Is this a good deal? 4-family in St. Louis

[Melissa Kaatman-Boettge]

Hello BP community! 

I'm hoping to get advice from some more experienced STL investors about a property we are currently under contract with. 

We are under contract for $176k on a 4 unit, each unit rents at $600/month. The property is in Tower Grove South near Civil Life. We plan to live in one of the units and rent out our current home in Maplewood. 

Overall the deal looked pretty good to us, good price and we like the location. The problem is yesterday we had the inspection, and more came up than we were hoping for. Some of the issues we already knew about, and some things were unexpected. 

Things we'll have to fix: 

The balcony is pulling away from the building, so we'll have to have an engineer come out and we'll probably need piering. 

On the sewer lateral, one of the lines had 2 breaks, but it was on the city side. The other line had a blockage, so he was unable to see very far. 

The wall in one of the upper units had slight water damage, due to the window sill being rotted out. 

All of the windows are older, some are painted shut, some do not lock. (wondering how soon we will need to update these?)

There are some areas that will need tuckpointing. (could be another culprit of the water damage) 

2 of the AC units are not cooling properly (might just need freon).

On the bright side, the inspector said the roof looks great! 

So, what do you think, still worth it, or could we find a better deal? 

[Peter MacKercher]

@Melissa Kaatman-Boettge With the items you're mentioning the prices for fixing those could go into the thousands for one item, so use that to negotiate the price down to whatever price you feel comfortable, or see if the seller will fix the issues brought up in the inspection. Without having seen the property and having actual bids for the work it's not possible to give an exact number, though, so if you move forward have an overage budget in mind, prioritize the list of repairs to save up for and re-run your numbers to see how the extra repairs affects your returns on the property.

Some of those items can be deferred (A/C in particular, as it's October and you wouldn't close until it's November proper), but items like being able to lock the windows are hopefully easy fixes (you can usually add locks to older windows here) that shouldn't require a replacement. Worst case if you don't want to budget for that now is to simply screw the windows shut if the units are on the first floor and you're looking at replacing them. Also keep in mind that if you do anything with the windows you'll want to repaint them for LBP compliance.

$600 in that area isn't bad for a 1 bedroom -- Civil Life is a border area that is lagging the rising rents a bit farther north in the TE South area but is also on the uptick. What you can get will depend on the season and the exact amenities and condition of the units. If they're 2 bedroom units you'll fare better on that end and then $600 is on the low side. Just remember, if you have vacancies, that you're entering into the slowest season for filling them.

Also, it might be wise to factor in the additional cost of living within walking distance of Civil Life since they have such good beer.