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we expected to pay $900 for the property, which seems reasonable for the condition it was in (Its quite ugly and out of date).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.