Kansas City, MO: 15.4% Return on Investment (2011)
Kansas City experienced a prolonged period of steady value appreciation up until its value peak in 2006, and only a minor correction afterward. The 2008 financial crisis only impacted Kansas City modestly, as its values had already contracted. The subsequent years saw moderate price volatility that appears to be approaching a bottom in 2011. We anticipate modest net value appreciation in 2011 as Kansas City joins most other linear markets in a regression toward fundamentally sound valuation. Currently, approximately 22% of listings are from foreclosures.
As the transportation hub between all four corners of the United States, Kansas City represents a vibrant market for investors. Between transportation, agriculture, and other forms of commerce, Kansas City represents a fundamentally sound city with a solid economic base. The importance of a steady economy like Kansas City is that it does not typically exhibit the same level of volatility as other market areas with h
igher taxes that are more tightly regulated. The reason is that low tax, low regulation environments can support “bread and butter” industry that operates at lower profit margins. When the tax and legal burdens are increased, only high margin companies can survive. Since high margin industries are also the most volatile, it logically follows that escalations in the cost of doing business for a given area will increase the amount of value volatility.
Kansas City is another area with attractive cash flows that serve as the fundamental basis of its ROI profile. The linear nature of the market means that investors should only expect modest value increases and leveraged appreciation over the long-term horizon. However, the superior cash flows still exceed the rates of return for many other investment categories with similar or even higher levels of risk. It is unlikely that Kansas City will become the next booming metropolis, but it is also unlikely that the city will experience a value collapse either. It is a solid market that provides an excellent opportunity for income property investors to build the basis of their portfolios.