St. Louis rental investment price points

[Tom Echols]

Hello fellow BP’ers! Very quickly, I rehab and sell rental properties in the St. Louis area. I am exploring moving into different price points (better areas) and wanted some feedback from the out-of-state folks. Generally, I have been selling sfr in the typical 35k price range you so often hear about when investing here in St. Louis. While in general the (true and not manipulated) cap rates are pretty dang great in this price range. The first problem is its getting harder and harder to find deals that work. Second, and to be very frank, I feel the higher the rate of return, generally the higher the risk with quality of tenant, crime, just fill in the blank. I just had my first break-in during a build, and it cost me dearly. I know “stuff happens”, but it made me think. I am reaching out to see if there are those that have interest in higher prices points. St. Louis has all kinds of great areas, but NOT in the 35k range. I’m looking to see if there is interest in sfr with cap rates in the range of 8-12%. It allows for better areas, and some appreciation as well, which doesn’t really happen in that 35k window. A typical example would be an 800-900 rental, rehabbed, 50-60k. 1100-1200 rental 80-100k. Feel free to comment good or bad on this subject. I appreciate the feedback and this community in general!

[David Ounanian]

Hey @Tom Echols I try to stay away from the $35k or less properties in St. Louis since it involves a lot of risk and demands a healthy amount of experience to navigate.  I personally invest in the range just higher with ARVs of $70k or more.  I have found there is a lot of demand for properties in this price point because cash flow is good and the tenant pool tends to be better.