Saint Louis Investors

[Account Closed]

Hi guys! As someone who's grown up in the STL area, and now live in California.. I was curious on everyone's thoughts on STL as a market as a whole. I've done pretty well with some flips and rentals there but was curious on if anyone else was focusing on STL or decides to stay away because of the declining population and crime rates 

[Bennie Williams]

Hey @Account Closed I also grew up in STL in the Ferguson/Florissant area, moved to NYC after graduating from SIUE and moved to LA in 2001. My experience with real estate investing in STL is probably similar to most people's in other cities, there have been ups and downs. I do think STL is a really good buy/hold city. There are plenty renters and even my first property waaaaaayyyyyy back in 2006 (an SFR in Walnut Park), which was in one of the worst neighborhoods in STL, I was still able to find renters. It was a longer process and turn over as high (and a few other challenges) but I still count that as a learning experience. In my opinion, STL is not a good fix/flip market. There just isn't enough forced appreciation no matter how much upgrading and rehabbing you do. STL is an affordable housing marketing so the choices are plentiful for qualified buyers and truthfully, there's probably nothing that special about your rehab that buyers can't find somewhere else.

Regarding crime, yes, STL has plenty of it. I really haven’t had good luck in north city so I typically stay in south city. You can even find good deals in high crime areas like Dutchtown and Gravois Park. Those neighborhoods do have issues with crime but they are close to other great neighborhoods and they continue to improve.

Below are my top 10 tips for investing in STL:

1 - Find a great management company – This is super important because as an out of state investor you will depend on them for almost everything in the early stages.

2 - Focus on a particular area for your first few projects – I think starting with an area you are familiar with is important. If I could go back to the beginning, I would definitely start my investing in north county.

3 - Rental Rates – Have a pretty good idea of rental rates in your target area. Your management company will be important for that. I also use rentometer and Apartments.com

4 - BRRR – Use this method after you've made a couple investments (2 or 3) and have a good understanding of how the rental market in your target area behaves.

5 - Find a maintenance person – One of the things I’ve learned is that your management company will completely raid your pockets with maintenance request. Get on thumbtack or find a friend that is handy or do whatever you have to do to avoid your management company’s maintenance pricing. At this point my management company just emails me the maintenance request and I send my guys to correct it. I save at least 50% with that.

6 - Old Houses – STL, particularly in the city, is full of 100+ year old homes that look like great deals. The most important things when evaluating these houses is plumbing. Always, and I mean 100 out of 100 times, have the sewer line scoped. This is important because STL city is requiring that the city main water tap into the home be changed if there is any plumbing work that requires a city inspection. In other words, your 7k sewer lateral repair will turn into a 10k+ sewer lateral and city water tap expense real quick.

7 - Shotgun Layouts – I hate them, renters hate them, unfortunately most of the 2-4 family buildings in STL are set up that way. If you can find buildings that do not have this layout, that’s less work for you and easier to rent. With that said, they are still easy to rent but you won’t get the best rental rate without changing the layout. Changing the layout means moving the kitchen, moving the kitchen mean moving water lines, moving water lines means city inspection, city inspection means city water tap. Budget accordingly.

8 - To GC or Not to GC – I’ve done both. I have rehabbed a building with a project manager and Thumbtack and I have used a GC, either method presents it’s own set of challenges. If you have more patience and time than money, PM + Thumbtack. If you have more liquidity, take the time to find a great GC but still have some local eyes to check on your project. Have a friend make frequent stops or even your realtor. You can buy your realtor lunch a few times and they’d probably stop by for you. The point is to make sure the GC knows that just because you’re out of town, someone will be checking in.

9 - Technology – This goes back to my earlier comment about the management company. Try to find a management company that has some sort of client portal that updates information about your properties in real time. That way you can see what’s going on immediately.

10 - Rehab and Purchase Cost – Frequently in STL your rehab cost will outweigh the purchase price of the property. Working with a lender who understands that a house you purchased for 40k will require 65k of rehab, but yes, the ARV will be 185k when it's complete. The idea that rehab can cost more than the purchase price is something (some) lenders are uncomfortable with. It sucks but that is a quirk of dealing with STL real estate.

Other than that, I’d say STL is a great market to build a nice portfolio, gain experience and build from there. It’s a fairly stable market so you’ll have a good idea of cash flow and future property values. So dive in, start investing, take your bumps and bruises, wins and losses and build wealth!

@Alex Bekeza