s just a little bit too cold out for me so-

Eric Scheele:
Yeah? That’s okay. We were outside, I guess you said it was 30 degrees earlier.

Lucas Scheele:
Yeah it was 30

Eric Scheele:
Yeah, we were out in Bonner Springs taking a look at a house, trying to help the KCPG Realty Group move a house for a distressed owner.

Lucas Scheele:
Help her relocate. A new start.

Eric Scheele:
Hopefully we will bring that one to terms. Where else you’ve been this week?

Lucas Scheele:
Also been out to Overland Park doing a huge, huge foundation job, one of our biggest yet.

Eric Scheele:
Oh yeah, on the pier side. So there’s little braces, there’s internal drains, there’s white walling, there’s some pumps.

Lucas Scheele:
Yeah. There’s beams as well. It was basically everything except a wall push back on that job.

Eric Scheele:
And we see the final product on?

Lucas Scheele:
We actually see the final product tomorrow. Hopefully, we’re going to get to film, but hopefully in about a week, half a week, you guys will be able to see that whole video with Brian Dufour, our director of operations for KC Pier, which is pretty cool.

Eric Scheele:
Oh nice. Yeah, absolutely.

Lucas Scheele:
Yeah. So what are we talking about today?

Eric Scheele:
Well, I think we’re going to dive in. What is this? This is our maybe third or fourth podcast.

Lucas Scheele:
Episode three.

Eric Scheele:
Episode three.

Lucas Scheele:
Yes sir.

Eric Scheele:
Okay. Officially, we actually have our first couple subscribers on YouTube. That’s a big celebration, there we go, we’re off.

Lucas Scheele:
Yes sir.

Eric Scheele:
First one to one and now next one is a million we are talking about. I don’t think it’ll happen, but anyway, we do this for our labor of love. It’s not necessarily for subscribers, but it’s always interesting to hear some comments from people that we’ve already had some participation. And that’s, that’s interesting because we love what we’re doing and we help other people love the real estate world as well.

This is the Kansas City real estate industry leaders. We’re going to have … and we’re using this exchange between you and I, this is important. I want to talk about this because it is early. We’re using this exchange between you and I to get our format down of podcasting and also getting our flow and getting our syndication set up, which we’re actually in production right now. We don’t really have a podcast that’s syndicated as of yet but of course, once you hear this as a listener, we will have been syndicated. But we’re three or four episodes into this and we’re still waiting for our syndication to actually come through production.

Eric Scheele:
My point is, we’re working out our bugs and we’re talking about what we do, which we’re going to continue to do in different chapters in terms of the real estate world, but I really look forward to bringing in real estate industry leaders from the Kansas city area, which we’re starting I think within the next couple of weeks, correct?

Lucas Scheele:
Yes, we are actually, which is going to be really cool. We’re going to bring in actually some of our realtors in from the KCPG Realty side, as well as a whole bunch of other foundation people. We’re going to bring in Brian Dufour, as well as Eric Lancaster, a few others, so it should be really exciting.

Eric Scheele:
Yeah, absolutely. And then we’ll be talking to brokers and some property managers and just all likes, all makes, walks of life related to real estate are coming into our studio here in Kansas city, Kansas and we’re going to talk shop with them.

Lucas Scheele:
Yeah, absolutely.

Eric Scheele:
And it’s great talking between you and I, but it’s going to be more fun to spice it up a little bit and get some new blood in here and let’s talk about what they do versus what we do. Right?

Pros & Cons of Working with a Kansas City Real Estate Cash Investor

Lucas Scheele:
Yeah, for sure. But for this episode, I believe we are going to be talking about the pros & cons of selling a home to a cash investor. So when it comes to buying homes or just for you people, reaching out to you as a cash investor, would you say that it is trending right now? Is this trending to go reach out to a cash investor to get rid of your home?

Eric Scheele:
Yeah, we’re five years into this, and if I compare, five years isn’t a real long time, but it’s long enough to definitely see trends and understand. We understand our business and we got our flow and we’re evolving with some of the market changes and things that we see within the industry itself. But yeah, absolutely. If you look at where we started five years ago and the type of house that we saw and still see today, it was mainly spinning off of one of the pioneers in the real estate cash investor market, which is we buy ugly houses.

Lucas Scheele:
Yeah, the first one.

Eric Scheele:
And so that being said, five years ago, when you would hear from a person, most likely they were probably selling in their mind an ugly house, or it was a house that was in a lot of disrepair and needed a lot of attention. And so if you fast forward to today, we still see those homes and we still get a lot of calls from people in distress situations or have houses that just have a lot of repair and deferred maintenance that need a lot of attention, a lot of downsizers, a lot of retirees. We get phone calls from people that have moved out of state and now had a renter in there and then don’t want to do the property management thing from 500 miles away. You get those calls with those distressed properties but we also see some pretty nice property.

Eric Scheele:
So absolutely, it’s trending. I’ve had a call personally this summer on a $2.2 million house out in South Overland Park and we worked with $1 million dollar property in a state out in Harrisonville and we on the KCPG Realty Group have a $600,000 property right now, a $500,000 property, two $400,000 properties. And so things definitely are becoming, I guess more acceptable as a cash selling as an exit strategy for a home, as a seller to at least consider a real estate cash investor over the traditional real estate MLS, sell it through a realtor or work through the showings, and the closings, and the negotiation, and the inspections and everything else that goes with that, right? So yeah, I think it’s trending. I think it’s going to continue to trend because people like immediacy, they want their answer and they want it now.

Eric Scheele:
This is a … today’s world is-

Lucas Scheele:
Fast-paced.

Eric Scheele:
… very fast-paced, and they would like some resolutions. And that’s the thing about selling to a real estate cash investor is, you can literally sell a house in a matter of minutes and within a few days or a few weeks, you can have that house sold, moved and be done with it. And you can’t necessarily see that through the traditional MLS. And so all those factors I think are definitely contributing to trending and becoming more acceptable to the general public as selling to a cash investor, real estate investor as an option.

Lucas Scheele:
Yeah, for sure. Always the real estate market is just growing and growing nowadays, but when it comes to the cash investor, what are some advantages of that? I know that you guys can’t say property guys we offer creative real estate options. What are some advantages to selling to a cash investor?

Pros & Cons: “Easy Button” is an Advantage

Eric Scheele:
So we’ve touched upon it a little bit. It’s done. We talk about this all time. Let’s set the easy button out there, right? That was easy. And it can be the easy button of real estate. And sometimes I tell people that on the phone, I say, “Don’t call me over unless you’re serious about selling because you are going to have an opportunity to literally sell house in 10 minutes and come to an agreement and plan for a closing as soon as a couple of weeks away, or if you want to sit, close it two months from now, it doesn’t matter to me when you want to close it but if you really want a fast pace, a close, you can.” And so I think that’s probably the biggest advantage is that it offers is time.

Eric Scheele:
You save a ton of time by going through a real estate cash investor. You don’t have to worry about all the deferred maintenance. You don’t have to pick up the house. A lot of times you can just pack up and leave. Well, there’s been more than a few houses in the past where we’ve worked with the owner and ultimately just said … most of these tend to be cases where the owner is actually an heir to an estate. So they’ve adopted the house of their parents or grandparents and the house is full of 30, 40 years worth of inherited stuff that they don’t have a room for. They’ve already picked through their valuables and so they can just simply walk away from that house. You can’t do that in the traditional real estate world.

Lucas Scheele:
Not at all.

Eric Scheele:
No. You’re going to have to clean that out. You’re going to have to find places for it. You’re going to have to bring in the haul off junk guys or you’re going to have to do something with it, get a storage unit, something. And so I think the biggest advantage to work with cash investor is that there is that time savings and just what some people perceive as the headache of it all. No inspections. Inspections are done the day that you come to an agreement, there’s no re-inspection. There is no closing that actually is pushed out 30 to 45 days because of underwriting and conventional closed models. If you’re working with truly a cash investor that is going to come with cash on the day that you close, it becomes a very easy and simple solution, which is highly attractive to some sellers and becoming a more and more popular option for people.

Lucas Scheele:
Yeah, it’s always great to have options, multiple options, especially when it comes to the real estate side of things. But those are just some advantages. What would be some potential pitfalls of selling to a cash home investor?

Pros & Cons: If You Don’t Need to Sell Fast, Financially Can Do Better Otherwise

Eric Scheele:
So you can flip that. You can say, “Well, the time is good.” But if you don’t necessarily … if you’re not necessarily worried about selling very quickly, then you can probably do a lot better financially by not going through a cash investor. The traditional real estate option by selling to an owner occupant is always going to bring more cash to the table in most all scenarios for a home seller. But the convenient side is there for the cash option, but it does come at a cost. And so there’s always that cash versus time constraint and consideration that homeowners have to make.

Eric Scheele:
Okay. If you’re going to sell fast and easy, it is going to come at a cost because now you’re not paying the realtor the 6% fees. Now, the cash investor ultimately is going to have to pay that realtor when he ultimately sells it. You’re not going to fix it up. Like we said before, you don’t even have to take the stuff out for a lot of these guys. So the easy button is great, but it does come at an equity compromise. And so probably one of the biggest pitfalls you have as a seller is to work through that time versus cash constraint. And so sometimes, at least for us on our side of KC Property Guys is sometimes you throw out that cash number because we’re the one rehabbing the property, from the inside of the house and the exterior as well as the landscape and property features, such as outdoor living spaces, deck and patios –  I said before.

Eric Scheele:
We’re the ones paying the realtor. So there is that number and sometimes that comes with sticker shock. You give them the cash number and they’re like, “Oh my gosh, I didn’t expect that.” And so we try to help them walk through the numbers and make them see why the number is the number and we just happen to have a team of realtors on our side. So we can actually talk to them about a real estate play and compare the options. And we have … if you go to our website, it always says, “Creative real estate solutionists” and that’s come from experience of work with so many people in different life scenarios that there’s probably a hybrid solutions also between the cash option and the realtor option, that can be considered a creative solution that’ll bring more cash to the table than just the cash option may be less than the realtor option, or maybe we actually … sometimes we actually help homeowners fix up their house pre-list packages and bring more equity. Spend $1 to make two scenarios and bring more equity to the table for them through creative real estate.

Eric Scheele:
And so those types of options which are out of the box options always exist as well to avoid or compromise some of those pitfalls, which typically is the cash number. The other piece to that I guess is, when you’re dealing with cash investment, cash buyer or a cash investor for real estate, that’s a broad term. We probably should talk about that as a home seller because sometimes this is seller beware, the cash investment world can be wrapped up in a lot of different ways and most people think it’s a cash buy and that’s the traditional way and that’s the way we do it as well, but there’s those programs out where you can sell houses with other people’s cash, a whole sale in play or an assignment play.

Eric Scheele:
And there’s different models out there that some investors use that aren’t nearly as reliable as a true cash investor who’s going to come to the table, close with cash you can count. It’s done. Truly is that easy button. And so as a seller, you got to be aware of some of those and educate yourself, read fine print take a look at contracts. Use Google as your rep source-

Lucas Scheele:
Little map.

Eric Scheele:
Oh absolutely. And read reviews and make sure people are reputable. Are they on the BBB? And those types of things also just to make sure, and that’s true with any industry or any service-related industry. If you’ve got an HVAC guy in or a Kansas City electrician, you’re going to want to check his reviews all the same and make sure he’s all validated. But it’s the same thing in the cash investment world too. Do your homework, make sure you know who you’re dealing with to avoid those pitfalls or surprises because I think we’ve talked about this before, there are definitely cases in the past where I’ve worked with a home and I’ve given my solutions, but they end up going in a different direction and it’s one of those alternative programs where the fine print maybe not was exposed, or maybe they just attempted to go through an alternative other than a traditional cash investment and then came closing and the phone rings and there was a backout.

Eric Scheele:
And so the next day I get a phone call saying, “Hey Eric, can you come back out? Let’s take a look and re-speak about what we spoke about three, four weeks ago.” That job we’re doing in Pleasant Hill same thing literally. We were under contract initially as a cash buy, a very nice home on three acres out in Pleasant Hill, deal, the next day I get a call and she said, “I got this other traditional buyer that it represents a lot more money.” I said, “Okay, that’s fine, no problem. Take it, run with it.” And so she left with my blessing and because we were under contract at the time, so we canceled that and let her chase that but unfortunately, 45 days later I got the phone call and she had already moved to the Ozarks.

Eric Scheele:
And so 24 hours before the close date, things just fell through. And so we went back to our original contract, finally got closed on. Now we’re actually out there working on it now. So those things are real. And if it’s happened once, it’s happened a dozen times for us in the past and-

Lucas Scheele:
And it will happen again.

Eric Scheele:
… and it’ll happen again. So seller beware, seller just make sure you’re educated and really do your homework.

Lucas Scheele:
Do your homework. A lot of research.

Eric Scheele:
And read the fine print in those contracts and you should be able to make a good choice because there’s definitely some really reputable cash buyers out there.

Lucas Scheele:
That’s some great advice.

Eric Scheele:
Yeah. Well, that’s what we’re here for, right? Pros and cons.

Lucas Scheele:
Yes. Yep, yep, yep.

Speaker 1:
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Lucas Scheele:
So like you were saying earlier, you do think that the market is trending right now and that it is just going to go up, keep building and building, so what would you say the local market and Kansas city right now is?

Eric Scheele:
Yeah. So what’s the status?

Lucas Scheele:
Or what’s it trending at right now? How is it?

Eric Scheele:
Well, we’re in December, right? So traditional real estate and even the investment real estate slows down, right? And we work in some channels on KC Property Guys that don’t slow down. And so we stay busy, but traditional real estate and the cash buy phone calls have definitely slowed down. We normally get five to maybe 10 on a real busy week, phone calls for a cash buy and now we’re getting anywhere from two, maybe four calls. So it is trending down, but it is December.

Lucas Scheele:
Yeah, it’s slow. It’s around the holidays. No one wants to get out on the holidays.

Eric Scheele:
You’re still munching on turkey, and you’re still … now you’ve got aunt Edna and uncle Bob coming in town. No one’s going to sell a house during that time. So-

Lucas Scheele:
It’s tough. It’s tough.

Eric Scheele:
The people that are selling house, they have to sell house. And then I was just working with a couple just last night out in the lease summit and it’s an estate home, well, the parents are still living, they moved in with the son. Son redid his whole basement for his parents. It’s a fantastic story. And the father who was there, he was present, was selling this house and he was really concerned about selling it prior to his next mortgage payment. He’s never been late in 18 years. He didn’t want to be late, but he also is on social security now. His wife is under some health conditions and he’s one that really wanted to make sure-

Lucas Scheele:
Everything would be in check.

Eric Scheele:
And closed by the end of December. And so we’re going to be looking at fast tracking that particular one, but that’s an example of seasonal changes in the market. And it’s definitely a slower time to people that have to sell. And the people that are looking to buy, by the way, are serious about buying too. There’s not a lot of tire kickers that are getting out when it’s 30 degrees in the morning. Those people are really looking to buy. They need to buy. They’re moving in town or something to that effect. So it’s slower, but it’s still trendy. It’s still an okay time but it’s just a slower time. If you’re a real estate investor looking to get into the field, it might be a little tougher to get into the field right now. The spring time-

Lucas Scheele:
Not much skin in game right now.

Eric Scheele:
Well, and everybody else is also looking for houses. If you’re not doing a large volume, you get a lot of mid-sized investors that are looking for houses. And so it’s a really aggressive market too, which can be a really good time to sell from a seller’s perspective. Keep that in mind. Supply and demand, right? You can use that as your leverage and just make sure you do your homework on who you’re working with before you … some numbers, and I tell this to homeowners too, some numbers are too good to be true and they really are. Here’s my number, here’s the other reputable guy’s number, here’s the C company, who’s also a reputable number. And then all of a sudden you get this number that’s just like, “Whoa, wait, that’s way out of everybody else’s range.” So you get the experience numbers that are all in the same area-

Lucas Scheele:
That can explain it through of why it is that number. Yeah.

Eric Scheele:
Yeah and then you have this other one that’s just a little too good to be true-

Lucas Scheele:
But fishy.

Eric Scheele:
Better be careful with those because a lot of times they are … do your homework. Some of those guys make mistakes too and let them make the mistakes. Like we talk about, you lose or gain your business on the day that you buy a property. So if someone makes a mistake, you can let him make him say, but at the same time, most of the time it’s not a good thing. There’s something there that you really need to look into a little bit further if you’re going to consider that out of the realm type of normal offer on a home.

Lucas Scheele:
Yeah, absolutely. So when it comes to the homeowners selling their house like you were talking about, what is one way that they could assess the own value of their house to try to figure out what kind of market they’re in, how much it is so they can tell when somebody’s going to be not upfront about it?

Make Sure You Can Trust Your Realtor

Eric Scheele:
Sure, absolutely. Talk to a realtor, that’s an easy way. Realtor always assess it, but they’re also going to want … they’re going to give you the hard sell to sell that house. And sometimes realtors … this is, I say this and I work with a realtor group, at least we have a real estate group as part of working with KC Property Guys properties, but we do see at times that realtors will tell homeowners what they want to hear, maybe not what they necessarily need to hear in terms of valuation. Well, you’ve got a $150,000 house when it’s compared to comparable data, but the realtor may go out there and say, “I can sell it for 175.” Because they’re trying to get the business. They’re competing with 10,000 other realtors in the Kansas city market.

Eric Scheele:
Some of that gamesmanship goes on in the real estate world as well. So be careful. Find a realtor that you can trust I guess and that will create comps that you can trust, comparable other homes that have sold in your neighborhood that you can trust. And if you want to do self-service, then realtor.com, trulia.com, zillow.com and you can do those. There is a pitfall against using some of those sources because a lot of them will just geo locate a half mile circle around your house. And if 10 homes sold in the last six months, you add up those 10 homes value, you divide by 10 and it spits out an average without necessarily consideration a condition or square footage, some of those tweak and fine tuned square footages, but you can really see some misappropriated values on some of those wholesale websites and end-user real estate websites too.

Eric Scheele:
So do your homework, compare it, when you’re going to hear the number from the cash real estate investor, it will be different because keep in mind, they’re paying the realtors, you’re not. And they got to fix this house up to ultimately sell in the market and you don’t.

Lucas Scheele:
To get full potential out of the house.

Eric Scheele:
Absolutely. That’s the investment side of that business. And the reason you’ve called that cash investor most likely in the first place, is because you don’t want to do that stuff. So there has to be a cost of not wanting to do that stuff. So just be realistic about it and have an open mind and call a couple of reputable real estate investors, and just listen to what they have to say, and do your homework on who they are, compare it to what you’re seeing on Zillow and Trulia, and maybe even comps run by a realtor and come up with your options. That’s the whole thing about selling a house, which is really popular, especially coming into spring time, which will be here before you know. You do have options as a seller. And so it’s something that if you really want to take your time and take a look at the options and find what fits best for your life scenario at that time.

Lucas Scheele:
Okay. Awesome. Well, thank you so much for all of your advice you’ve given us today and I hope you guys have enjoyed this video and learned a little bit of something here on episode three. But that’s been our advantages and disadvantages of selling to a home cash investor. And we’ll see you guys on the next episode. So you guys take care.

Eric Scheele:
All right.

If you guys are trying to get into contact with them for some creative real estate options, feel free to reach out to them on kcpropertyguys.com or just give them a call at (913) 730-0086 and we’ll see you guys on the next episode. Have a great day.

Thanks for joining us this week on the Kansas City Real Estate Leaders Podcast. Please support all things local to Kansas City and hey, be sure to subscribe and share our podcast on Facebook and LinkedIn. This has been a KC Property Guys production. kcpropertyguys.com.

Check out the rest of our Kansas City Real Estate Leaders Podcast episodes here. If you’d like to sell your house get in touch with us here!