Here’s why investors love KC real estate and what that means for buyers

Published: May. 5, 2022 at 4:46 AM CDT
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KANSAS CITY, Mo. (KCTV) - Traditional home buyers in the KC Metro are facing fierce competition from investors with deep pockets.

It doesn’t matter where in the Kansas City area you’re looking to buy a home; the housing market is red hot right now. It seems the rules of home buying game have changed during the past few years, and there are definitely new players. Investors are becoming more active, and first-time homebuyers trying to break into real estate are finding themselves outmatched.

In the olden days, say, three or four years ago, if you wanted to buy a house, you might be competing against a single buyer—or maybe a couple of other families. You would look at several options, take your time to evaluate, and finally make an offer. Often, you could get the house for less than the asking price.

Those days are gone—at least for now. Today, a buyer might be competing against dozens of others, make an offer on the spot, and pay thousands over the asking price.

First-time buyers John Allen and Monica Wanniger have been house hunting for five months. They’ve looked at more than 50 homes, but keep getting outbid.

John Allen and Monica Wanniger have been house hunting for five months.
John Allen and Monica Wanniger have been house hunting for five months.(KCTV5 staff)

“It’s just an emotional roller coaster,” said Wanniger.

“It’s Insanity,” said realtor Sherri Hines. “There’s just a frenzy that you can’t describe. The tension level with buyers and agents and lenders and inspectors--there’s just a stress level across the board that is hard to even explain.”

How did we get here?

What happened to create this fierce competition? Lack of supply is partly responsible. But another factor is investors. They weren’t really in the Kansas City market five years ago, but now they are buying up homes all over the U.S.

“The investment community is seeing an opportunity in real estate,” said Realtor Michael Pierce. “It’s easy for us to look at the numbers and say ‘Wow! Homes have appreciated 11% this year, they’re so expensive.’ However, the investment community is looking at these are real good opportunities and long-term investment opportunities. So that’s why they’re coming in and attempting to take up as much of the inventory as possible.”

Investors have more buying power than the average buyer. They can offer all cash, waive inspections and snap up starter homes. Those homes are then turned into rentals.

Real estate investors are buying a record share of homes. According to Redfin, investors bought 18.4% of all homes nationwide last quarter. And although no one keeps track of that percentage in Kansas City, buyers and real estate agents will confirm investment buying is strong in Kansas City.

Marck de Lautour, with SBD Housing Solutions, is not surprised institutional investors are here in Kansas City. He’s a local investor.

“Yeah, institutional buyers for sure are coming in and buying up as much real estate as they can,” said de Lautour. “It’s cheap land. The land is actually really, really cheap compared to the coasts of California and Florida and Vegas.”

According to de Lautour, these investors get the best return from renting the properties, and he doesn’t think that’s necessarily a bad thing. He says there’s a whole new way to invest in real estate without owning a home. You can buy into a real estate hedge fund, and keep your options open.

“It’s a work from home, convenience of moving to and from any marketplace,” said de Lautoru. “If Google calls today and they have got a job in Austin, Texas, well, maybe they want to go to Austin, and they don’t want to be tied down to “Oh my gosh, I’ve got to sell my home in the markets dipped.’”

What’s ahead

None of the experts we talked with expect the supply of available homes for sale to improve anytime soon. Marck de Lautour believes renting is the future for many Americans. Previously, investors focused on lower-priced homes with affordable rent. But that’s changing. According to Redfin, mid-priced homes are becoming more popular with investors, making up 32% of investor purchases in the fourth quarter—that’s a record high.

So now, investors are going after the same houses as traditional buyers. Anything priced around $317,000 is now the hottest ticket. Hedge funds are snatching up those homes with full cash offers and waiving inspections. If they overpay for a house, they believe they’ll get the difference back, and then some, over the life of the investment.

“That’s the reason why these major investment companies are doing it,” said Curtis Jay, “Because they know that real estate is a sure bet for the most part.”

But some wonder the price to be paid for communities. Kansas City realtor Curtis Jay is concerned about how out-of-town investors could change the fabric of a neighborhood.

“If there’s an out of state investor who’s coming in, buying up lots of properties, it’s going to be an area just full of renters,” said Curtis. “Nothing wrong with that, but there’s a different kind of mentality, a different kind of look, that neighborhood may see.”

From everything we’ve learned, Kansas City is a newer target market because our housing is affordable. Property values are increasing and other investment markets, like along the coasts, are getting tapped out. But this real estate game impacts all of us—even if you’re not looking to buy or sell a home. Rising property values mean higher property taxes—and higher rents.