Assessment warning STL

[Kyle Eckert]

A cautionary tale with actionable advice for STL specifically, and probably REI in general.

Advice: When looking at tax numbers for your investment model, make sure the property is assessed correctly when running the numbers.

Story:  We purchased our first 2-family in Sept. 2017.  Looking at city records, we expected to pay $900 for the property, which seems reasonable for the condition it was in (Its quite ugly and out of date).  I didn't think to look at what it was assessed at: $57K...  

St. Louis assesses properties every odd year, but must have overlooked this one for some years.  Our purchase must have put it on the radar, and it was reassessed at $120K with a tax bill of roughly $1900.

While it did not totally destroy our investment, it did derail a few things.

The numbers:

At Purchase: 8% CoC return, $275 monthly cashflow

After assessment: 5% CoC return, $190 monthly cashflow

After $10K to bring to market rents: 9% CoC return, $370 monthly cashflow

Not a stellar investment once fully upgraded, but not too shabby for our first swing.  We are also learning a boat load, so I'm not too mad.  I am still looking for a reasonable person at the assessors office to explain how this was missed for so long.  They are quite rude and not helpful, but ill keep calling.

[Dan Hoehn]

Hey @Kyle Eckert, If your purchase price is less than the reassessed value, you could contest it with the assessor's office. Using both the purchase price and appraisal if you have one.