All Forum Posts by: Bob Hines

Postlets.com

I've purchased vinyl plank flooring from Menards in several places now.  I think it was Shaw Citadel and not the brand listed in the ad.  It has held up good so far and was easy to install.  I would not put regular laminate flooring in a rental property.  Laminate is made from MDF which does not do well when exposed to moisture.  I don't trust tenants enough to not get water through the house or to clean it up appropriately.  Seeing you're in ND, snow on shoes could cause a major problem with laminate so I wouldn't even consider that.  

I've been considering trying some of the sheet vinyl as they have some good looking stuff for a cheap price.  The only thing that is holding me back is the lack of know how, or who, will install it.  

I'm confused on a couple of points: How do you plan on screening out of state tenants from NYC if you don't want to use a PM in your location to do it?  Are you talking about paying a PM to do all the work of finding and screening tenants and then re-doing all the work and then re-screening yourself?  There is a big difference in what is listed on paper and all the ques you pick up showing a prospect a property.  You either need to be there or have somebody who is to pick up these ques.

If you are going to find and screen your own tenants, why pay a PM for monthly maintenance?  Most of the work is at the beginning and very little goes on month-to-month with rentals.  I would find more value in having somebody help me find a tenant than paying them monthly to 90% of the time just cash checks.  When there is an issue, you get a call from the tenant, then make a call to the handyman and then send a check out to whoever fixed the problem.

Why do you keep going back to turn key?  Why not just purchase a rehabbed investment property and place your own tenants if you are so concerned with possible turn key issue?  TK is not for everyone, so maybe it's not for you.

Good luck with your investing.

If you are unsure about what to buy, looking in that price range and wanting to live in the unit, why don't you look at a duplex west of Kingshighway?  That's the only part of town I would buy a duplex for $100k+ as an investment.  Plenty of 4 families you can buy for that price or lower in South City.  Lots of duplexes that you can get similar rents for less than $100k too.  

Does the Soulard property have any attic space?  I was able to run flexible duct in a small attic space in one of my duplexes to get forced air heat and central air installed.  Furnace is electric and placed in the attic.   Just run the power and AC line to be good to go.

The reason people aren't lined up to buy these is because you're a California investor and thus much smarter than the local St. Louis investors.  You have special insight that the local rubes just don't have.  Especially if you're looking for 1% deals in St. Louis.

From an owner's perspective, tuckpointing, roof and sewer lines matter.  From a renter's perspective, there is no difference between freshly tuckpointed and 50 year old tuckpointing.  Or roof.  Or sewer line.  It's just supposed to work.  So while fixing a defect like an old roof keeps a property from having a negative mark to value and prevents further deterioration which technically improves market value, it doesn't add value in terms of higher rents or faster leasing.  That's why I like to avoid those expenses as much as possible and prefer to put in upgrades that will increase rents or lower vacancies-new kitchens, baths, refinished floors etc.  That said, if you own a property long enough, you will need to replace a roof and could need tuckpointing and probably a sewer line if it's still the original 90+ year old cast iron.  If you work in the cost to replace a roof and tuckpointing into your offer price and get it accepted, there is nothing wrong with that.

I'm not sure where your 4 family is located (I thought I saw something about the Gravois Park area but don't see that now) but from what I have seen, unless they are 2 bedroom units, not many apartments in a 4 family rent for more than $450/month.  Most of the $450s I have seen are near Kingshighway.  So make sure all of your plans are based on the current $1700 ($425 each) and not $2000 ($500 each).  You might be able to raise rents that high, but let that be a bonus instead of a requirement to meet your numbers.  The $420 apartment that I rented at Kingshighway and Chippewa 14 years ago might rent for $450 now.

That's a great observation on ARV for investment properties here. What is it? Most that have been selling are foreclosures and a good number of those either need work or need lots of work. The foreclosures are starting to dry up but the finished properties really aren't picking up speed. So what is the ARV? I don't know. It's a strange market right now. A duplex listed for $35k that needs $30k of work is selling fast but a similar property that needs very little work is sitting on the market in the $65k-$75k range. Is that investor putting all that money and effort in for nothing? As long as the bank is happy with my collateral for their loans, I'm not concerned as I'm not looking to sell right now.

I just re-read and I'm a bit hesitant to speak absolutely, but if these are your first 4 investment properties you are looking at tomorrow-DO NOT PLAN ON WRITING A CONTRACT ON ANY OF THEM. Know that going in. Especially since you are looking at four families, a duplex and a SFR. I guarantee you, one of them will be the best that you look at tomorrow :-) But how do you know how they stack up against the rest of the market? You need to look at lots of properties to get a feel for what is and is not a deal. Have your agent put you on the MLS email list to get updates and watch what sells and for what prices. I will go out and look at 20 properties in a weekend for months and not find anything to make an offer on. And I've also called my agent up to go look at 1 property after work in the dark and written a contract on the spot. The odds that you are the latter on your first time out is slim. It could be a great deal, but with a sample size so small, it will be hard to tell. And reading your other posts about buying friends houses, I would caution you not to jump in too fast. It would be better to look at more properties and come back to it later if it's proven to be a good deal. It's easier to make up opportunities than losses.

I have a coworker who lives in Bethalto and drives to Clayton every day.  It's not that bad of a drive if you would want to expand the area you are looking at to include the city or county over here.  I hear her complain about her property taxes being high in IL.  Might want to compare to MO.  This link will get you tax and ownership info for the City  Geo St. LouisThe county has a website with the same information but I only have the city's as that is where I invest.

I won't even go look at anything listed by Eichelberger Realty.  They own enough of their own properties and also rehab that anything they are selling is complete junk.  There is another agency that I've seen list their own multis, GI International or something like that, and they have all been junk.  I'm not even sure how they ever passed the low bar of occupancy inspection they were that bad.  So buyer beware with realtor owned multis.  That said, I have a friend who is a Realtor that has sold some of her own properties that have been good buildings.  

Skipping the obvious, I always make sure to check out the following:

• Tuckpointing-is mortar popping out of the wall or missing or are there little chunks of concrete on the ground around the property?  This can be costly to remedy and adds no real monetary value for the big expense.
• Plumbing-is the stack cast iron?  How does it look?  Has it been redone?  Is it PVC to cast iron at the floor or PVC under the floor?  Any sign of sewer work-line of new concrete in basement, pvc sticking up in the yard?  I always get a sewer inspection as a contingency, it's best to know while you can still negotiate.  Are the water lines galvanized?  How old does HWH look?
• Electric-lots of old 60 amp services around.  Is it fuse or breaker?  Does it look like an old breaker panel?  Is it Federal Pacific?  How does the service entry wire look (wire from meter to panel)?  Are outlets 2 prong or 3 prong? Knob and tube?  How much room is there in the panel for expansion?
• Floors-are the floors slanted?  Is there hardwood underneath the flooring?  Do you think the flooring is in good enough shape to refinish?
• Roof-how does the roof look?  Any signs of water damage?
• HVAC-Boiler or forced air?  Central A/C?  How old does it look?

None of these are a basis to walk away from a deal but are some of the bigger things to look for which aren't as obvious as vinyl tile peeling.  I would rather spend $10k on a new kitchen and bath than tuckpointing and a sewer line.  One adds huge value and one basically offers none.

Will you be meeting with the owners to talk with them?  I can already tell you the vacancy answer: "Not long as they're easy to rent" or "I'm just keeping it vacant to show".  Just stick with facts, ask about age of roof, furnace, ac and copies of leases.  Confirm the condition yourself.  Nothing else will really matter coming from someone who has an interest in selling you the property.  The expenses and maintenance will always be "Low", trust me.

A question for you: What special knowledge or skills do you have that everybody else who has looked for an investment property in St. Louis over the last 2 years lack?  Maybe they just lowered the price but the multis I've been watching have been going under contract within a week or two of hitting the market lately.

There are lots of places in South City that are great for rehabbing. West of Kingshighway is one of those areas that it is really hard to do it though if you are solely looking on the MLS as everybody and their dog is looking at that area. There are different market forces at work there so you need to understand them and play by the different rules if you want to invest there. It's like The Hill, it's a great neighborhood but it's in a completely different real estate world all on its own. For starting out, maybe look at Tower Grove South, on the south end of the neighborhood where there are smaller, one story, 2-3 bedroom houses that can be sold for a good price if done nicely. They will be smaller than the 3 story homes near the park so it should be easier and less cash invested to rehab. There are several other neighborhoods that are doing great that are east of Kingshighway, there are even areas east of Grand that are good places for rehabbing. The problem is, there are so many people looking to rehab now that the easy $20k rehabs are no longer available if you're looking on MLS. That leaves finding stuff not on MLS or doing the bigger, more involved rehabs that others are passing up as "too much work".

Make sure you know your costs.  Lots of places in South City are 80+ years old.  I put a contingency for a sewer camera inspection on every place as that $150 is worth knowing if you're going to have to replace a sewer line while you can still renegotiate or back out.  How much is that going to cost you?  What if the 80 year old cast iron stack is leaking, how much is that?  Lots of fuses and old 60 amp breaker boxes in that area.  How much will that cost you to replace?  There is some aluminum wiring west of Kingshighway, is that an issue and how much will that cost if it is an issue.  Knob & tube?  Is the tuckpointing popping?  How much is that going to cost?  The great thing about South City is pretty much all of the houses have hardwood floors under any carpet or other flooring.  How much is it going to cost you to refinish those?  At what point can you refinish them and at what point are they beyond repair?  You need to know these things not only so you can set your budget but so you can be competitive in offers.  If it takes you $5k for a sewer line but I can do it for $2k, I can offer more and still make the same profit.  If you think it's going to cost $5k when it could be done for $2k, you may miss your numbers and pass on the deal where I might be all over it.  That fuse box might look scary to you and must "cost thousands" to replace but knowing I can get it switched it to a new one for $600 it barely registers as an expense on my list.

Good luck and move forward in an intelligent manner, especially if you are using hard money.

With this being a 3 bed with 2x 1 bed units, it is set up perfect for an owner occupant to live for free/cheap.  

I have seen areas of town that are good, solid areas, people will pay $300k-$350k for a 4 family that will rent for $550-$600/unit.  It doesn't make much cash flow sense but the people that are buying them are thinking that it will be easy to rent to good tenants and will be easy to manage so they will add their own labor and money in repairs over the years and then in 30 years, around retirement time, they have a fully paid off building that tenants bought for them that they can either live off the rents or sell for retirement.  They view it as a part-time weekend gig that provides an extra forced savings account for retirement.  So, in that light, it does begin to make a little more sense to a casual investor.