April, 2023

This feels like 2010 to me. No one knows if we’re out of the woods, if economic signs are going to be pointing up, but the bad news with inflation and interest rates has been out for over a year. We just had bank failures and we might have more, and many are predicting a recession in H2 2023 or H1 2024.

Another bank failure will not be welcome news and could set off alarm bells in world markets and a stock market retraction, but the Fed is resolved to contain it. They’ll pump liquidity into failing banks and force mergers but they won’t let the problem get out of hand.

An expected recession will likely be a non-news event. We’ll just hear about it after the fact.

And along the way interest rates will stabilize and buyer demand will return.

Just like in 2010, when I purchased my first multifamily property. I was eager to invest in real estate prior to the 2008 recession. Fortunately not blindly eager enough to pull the trigger before the bottom fell out. I held out. No one knew in 2010 that the worst was behind us, but it had been down for awhile, markets had stabilized, and banks were lending. Banks had also taken a lot of properties back as REO and foreclosures, many more than they have today, so deals were all around.

There’s a good chance I’m wrong, but if so, what more will happen? Higher interest rates, higher unemployment? You don’t have to call the bottom because you’re going to hold for a long time, several years. You just need to be certain that you’re close to it, because when it is clear to everyone that the bottom is behind us, buyer demand will surge and your window of opportunity will close.

Podcast Alert!

Two recent podcasts just went live!

I had the good fortune to join Jason Wright on the Real Estate Investor Marketing Stories podcast. Jason was born without an “off switch”, he’s driving results 24/7, focusing his business on ActiveCampaign, sales funnels and all things marketing automation.
Check it out! Click here to listen.

I also joined had the good fortune to join Taylor Loht on the Passive Wealth Strategy podcast. Taylor helps people escape the Wall Street Casino and learn to invest in real estate without the headaches. He’s been directly involved in the acquisition and management of over $150M in real estate.
Check it out! Click here to listen.

Overland Park, KS – Even though it’s a suburb of Kansas City, Overland Park is still the second largest city in Kansas, at 197,000. And growing, 31% population growth in the last 20 years which is pretty astounding. Kansas City in comparison grew 5%. Overland Park’s success has spread to nearby communities too, including Olathe, population 143,000 and 20 year growth rate of 53%, Shawnee where I have apartments, and several other communities.

Growth leads to new retail, office, roads, and companies moving to the area. It becomes self-perpetuating, as the word is out this is a nice area to live and welcomes the growth.

Jobs growth in the major Kansas City Missouri and Kansas metro is strong, averaging about 3.5% over the last 18 months, but that only tells the story of a much larger area. The big jobs event in the OP area is a Panasonic plant being built in De Soto, about 10 miles away. It is expected to add 25,000 jobs to the region. Yes 25,000. It is still just a projection but any number close to that will be transformational for this region. They are building it here because there is land available and because they won’t have any trouble attracting people to move to this area. It’s new, modern, comfortable, low crime, inexpensive, and safe.

Expect more companies to move here because of that. They will be suppliers and companies in related industries hoping to poach good employees from Panasonic.

The employment story in Overland Park is really a story of the greater Kansas City area itself. People get jobs at one place, then many decide to live somewhere else. What I found very interesting is that there are over 58 companies in the area with more than 500 employees. That’s a huge number, and captures the diverse employment base of the area.

Other factors in Overland Park’s favor: a 47% increase in household income in the last 20 years to $91,000 today, a poverty rate of 3.8%, and a 91% increase in house values in 20 years to $306,000. That’s still an affordable house compared to most major metro areas across the U.S.

The attractiveness of one area like Overland Park lifts nearby communities too. If you’re looking in places like Grandview and Raytown which have not been as prosperous and had nominal growth rates, look again. Paths of progress lead in surprising directions and yesterday’s war zone becomes tomorrow’s renaissance.

Finding Your Superpower
I swaggered into the world of real estate in 2010 thinking I was the most experienced beginner ever. I had tech skills, sales experience, and connections.

How long do you think that confidence lasted? About a month.

My first property closed and I drove to it to introduce myself. My “fully” occupied triplex had one completely empty unit and one with a tenant who wanted to sue the owner. My trial by fire was to talk him down, figure out how to find tenants, write a lease, and do full unit turns – by myself.

Unexpected setbacks are the best learning opportunities, but if you survive them you have skills you didn’t have before.

The most common conversations I have are how to get started in real estate investing. The main point of the question is, I don’t have thousands of dollars to be able to go out and buy a property but I still want to get started. The fact that they’re asking the question, though, is a hugely positive step. Most people don’t even get past the part about not having enough money to invest.

If you’re asking the question, you can find an answer, an answer that depends on you, your skills, and your goals. It starts with what are you good at, and what do you like doing. You’ll hear it referred to as your superpower but that’s too much hyperbole. We all have special skills, even if we just finished high school or college.

Have you ever been asked “What do you want to do with your life”? I never knew how to answer that, still don’t, and presumably it’s a very important question. I’ve had more important things to think about.

But being asked “What are you good at?” is worth thinking about. You should become familiar with all of the tasks required to successfully be a real estate investor. That will help you determine what you’re good at, what you can bring to a real estate deal.

A lot of times it’s money, but just as often it is another skill that is difficult to find at the high quality level needed for real estate investing. What skills could they be?

Before we answer that, it is absolutely critical to understand that there are core minimum qualities a successful real estate investor needs to have. They are integrity of character, creativity, ingenuity, work ethic, and listening. Others, to be sure, but if you don’t have these, don’t even bother.

Underwriting a deal is a great skill, especially because most people don’t have this skill. Many say they do but their spreadsheets are amateur. Others are completely fine letting others do this task. If you are technically or financially inclined, get good at this. Take a class in it. Download several underwriting models as they’re easy to find on the internet. Make your own. Call brokers, get deals sent, and plug their financials into your spreadsheet. Then you have something of value to talk about.

Investor relations is overlooked and is not something that just anybody can do. What do you report? When? What does not need to be reported? How do you keep your investors feeling like their money was invested well? Do you know how to make charts in spreadsheets, use an email campaign tool, are you on the calls with the property manager, taking good notes? This task takes time. Messaging and communications make the difference whether that investor will invest with your team again. More so than returns.

Bookkeeping – do you have any skills here? Even better, do you know how to find people with specific skills? Have you hired a virtual assistant, a temp, or a freelancer? Working as the bookkeeper’s liaison for the team is a very important role. Your numbers need to be accurate every month, and you can’t have your CPA try to reconstruct your whole business at the beginning of the year when you need them to do your taxes.

Sourcing deals – calling the brokers. Yuck, who wants to be making cold calls. You do. It’s easy, and even though you have no idea what to say, and they’re going to discover you’re a newbie amateur, it’s something you will get good at very quickly. Learn how to find brokers and talk to them. Get them to send you deals. Use them to learn about the market. And get to know them, because when they get to know and like you, they will send you deals that they won’t send others.

Raising capital – you don’t have deep pockets yourself but you have family, friends, coworkers who would appreciate someone talking to them about real estate investing options. You’re not selling them, you’re offering them an opportunity. Get over that hesitation and have those conversations.

Social media – most people wanting to get started in real estate are relatively young, and have that special quality that they are social media junkies. I’ll never be as good as they are, and have come to respect their skills. If that’s you, don’t discount it. In fact, get better at it. If you post pictures on Instagram, do you post videos? Do you know how to edit a video, add captions, remove pauses? Do you know when Instagram and LinkedIn decide to push your posts out to bigger audiences? Learn it, because most of us don’t know this.

There are probably 5-10 more roles that you could fill in a real estate general partnership, without bringing capital to the deal. Don’t shortchange yourself. You have value and it’s your job to determine what that is, then leverage it.

Who We Are

Cardinal Oak Investments acquires, improves, and manages under-valued commercial apartments. We buy B and C class properties of around 100 units in the Southeast and Midwest. We look for properties whose amenities, aesthetics, and appeal have fallen into obsolescence, whose care reflects tired management, and whose location is where a stable workforce wants to live.

And we partner with like-minded investors looking for stable assets that produce good cash flow and strong appreciation.

Founded and managed by John Todderud, Cardinal Oak Investments has acquired properties on both coasts and in between creating annual double-digit returns.

For more information, schedule time with me or contact us.

Please note: Past performance is no indication of future performance.