Investors trading out 401(k)s for four-plexes, cash flow

Local developers Andy Mackey and Mike Yeates own a unique type of real estate brokerage that specializes in placement of funds in locally built four-plexes and townhomes.

“Many investors think a 10 percent return in the market is great,” Mackey said. “Yet so far in 2016 we will have placed over $26 million in our projects, with investors realizing returns well into the double digits. Many investors don't want to wait until they are 59 to start pulling funds from their 401(k)s and instead see real estate as a tool that helps them retire earlier without all of the penalties of traditional savings plans.”

Regular 401(k)s and traditional IRAs have taxes and various implications that can make some investors worry that they may not be able to use their savings until it’s too late to enjoy them. Real estate investments have several advantages over traditional savings tools. For example, a 10-15 percent cash return in real estate is also typically accompanied by a property that appreciates in value and is paid off by tenants. Additionally, rents are usually going up, not down, so investments grow over time. All this, coupled with the tax advantages of having an interest expense, makes real estate a rather safe investment.

Mackey and Yeates don’t just tout this model – they practice what they preach and both own townhouses in various developments.

“Some of my first projects I bought in 2006, and they’ve since appreciated 100 percent in value, partly due to the rebound in real estate and partly due to the nature of normal appreciation,” Yeates said. “We took our own interests and business principles and began building out four-plexes and townhomes for local and out-of-state investors who just can't seem to get enough!”

The Real Estate Store is taking luxury townhouses to a new standard, and it’s paying off. After the recession, there has been a significant shortage of affordable living. Townhomes are in tremendous demand for tenants who prefer traveling, foregoing the yard work and maintenance associated with traditional homeownership. As a result, this trend has caused rents to escalate for investors in the Kansas City area.

The partners handle all phases of development and construction to ensure that when tenants move in, investors can close and recognize their returns, creating an efficiency that investors appreciate.

“When we first meet with investors we hear, ‘I don't want to be a landlord.’ Once they understand the property management team that's in place, it becomes a non-issue,” said Mackey. “Some of the customers of The Real Estate Store have never even seen their leased rental units, which speaks to the professional nature of the local partners that handle their business.”

The partners currently have another 48 units under contract that were sold before they even broke ground. They both expect more four-plexes developed and sold for the group in 2017 as they finish current projects and start their next one off of Missouri 152 and North Oak.

“The only inventory currently available is in Lee’s Summit, and we are pulling together various investors to place funds,” Yeates said.

The partners do business with larger investment groups, in addition to individual professionals who want to diversify their portfolio. Their mix of investors is about evenly split between groups and individuals, and Mackey and Yeates are always seeking new and repeat clients, including those from outside the area.

“When doing business with investors from out of state, we have a duty to react quickly to their questions and concerns to make sure their asset is being protected and receiving the best tenants and leases,” Yeates said. “Local investors can see their townhouses being built and have minimal involvement, but seem to enjoy the oversight.”

The Real Estate Store is unique in that it’s not a franchise brokerage with lots of fees, but a homegrown local development company out of Kansas City’s Northland. The Real Estate Store has its offices in a well-known project. In 2014, Mackey and Yeates acquired the “Oldest Home in Kansas City” and saved it from demolition. The 3 Gables Farmstead is a historic monument, initially constructed in 1824. The partners bid against several local developers, answered the civic call and began the renovation process to save “The Most Endangered Home in KC,” according to the Kansas City Historic Society. The 3 Gables Farmstead has been featured in The Kansas City Star, Fox 4 News, Northland Lifestyle Magazine and more.

For more information on how to acquire four-plexes and townhomes in the Kansas City area, you can reach Andy Mackey at 816-721-2747 or by email at mackeyandy@gmail.com.

This story was originally published September 7, 2016 at 12:02 AM with the headline "Investors trading out 401(k)s for four-plexes, cash flow."