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Updated almost 3 years ago, 02/18/2022
Small Commercial Multifamily
Hi I'm actively looking for and making offers in the nicer areas of STL for a commercial multifamily property. Anybody have recommendations on areas to focus on our supporting cast to help us find these? Thanks in advance
@Jason Rhodewalt. Not that I know STL, new investor here and from Sacramento too, wondering what you mean small multifamily commercial, what size? Also wondering if you know and use good commercial lenders for national properties?
To me thats probably 5-15 units... somewhere in that range.
I would not say that I know any good commercial lenders yet - we're interviewing a few currently but I would want to go all the way through a transaction with one before I recommended them
Just curious as to why you've selected St Louis? I live in Oakland myself, but If I didn't have family there, I'd invest somewhere with more growth, like Dallas or Jacksonville.
There is some growth in STL but more importantly the price to rent ratio is much better than somewhere like Dallas. It’s the classic decision of cash flow vs appreciation
STL guy here, happy to talk with you about areas that you are interested in. STL is tricky, can vary wildy over a short distance. We'll be investing in LTR's here in STL shortly, but our first investment was a STR in Florida utilizing a vacation home loan. We plan to diversify with LTR's in the STL area.
Jason, I hear ya, but in my experience over the past year or so that price-to-rent ratio has taken a plunge for the worse. I was looking at houses physically back when I visited in November 2021 and the 1% rule just no longer applied. They're going for too much nowadays.
@Peter Kozlowski I wasn't saying it was great in STL just better compared to an appreciation play like Dallas or Phoenix. I'm still able to find duplex's on the MLS that will have positive cash flow and decent CoC
You must be looking at a different MLS than I'm looking on, because my agent is telling me his other buyers are being outbid on properties by $30-$40K. One guy he told me made twelve offers on twelve separate properties and it kept happening to him.
I’m not saying it’s easy or that you can buy for list but with enough focus and attempts you can find something that works
@Jason Rhodewalt
By nicer areas of STL how nice do you mean exactly? St. Louis is a unique place and nice can be a relative term. I’m currently house hacking in arguably the nicest part of the city (CWE) but a lot of other areas of the city are nice too depending on what you mean. the inner ring suburbs of the county are usually considered nicer but tend to be higher priced but they will also have small commercial multi families.
I know there’s currently a 10 unit on the mls in maplewood (great area) that I’m assuming would fit your criteria, however I think it’s overpriced but I don’t often underwrite commercial size properties
STL has a huge amount of small commercial multifamilies. These are highly sought after and are frequently bid up and go off market.
Personally, I would focus on the areas which are next to the nice areas. Tower Grove South is over priced, but Tower Grove East is currently being developed. Benton Park can be overpriced, but Benton Park West is currently being developed.
Focusing on these areas which haven't been already developed can put you at the perfect cross section of cash flow and appreciation, especially long term with rents expected to rise.
Feel free to reach out to discuss your strategy, I'd love to connect.
@Kyle Eckert would you know if the tower groves and benton parks allow STR?
Thanks
What does everyone think about the West End?
To my knowledge, STL city does not have any restrictions when it comes to STRs, and the individual neighborhoods cannot impose stricter rules. Lafayette Square, our most prosperous historic district has the most restrictive rules when it comes to housing due to historic preservation, has a high number of STRs.
Here is my golden rule for STL city rentals. As long as you're taking care of the property and adding value to the street, neighborhood, and city, they will stay out of your way. I haven't heard much to counter that.
I have high hopes for the West End (not to be confused with CWE). Its still a rough neighborhood, but I have been watching it for 5 years now, and it has come a long way. Close to Delmar and the Loop, as well as part of Washington University's satellite campus, I think it is prime for development as the first stop for investors willing to cross the Delmar Divide. Page Blvd on the northern edge is still very rough though.
As always, feel free to reach out for a deeper discussion.
Cheers
Kyle, you know your stuff! I won't forget that when we are ready for our LTR's here (currently in STR mode out of state). Very good description of the different areas, and spot on with the Delmar Divide. I was a police officer in North STL Co, so familiar with the different areas up there. Very specific pockets of which I would invest in, Overland, St. Ann, Vinita Park, etc... probably making up the NE corner for my interests. It's certainly hard to define for folks not familiar with the market.
@Kyle Eckert thanks for your thoughts. Your description of the West End (very different from Central West End) aligns with what I'm seeing. We just went under contract on a 24 unit just a couple blocks north of Del Mar. The drive by test "feels" good and the proximity to the university and the Del Mar loop make me optimistic. Also nearby the big Del Mar Divine investment so seems like there is a lot of money going into that area. I'm hoping this translates into strong rent demand/growth in the next few years.
@Jason Rhodewalt, STL is land locked. There is no Mar here. It's Delmar. All one word. I see a lot of development there and am optimistic for the West End area, however there is still a lot of work to be done there.
Ha... well then I should probably question that ocean front building someone just tried to sell me
Quote from @Aaron J Latal:
@Jason Rhodewalt, STL is land locked. There is no Mar here. It's Delmar. All one word. I see a lot of development there and am optimistic for the West End area, however there is still a lot of work to be done there.
Quote from @Brandon Carlson:
@Kyle Eckert would you know if the tower groves and benton parks allow STR?
Thanks
I sold a property in Benton Park where the seller was using it as an STR and the tax had been raised to around 12,000 from the 4k range! I had to get documentation from the city about the tax rate being reverted back so they could qualify for the sale since it destroyed their debt to income ratio at the inflated tax rate! Some owners do not publish exterior photos for this reason.
- Alicia Sierra
Quote from @Tom Niehoff:
STL guy here, happy to talk with you about areas that you are interested in. STL is tricky, can vary wildy over a short distance. We'll be investing in LTR's here in STL shortly, but our first investment was a STR in Florida utilizing a vacation home loan. We plan to diversify with LTR's in the STL area.
There are a lot of nuances - by block, location and house qualities that hike or destroy value in a unique STL way. Same thing applies to the rent rates. I find that the relocated renters will pay a super premium for certain qualities and amenities.
- Alicia Sierra
Quote from @Alicia Sierra:
Quote from @Tom Niehoff:
STL guy here, happy to talk with you about areas that you are interested in. STL is tricky, can vary wildy over a short distance. We'll be investing in LTR's here in STL shortly, but our first investment was a STR in Florida utilizing a vacation home loan. We plan to diversify with LTR's in the STL area.
There are a lot of nuances - by block, location and house qualities that hike or destroy value in a unique STL way. Same thing applies to the rent rates. I find that the relocated renters will pay a super premium for certain qualities and amenities.
What qualities or amenities do you feel like renters will pay a super premium for?
