Outside investors keeping local market afloat

Although the cost of land in Southeast Missouri is rising, it's still low enough to be attractive to investors from other states.

Many investors are members of investment clubs, organizations that will, for a fee, educate its members about finding real estate to invest in for a good return on their money. Some clubs hold seminars, others offer information on web sites. Lately, these clubs have found that the Midwest is a good place to buy property.

"I can speak from the California perspective," said Kathy Fettke, co-owner of Real Wealth Network in Walnut Creek, Calif. "In California, and on both coasts, real estate is very, very expensive and overpriced."

Land and homes are available in California, Fettke said, but an investor can buy something similar in the Midwest for about half the price and double his cash flow.

"In my neighborhood, a $1 million home is a fixer-upper," she said.

Outside investors are looking for areas that are showing growth, and have a high demand for rental property. In California, Fettke said, property costs more to buy, but it rents for about the same as rental units in the Midwest. A $400,000 home in California may rent for $1,200 a month. "We come to the Midwest, get a $200,000 home ad the same in rent and double our cash flow," Fettke said. "We think it's an incredible deal."

Fettke's company teaches its members about market cycles, indexing property, and asset protection, she said. "What that does is create very, very savvy investors. When they see deals they know how to research the area, how to crunch the numbers and make spread sheets. They don't do what many uneducated speculators do who do not understand how to research the rental market. When that happens we have way too may investors flooding the market, and that causes a downturn eventually. We don't want to do that in any market; it's not good for anybody."

Sheila King of Realty Executives in Jackson said she once worked with a man from Oregon who read a book on investing written by Donald Trump.

"He read the book and it said to research the areas around the country and find out different things, and if it's good to get into investment property," King said. "He bought 15 to 20 rental houses in Cape Girardeau."

Some out-of-state investors look to the Midwest to retire. Fettke said that retirees can sell their California home, move to the Midwest and buy another free and clear.

"From an investor's perspective, there are deals everywhere," she said. "It's a buyer's market; it couldn't be better."

Fettke added that out-of-state investors have been a boon for people who were caught in the sub-prime mortgage correction and lost their houses. Investors buy up the property and lease it back to the owners, she said, with an option to buy and a portion of the rent going toward the equity.

"A year ago banks were giving loans to anybody with a pulse, " she said. "Builders were stuck too. We're working with a builder in Branson who had 12 contracts filled out, and he's stuck with 12 homes. An investor will buy them and the person who is living in the house can go into an educational program, learn how to fix their credit and be able to own the home."

Local developer Mike Mathes said his collaboration with a California investor has been as good for the local economy as it has for the investor and for his own business.

"You can say Mike Mathes has sold approximately $20 million to investors outside the area," he said. "That's new dollars into Cape Girardeau County, and I project it will be $30-35 million before the year's out. We build it and sell it to investors. Local people aren't buying. It's added revenue to the cities of Jackson and Cape, and definitely more taxes.

"We've built 225 homes a year that will be bringing outside investors to the area. That's involves a lot of workers -- carpet people, cabinet people, tile people, electricians, plumbers, roofers, jobs. We're creating a large amount of jobs. "

Fettke cautioned that some investment groups, unlike hers, are made up of individuals who pool their resources and buy property. Those groups are regulated by the Securities and Exchange Commission, she said, and are subject to its rules.