Multi Family investing near Cherokee St.

[Ryan Carr]

I'm a newbie to the investment world and ready to finally get serious about purchasing my first multi family rental property.  I lived in South City St. Louis for about 9 years until about 2 years ago, so I know St. Louis can be different from block to block.   I was able to find an off the market 4 family within two blocks south of the heart of Cherokee st.   It is currently rented and on paper the cash flow looks great.

Does anyone have any thoughts about investing in this area?

When I was living in South St. Louis a couple years ago, there seemed to be a lot of development and rehabs in the Cherokee st area, which is a good sign, but do you see this trend continue?  

This is my first rental so I'm stuck trying to find a place that I can afford, but also be in an area where there is a possibility to have decent tenants and hopefully some long term growth.  

Any thoughts from local investors on this area would be greatly appreciated.

Thanks,

Ryan

[Bob Hines]

I've had the same thoughts about Cherokee St. It really depends on the block. Some have more potential and some will be rehabbed much quicker than other blocks. It depends what the housing stock is and what condition it is in. Are there lots of boarded up houses falling apart? REALLY falling apart? Might be harder for that to be rehabbed. Are there larger buildings or smaller buildings? People like to rehab the larger ones over the smaller ones etc. The east end seems to be rehabbing faster than the west end because that is where the activity is on Cherokee St.

If this is your first property, you're going to have to learn tenant screening and be on your A game 100% of the time in this area. The area you're talking about I refer to as "Where out of state investors go to die." Lots of investors, especially out of state investors, buy here because of the siren song of high returns only to never actually see those returns because of non-paying tenants, continuous repairs and vacancies. I'm not saying those returns can't be made there, just that it's tough and requires work.

Make sure your "off market" deal is actually a deal. I subscribe to several emails and their off market "deals" are only off market because they could never get that much on the market. They are just hoping someone will pay that much for it. 

Also, for your first property, don't expect to make money. And what I mean by that is, when I started, all the rent went into an account and the expenses came out. Yes I made money but the account never seemed to grow very much. As the balance inched up, then taxes were due. Or insurance, or an AC repair.... It wasn't until I got to #6 that it finally felt like the account would actually grow every month. Just go in with realistic expectations, don't expect to be able to spend an extra $1,000 a month because now there is $1,600 of rent coming in. That money won't be there.

Good luck! Go in prepared and landlording can be a great experience.

Bob