All Forum Posts by: Bob Hines

It's tough to give advice on this one.  That is definitely a 'pride of ownership' area and many there will buy 2 families to live in one and rent the other out to live for free.  Also, because of the area, some people take the approach that it's easy to manage with easy to find good tenants so in 30 years they will have a paid for property even if they don't make money right now.  So there are different market forces at play here than a 2 family east of Grand or North County.  

Using the 50% rule with rents of $650 each and a $507 payment, you cash flow almost $150. Not $100 per door like some aim for, but respectable for the area. It seems to me that $125k+/- would be a decent price if it's in top shape (I'm talking area sales, not cash flow metrics you find here on BP). One of the units looks to still have the old metal cabinets so I don't think it should be priced at the top of the market so your range of $110-$115k is probably a decent price for the area. Thus it's listed with an agent on MLS.

If you want a good, solid building in a good solid area; this may be a pretty good deal for your first one.  You won't lose money with it.  If you're looking for top dollar cash flow, you can find much better returns elsewhere but that will also be more work and a steeper learning curve for a first rental.  To put this in other terms, this area is an AA bond (AAA is the top), it won't have the greatest returns but you will have a great shot at getting those positive returns as it's a good area with good tenants.  There are C or "junk bond" areas that offer the potential for really high returns but the likelyhood of achieving those returns are much lower, and possibility of negative returns are higher, as it will be a rougher area with rougher tenants.  And there is the in-between.

I have a friend that is an agent who owns 20+ rentals herself and does rehabbing too.  I have stayed east of Kingshighway with my rentals but I know she has helped several clients buy west and would know a lot more about prices of properties, rents and rehab needed then I can do looking at realtor.com.   Since she does her own investing, she is WAY better than any agent that knows nothing about investing.  Let me know and I can send her info to you if you don't have an agent and would like to view the property.

That's a good, high rental demand area.  I don't own any around there but the first apartment I lived in moving to STL was at the corner of Chippewa & Kingshighway.  It's a good area.  Large number of rentals in the area.  I think the apartment we rented for $420 in 2000 now might rent for $450 now.  That was in a quad.  So don't plan on much in rent increases as there is lots of competition and selection for tenants there.

St. Louis was built heading west and areas in South City are judged by east/west of main streets.  West of Kingshighway is judged as 'the best' area for rentals and there are many people that won't even think of looking east of there.  Chippewa is a very busy street so those units will have that going against them but they are on/near major bus lines so they will have that going for them.

In certain areas in and around St. Louis, adjoining blocks can be entirely different worlds.  Make sure that the comps you found are in fact comparable if you are comparing from 2 miles away as there could be a big difference.  Make sure you know your target market too.  If people are paying $170k-$190k for no updates, linoleum etc, make sure your upgrades are worthwhile.  The market may not reward you for putting in granite counters or extensive updating if the neighborhood won't support it.

@John H. I always purchased the knobs that were at the locksmith shop thinking they were special. I just replaced the interior knobs in a new property and the ones from the locksmith seem very similar in finish and construction to the hall & closet ones from Menards. I can't guarantee they are the same but from my untrained eye they are the same. I'm going to try the hall & closet next time and see how they work.

We have a client whose brother wanted to buy him out of their business. We looked at how much he was making from the business each year, $500k+ and at the results of the business valuation by a CPA and it really didn't make financial sense for him to sell as they were offering about 2.5 years of his earnings and he would be giving up perks. Since the deal fell through, he has made more than they offered him and he still has his original ownership stake.

On the flip side, we have another client that bought out his brother's ownership stake at a business valuation price. Now he would love to retire but can't find someone to buy him out for more than just asset value. Since he makes such a good return on the asset value, he can't come close to getting that return elsewhere so he continues to work longer than he wants. His brother is liquid and been retired for nearly 2 decades.

Just a couple of different experiences to think about as you go about this.

My experience is South City as I lived there for 10 years, but I have heard from people who do North County that you want to stay away from North City. Maybe that means there are big opportunities on the Northside but I will stick to what I know.

As far as the other strategies, I am sure they are fine but they are more work than I want to put in. To wholesale and find all of those other deals you have to constantly be searching for them and marketing and I don't want to go there. Others do great with it but it's not for me so you will have to decide at what level of involvement do you want to have in real estate.

If you want to go Section 8, I would go ahead and contact them for information. There is a County office and a City office. I tried contacting them years ago and it took about 4 months for them to call me back. Make sure you understand how it works. I've never utilized it but from what they explained to me when they did call me back, I have to find a Section 8 renter, screen them, and then apply for Section 8 and have the inspection and then they can move in. That could be a couple of months process to get someone in. Again, I'm not sure this is 100% correct but you should definitely start looking into it if that's the way you want to go or to figure out if that is the way you want to go or not. I may look into them in the future, but right now I'm not having a problem getting my properties rented without Section 8.

I just had a 4 bedroom 1 bath house that I advertised and my phone EXPLODED! Well over 100 calls and emails from CL & the Postlets syndication in 2 weeks. Probably 15-20 were looking for section 8 so that size house might be a hot commodity to look into.

I love my master key system. A locksmith set me up with 5 different locks that I can rotate and my master key will open all of them so I only have 1 key on my keyring that opens all properties without searching for the right key. I even bought the padlocks you can key to match my master key to use on air conditioner cages so I won't need to find padlock keys when a/c's need serviced or replaced in the future.

The locksmith also gave me the tip to use passage knobs instead of locking handle knobs. It's too easy for a tenant to lock themselves out with locking handles and they really don't provide much security. I would say it's impossible to lock yourself out with just a deadbolt, but I'm sure a tenant will figure a way some day :-) He told me the story of an apartment complex which was dealing with a high number of break ins. He suggested they switch to passage knobs instead of locking knobs and the break ins dropped to zero. Apparently tenants would kick their own door in and turn it in as a break in so the landlord would have to pay to fix the door instead of the tenant paying to be let back in when locked out.

Welcome Ryan! The St. Louis region offers lots of areas of low and moderately priced real estate so you can start investing without needing lots of cash. North County Section 8 rentals and City are two of the biggest draws for long term buy and hold I am aware of. I stick to South City.

Since you're starting fresh, take a look at a Zip Code map and start finding areas that you are familiar with or think you would like to start working in. Then head to Realtor.com and start looking up housing prices to see if the price ranges will work for you. If your preferred areas don't work for what you can afford, start looking at nearby areas or just start picking areas. After finding the prices, start looking for rental amounts on Craigslist, Zillow or any of the other websites that have that information. Once you compare the rental rates to purchase costs, you may need to check other areas. When you do find a handful of Zip Codes to focus on, go drive them. Things can change block by block, especially in the city. Look for the major intersections or streets where things change so you can narrow your search criteria some more (West of Grand, South of 44, Dogtown neighborhood etc). At that point, if you could purchase a property (cash or financed), find an agent and start looking at properties. If you don't have enough to purchase a property, contact an agent and have them set you up to receive emails from the MLS of all properties that meet your requirements. I get automated daily emails of SFRs and Multis that meet my buying criteria. Look through all the listings, get familiar with prices. Go and look at properties, even if you just drive by and look in windows. With the email, you can mark Favorites and watch them. You can see how fast they go off the market and if you keep them on your Favorites once they are under contract, you can see how long it took to close and what it sold for. The goal is to have such a knowledge of the market that you know what is a good deal and know when to swoop in when one pops up.

Good Luck!

M2M just means you can end the lease with proper notice. If they refuse to leave, that eviction will be just the same as in they had a 1 year or 10 year lease. Check with your state laws, MO allows you to charge 2x the rent amount if they stay in violation of the lease. I sent my tenants who I wanted out after their 1 year lease a letter stating "...this is your 30 day notice. Please note that if you occupy the premises as of March 1, per the lease (I restate the law in the lease so it is in front of them), rent for March will be $1600..."

If somebody wants to stay as long as possible, it won't work. But if they see how much things will cost them, it may help them get out. My tenants mentioned $1600 several times in the last few conversations with them.

Put any equipment you wish to protect on a surge protector and be prepared to move at the end of the lease.