All Forum Posts by: Donald S.

@Yuko Tanaka If you're interested in investing in St. Louis I would encourage you to work with an agent that is familiar with investors and one who invests themselves. As for the rehab cost @Account Closed mentioned, there is no reasonable way to spend 30k for a kitchen and bath rental rehab in St. Louis unless you are in a high Class A neighborhood looking to get 1500+ rent on units. 

I'm an agent if you would like to discuss more in detail, feel free to reach out. 

This particular property probably isn't the best started property for an out of town newbie. If you were in town and willing to be hands on with it then it would probably be a great learning property since it has a relatively low cost to purchase and good potential return. As for the quality of tenants, that's more a matter of the quality of your rental and screenings. Regardless of your area, if your screening isn't thorough then you may get a tenant you'll need to evict. And sadly the school rating is not a great indicator for tenants in St. Louis, as that only measures public schools, and a lot of good people live in cheap areas of St. Louis (like say Ferguson) and send their kids to private school. Plus, as a 1 bedroom apartment you don't really have to worry about children, because you probably won't have tenants with kids. 

An ideal 1 bedroom tenant is a young professional or a retiree. Retiree's are great because they generally don't want to move and will stay as long as the place is kept in good condition. 

Good luck!

Cheers!

Hi @Erik Anderson

First let me say welcome. 2nd, this would probably have been better to post in the deal analysis area rather than the new member introduction page. Maybe one of the mods can move it for you? 

I'll give what advice I can from the information given. 

5% cap is a pretty steep asking price, but if it's in a good area, and you said you know the area so you'll be a good judge of that hopefully, then 5% is reasonable (at least in St. Louis). The main problem I see if expecting to lifts rents 40% in a few years. It's great if you can, but it's a tough feat to do if the place is already in good condition. If there are improvement that could be made, that could justify rent raises on current tenants, otherwise you're stuck looking for 40 new tenants in a couple of years, and the added expense of turnover for each tenant who doesn't want to pay more for the same building/amenities. 

I will ask, where is the extra $40k/yr income coming from? $1278/mo/unit = 613k income.

As for the flood insurance, that is generally required by the government and not the mortgage lender, and based on the flood data maps provided by FEMA. The amount of the insurance is set at the government level regardless of who your mortgage is with.

If it's been on the market for 300 days, it's not just Covid that is keeping it from being sold, so maybe take an experienced guy with you to look at it also and see if 4 eyes can see more about what might be under the surface. Or it could just be the price is slightly to high and the seller doesn't want to negotiate price, never know.   

As for the type of loan, once you're above the 7.5 mil mark you can't use the Fannie or Freddie SBL programs, so you're pretty much stuck with commercial loans. There's no "standard" product for something like this, so you'll have to speak with commercial banks or banks with commercial lending arms, and see what terms you're able to get. Some commonly used terms might be a 3, 5 or 7 year loan on a 20-25 year amortization, probably 4-8% interest, but being commercial it's really all about what you can negotiate. The more experience you have and the better your relationship is with the bank the better terms you'll usually get. 

Good luck

Cheers!

Donald

Hi Diogenes

Generally speaking getting into real estate is a great thing. Sorry you lost your job, if you're looking I hope you can find a new one soon, if you're planning on jumping into real estate maybe try to find something with a PM company or real estate company that you're qualified for. I know that may not be easy depending on your situation, but it could help with experience for your rentals. 

As for your specific questions, we would probably need more details, and probably more than should be posted on the internet to advise if this is a good idea for your situation. However from a general point of view, I would have tried to find a duplex to purchase initially, so you don't have to buy 2 properties. Since you already own the first one though, and if you can afford to purchase a 2nd, then it is usually a better idea to keep your current house and rent it rather than selling it to buy a new house. 

In business you want to hold on to assets that can give you future positive cash flow, if circumstances allow you to keep it. Selling off of assets should be done with a goal in mind, like you've hit a certain profit with it and are ready to move up to a bigger property (like a duplex or 4 family in this instance). 

Sorry I couldn't be more help. If you'd like to discuss details, I'd be happy to talk 1 on 1. 

Good luck and Cheers!

Donald

 Hi Emily, 

It's been about (over?) a year since your last post here, how did the project turn out?

 Hi Colton, 

If no one has reached out yet, send me an email or PM. I am an investor specialized Realtor. I'd be happy to help your friends. 

True Title, the St. Charles branch, ask for Tara she can help. They do double closes all the time. 

 It's untested, but a friend of mine who runs an airbnb from one of her duplexes is hoping that since 1/2 the building is rented to a long term tenant and the other half is the AirBnB it would be hard for the city to determine that it is being run as an AirBnB. The most common way for the city to find that out is information on where mail goes. If you have a house that gets no mail, and has utilities, that'll cause red flags for them to look further into. 

Just a thought. 

Investment Info:

Single-family residence buy & hold investment in Saint Louis.

Purchase price: $44,900
Cash invested: $51,100

Contributors:
Naveen C Reddy

Single family house bought through a wholesaler, financed 100% with private money, and refinanced in Nov 2019. Ended up leaving ~30k invested into property after refinance appraisal came in lower than expected.
The Property had a lot of problems that didn't show up upon our initial viewing even though we walked through with our contractor to determine what work would need to be done. We should have had a professional inspection as well, but thought our GC would be enough, he was not.

What made you interested in investing in this type of deal?

The property is in a great up and coming neighborhood and the potential rent to cost ratio should have provided us a great opportunity for monthly cashflow and appreciation.

How did you find this deal and how did you negotiate it?

A wholesaler we know in the area who does a lot of deals brought this to us. We did not negotiate a lower price as we thought it was fair. Upon further review, we should have negotiated.

How did you finance this deal?

Private, no payment, loan from friends who were interested in doing lending.

How did you add value to the deal?

We planned on doing this as a BRRRR from the beginning and I performed a CMA to determine what we could reasonably expect the ARV to be for refinance purposed.

What was the outcome?

Had our initial repair estimate been correct we would have been able to pull out all of our money, as it turned out we ended up leaving about $30k invested in the property, but it will still profitably cash flow.

Lessons learned? Challenges?

I'm always doing an independent and professional inspection from now on. Even though our GC went through, he missed a ton of stuff that needed to be done. I'm also done working with wholesalers who pretend that they are the end buyer.

Others have said it, but I'll go a little more specific. The good multifamilies that are fairly priced to offer a good return are gobbled up FAST! I'm an agent specializing in working with investors and we go through numerous places and almost always end up in a bidding war or just a multiple offer situation where the seller chooses someone else over us. If the property is in a good area, and offered at the right price, it won't stay on the market more than a week, if that, before going under contract. 

As you get to the more sketchy neighborhoods that might still be good investments, but will require some work and appreciation to make the most out of it, those properties are a little easier to get. So for example, in Webster Groves a fairly priced 4 family is going to be gone in a few days, where as a 4 family in 63118 (Benton Park West/Gravois Park) that's going to sit a little longer waiting for the right investor. 

Feel free to reach out if you'd like more information or help .

There's a lot of meetups in the St. Louis area. Check out the meetup section here on Bigger Pockets to see what's in the area. 

I know there's one in Dogtown that's free on the last Thursday of every month, friendly to new investors and experienced ones. At the Pat Connolly Tavern.