All Forum Posts by: Max Householder

We go through Eric Brand with Shelter Insurance. I've haven't seen anyone get a quote from Shelter for a rental property and then go with someone else! lol Their policy is very affordable, especially compared to most others.

@Levi Mitchell if you are not already invested in this niche, I would avoid student housing at all costs, at least in the short to medium term. College enrollment has been down significantly this year, nominally due to COVID-19, but I believe it was a bubble that was already bursting. Simply put, people are seeing through the scam of taking on significant 5-6 figure debt loads to get a degree that just does not guarantee the future employment that it used to. COVID also gave students and parents (payers) a test drive for online schooling and I think for most it's generally gone okay, especially when you consider the draconian rules and lockdowns enforced on many campuses nationwide. Why pay through the nose for a "college experience" that could get cancelled or pared down at a moment's notice? If college admins reacted in this way to a virus that's little to no threat to college aged population, what if there is an actual dangerous outbreak? Schools could be closed for years.

While a vaccine and low case counts may bring people back to campus in 2021-2022, it only takes a small decrease in enrollment, even just 5%, to blow a massive hole in the budget of some of these schools. States and local munis are already up ****'s creek due to decrease tax revenues, added costs to combat COVID, etc. they will not be in a position to bail out colleges that are bleeding significantly when they add up the losses for 2020. This will lead to reduced head count for staffing and force colleges to move more classes online to reduce THEIR costs, not to mention the parents and students who are leery of attending in person due to either virus risk, lockdown risk, or just that IT'S NOT WORTH IT ANYMORE.

On the flip side, if a Biden admin follows through on student loan forgiveness and moves forward with "free" college, then you may see in-person college survive, but there is still a huge sunk cost in time and earnings to attend a 4-year college in person. You simply can't offer $100k degree to every person in the US. They will have to cut costs somewhere and paring down the overhead cost of buildings, maintenance, utilities, etc. of large campuses will be paramount.

I believe traditional "college" will remain an option for high-end schools and tech/medical schools where in person labs and whatnot are important, but any social science, humanities, even engineering will move online for the vast majority of students or maybe for 2-3 out of 4 years and a 4th year in person for capstone, dissertation, etc. Regardless, the punchline is that there will be less people needing to live full time near colleges and especially so in one-horse "college towns" where few people live permanently anyways. It could be a catastrophe for those invested in housing people who no longer need to live there. My alma mater Mizzou had a HUGE boom in student housing, dorms, condos, apartments, all over Columbia, MO and many are sitting empty. There will be no getting back to normal in higher ed. COVID kills the dying and ultra-expensive higher ed. in the US was starting to crack over the last couple years and COVID simply broke it. 

I would not invest if solely relying on returns from students. Just my $0.02

Hey Robert, call Eric Brand with Shelter Insurance. They can do a cash value policy for investment property that is much, much more reasonable than what the other companies will quote you as they're usually pushing replacement cost which on these old buildings in south city is significantly more than the property is worth, thus the crazy premiums.

Holly Hills is a nice area, very stable, but also a little more expensive as a result. North of Bates and East of S. Grand and especially the other side of I-55 can get a little sketchy, but everything from Holly Hills and west is very solid.

There are R/R tracks that run north-south through Carondolet Park and then between Arendes Dr. and Dewey Ave. In my experience viewing properties in this area in the past and watching the market some, the few blocks between Bates, S. Grand, and those R/R tracks are generally lower cost and slightly less desirable than "Holly Hills proper" which is the blocks due north of Carondolet Park between Leona and Arendes. Just FYI, sometimes you'll see listings in the first area I described as Holly Hills, but it's more like Holly Hills addition/adjacent and won't get a premium attached to price. Maybe that's good as you get in cheaper, but maybe not for resale. Just something to be aware of, those blocks off S. Grand are still pretty nice and Royal Kebab is really good :)

Just my opinion here, not investment advice and I have no credentials, but if your properties are cash flow positive (at a minimum covering the mortgage payment and all expenses) then I would leave long term, fixed-rate debt in place as long as you can (i.e. make the min. payment and don't tie up idle cash in equity) especially if you are looking at a 20-year timeframe. The economy might suck for a while, but the Fed and global central banks more broadly have made a major policy shift over the last year, especially since COVID, they are opening the floodgates and intend to let the economy "run hot" above their "target" inflation rate for the forseeable future. The problem is there is too much debt globally, especially at the sovereign (country) level and the release valve for that is a debt jubilee of sorts by debasing/devaluing the currency. This has happened many times in the past and many times in US history. It always ends this way.

IMO, even if the economy is sluggish, asset prices should rise and inflation will come to commodities, food, sundries, and RENTS. This will have consequences in the remainder of the 2020 decade (think pitchforks and more economic populism) but for your purposes, this will mean inflating rents against a fixed debt payment. Now your expenses will surely rise in price as well, but for wealth-building purposes you'll be in good shape. You want to be a borrower right now (smartly, that you can afford and cover even with vacancies or a personal job loss) and NOT a lender in my opinion.

Also, Springfield should have some tailwinds as mid-sized metros should become more attractive as millennials form households and leave high-priced urban centers. This demographic shift from city to suburb was due to happen anyways, but with work from home becoming more popular, that just adds fuel to the fire. Why pay through the nose for a tiny apartment in downtown KC when you can get 3000 sqft and an a half acre in Springfield for probably the same or less per month and your boss doesn't care where you live?

I don't know Springfield city politics at all, but I imagine it's conservative overall so I doubt you'd see rent controls, eviction bans, punitive tax raises, disbanding police, etc. like you might in more liberal urban centers. Not a political comment on the merits of those things, just saying there are risks to owners of property/capital when economic populism drifts too far left. I would think Springfield would be a hold out there, certainly more than KC, STL, or Columbia. 

Just my $0.02, shoot me a DM if you want to talk further about any of these thoughts (not advice!).

63109 is a steady, relatively safe area that's adjacent to some of the hotter growth areas and is finally seeing some positive pressure in catching up appreciation to Tower Grove, Shaw, etc. Southampton closer to Macklind has been a desirable area for a while although it's a tad more expensive, especially closer to Francis Park. Christy Park is a decent area with positive pressure being between Francis Park and Holly Hills. Bevo is thought of as about to come-up from time to time, but it never really seems to take off. There are some pockets either side of South Grand, but it's more block to block outside of TG South/southeast. I've seen some people mention having success on South Broadway but I haven't spent much time on the ground down that way and it is sketchy-adjacent in places.

Hope that helps spark some ideas!

What part of town? @Peter MacKercher is our agent, pm, contractor, everything you need in St. Louis RE. They're pretty south-city focused though and STL is a large market

That's a pretty rough area of town so IMO I would avoid no matter what the numbers say unless you have extensive experience generating cash flow in low-income/D areas which it sounds like is not the case. St Louis Metropolitan Police have a crime tracker you can look at online:  CityProtect 

For me, the first step is to find the area you want to invest in (location, location, location), watch the listings in that area like a hawk, and you'll learn that micro-market well enough that you'll feel confident to move on a deal if the numbers work "for that area". Running the numbers on paper for any property is a good first step to get a sense of which pieces make the return numbers move around and stuff like that, but trying to analyze a "good deal" in a market as large and diverse as St. Louis is a recipe for trouble because you'll never be comparing apples to apples. Narrow your search down to one or two zip codes or a single neighborhood and then start look at properties in detail incl. rents, pictures, and if possible get inside as many of these buildings as possible. Listing photos can lie, a LOT.

Hope that helps!

@Peter MacKercher is our guy for everything South City real estate

Sure