How Kansas City Real Estate Investors Can Minimize Their Risk | Portfolio Diversification - Article Banner

Investing in Kansas City real estate is always a good idea. When you choose the right property, the right management team, and have the necessary systems in place, you can expect recurring monthly rental income. You will also have long-term ROI thanks to increasing equity and property values. You need to keep your property occupied with reliable, well qualified tenants and you need to surround yourself with experts, such as an experienced Kansas City property management team

You also need to be aware of your risk. As you probably know, every investment comes with a bit of risk. There is no crystal ball and there’s no one way that the market always shifts. 

One way you can protect your investment portfolio from unnecessary risk is by diversifying.  Let’s take a look at how Kansas City real estate investors can minimize risk with portfolio diversification. 

Open Your Portfolio to All Potential Opportunities 

You’ve heard the sage advice about not putting all of your eggs in one basket. This applies to your real estate portfolio as well.  

That basket could be anything – property type, financing method, even geography. If all of your investments are in a single building and that building loses value…well. You get the idea. 

Think about where you’re investing, too. If all the rental properties you own are in a single neighborhood, what happens when that neighborhood becomes less desirable, shifts to a more commercial or industrial area? If people stop wanting to live there, you risk losing money because it’s the only place you hold assets. 

Balance your risk by keeping an open mind. Look at different property types and consider different areas. If you’re outside of Kansas City and you’re looking for a new market, try Kansas City. Remote investing is easier than ever.  Talk to us about potentially hot rental markets whether you are local or outside of the metro area. 

Consider financing your investments differently as well. With interest rates rising, this might be the right time for a cash purchase or a 1031 exchange.  

Investing in Single-Family Kansas City Rental Homes 

A single-family home is always a great investment option because they are always in demand among highly qualified tenants. People who want to buy but cannot afford it right now will often rent a home for the privacy, the extra space, and the low-maintenance lifestyle that renting affords.  The rental market now includes people who do not want the responsibility of homeownership but want the  flexibility that renting brings and the benefits of a single family home. 

The tenants you attract with a well-maintained single-family home in a good location will want stability, and they are likely to maintain the home just like it’s their own property. When you rent out this type of property, you can count on:

  • Well-qualified tenants (make sure you have them properly screened of course)
  • Higher rental values
  • Better retention
  • Help with day to day maintenance

These rental properties also offer investors some great appreciation potential because values usually increase at a rate that typically outpaces multi-family homes. In the Kansas City rental market, depending on the purchase price and financing you choose; you can expect to cash flow your single-family home pretty quickly, and you’ll also build some impressive equity almost right out of the gate. 

Investing in Multi-Family Kansas City Rental Properties  

If you have always invested in single-family homes exclusively, now might be the time to consider a multi-family building. You don’t necessarily have to buy an entire apartment building. Look for a duplex, a triplex, or a 4-plex. Start small and see what your results look like. Here’s what you can expect from a solid multi-family investment, based on our experience:

  • More rent. When you have more than one leased property you have more than one rental income stream. This is a major benefit of investing in multi-family properties; you will have rent coming in from various sources. 
  • Less vacancy risk. As we said, there’s more than one lease, so, when that one lease ends, you aren’t left with nothing. You still have rent coming in from the other units. 
  • Better economy of scale. When you need maintenance or landscaping services, you can contract with a vendor who is likely to provide a discount because of the volume of work you need. You’ll save time and money maintaining a single building with two or three units than you would maintaining three single-family homes in different locations.  

There are, of course, challenges to multi-family investing. Tenants are more than neighbors when they live in a duplex or a triplex. They’re often sharing walls and communal space. This means conflicts and disputes can arise between your tenants more frequently. There might be complaints about noise or parking or trash or pets. This can take some extra time and lead to frustration for you as the landlord. 

Generally, there’s more turnover in a multi-family unit. Rents are rising in Kansas City, and you’ll have some great income, but the rental value on a multi-family unit will rarely be as high as that of a single-family home. 

Seek Advice From Kansas City Real Estate Experts 

Talk to Your NetworkThere are several good ways to diversify a real estate portfolio. With the market always shifting, you want to get ahead of any potential changes and be prepared for whatever is coming in the next year. Talk to your network. Find out where people are looking to invest next. Where are there some fantastic deals to be found? What are tenants looking for? How can you finance a purchase without overpaying for a mortgage? 

Educate yourself and rely on the advice of real estate professionals and your Kansas City property management experts. We can tell you what a property is likely to rent for. We can also advise you on what repairs or updates may be needed to attract tenants and earn higher rents. 

When you’re ready to diversify, we’re ready to help. Contact us at Key Partners Property Management.