All Forum Posts by: Max Householder

I do not know the U-City market at all, but this certainly looks like a nice few blocks on Streetview. From the little I do know, U-City is generally considered kind of split between I believe the areas north/south of River Des Peres (basically Olive Blvd). The areas to the south are closer to Wash U, Clayton, and the Delmar Loop, all very desirable areas in general. The areas to the north are rougher and certainly rough-adjacent. It appears you're close to the high school, elementary school, a couple synagogues (there's a large Jewish community in U-City) so from a 10-minute desktop study I'd say this property is in a good spot. You might try to find some other investors on here who focus on this area to get their insights. 

As far as the price, it seems rather expensive to me, but again I am not familiar with U-City market and I would guess it's less a market for cash flow than south city where I am at. From the comps you laid out, it doesn't sound like the price is way off, but it does sound like it's near the top of the market even though it has a glaring wart with the immediate repairs. Now someone else might tell you it's worth $400k and this is a screaming deal, so don't base any decisions on my sense of it.

If you run your numbers factoring in known expenses (sewer, water, trash, taxes, insurance) plus management (even if you plan to live there/manage yourself) and repairs/capex and you get negative cash flow after your mortgage, that's not a good investment. However, if buying a comparable SFR in this area or renting yourself would be $1800-2000/month, then if you house hack this and are net -$1000/month as your "rent", then that's still a win, but know that you'll either have to sell it or lose month every month after you move out. Depends on your goals there.

IMO, if the seller ignored something as large as a foundation wall needing replacement and you already sense there may be other deferred maintenance that was ignored, I would want a larger margin of safety than being all-in at retail value after this major repair with still more work to do. You could start peeling the onion of this repair and find more work is needed. I would at least subtract the $25k estimate from his $280k "bottom dollar" and start there. He's already come down $60k off his initial listing in a matter of weeks and now has to disclose this foundation repair to future buyers. I would think you lean on him for a lower price and if he tells you to pound sand, let someone else take the risk, especially on your first one. There will always be another property for sale.

Again, this is just my 2 cents and probably worth about that as I don't know you, this market, or this property so seek better advice for sure!

Good luck man!

NIMBYs gonna NIMBY.

I would go with the cash value policy. It's unlikely you would rebuild a south city 4-plex for the cost they're going to make you insure it for. With the cash value at least you can pay back the bank and walk away and the savings on premium is significant. Make sure you adjust the cash value amount as your property goes up in value so you will recoup some equity as well.

The downside is in the case of a partial loss, i.e. one unit gets burned out or a tree falls and knocks in a wall, if you get paid out 25% or 33% of the $200k, that might not be close to enough to cover extensive repairs on one of these old buildings. Make sure you have adequate reserves.

Last thing is earthquake. I don't carry it on my home or rental properties and wouldn't unless I owned them free-and-clear and even then it's a maybe. The premium is very expensive and the deductible is usually a large % of the property's value, like 20-30%, so you could be on the hook for $40-50k worth of damage before the policy even kicks in. These properties are nearly 100 years old, so they have already withstood probably thousands of minor quakes, so you're basically insuring against a catastrophic total loss due to an earthquake which is an EXTREMELY rare event, even with the New Madrid fault and all that. If "the big one" hits and levels your 4-unit, you and everyone else in St. Louis is going to have 9th Ward in New Orleans during Katrina-level problems and you'll probably get bailed out by FEMA or some other federal disaster fund. With a mortgage, the bank actually owns the building and even as over-regulated and anal as they are, they don't make you get earthquake insurance, so if they're not worried about it (and they worry about EVERYTHING) then neither am I.

This is just my 2 cents, I am not an insurance agent/adjuster or a seismologist. Do what's best for you and your family, but just some things to think about.

St. Louis because I live here, but if I were looking out of state Indiana would be near the top of my list in the midwest.

Willkommen Philipp! My brother lives near Osceola, about midway between Mishawaka and Elkhart. He used to live in Goshen and Elkhart before that. Small world. Good luck in your investing! Indiana is a great place to do business; one of the states with the most freedom in the country. https://www.freedominthe50states.org/

@Skye Anderson IMO, quibbling over the cost of management (within reason) is letting a dime hold up a dollar. Like a previous poster said, when you get to 10, 20, 30 units you're not going to care about that 10% fee coming off the top or one monthly rent dropping off for a leasing fee every few months. It feels painful early on when you only have a few units, especially if they are vacant when you acquire the property, but just remember this is a get rich SLOWLY game, so try to keep at least some of your perspective in terms of years as long as that lines up with your goals. As you grow, whether it takes 3 weeks or 6 weeks to turn over a unit won't matter in the long run if you place a quality, well-vetted tenant. It seems that most new investors think management is just getting a lease signed and handing over keys, but it's hours of thankless phone calls, showings, paperwork, bill pay, and data entry to get to the point of basically just cashing rent checks.

St. Louis is very block to block so I would recommend working with a realtor that has experience in South City rental real estate, including owning & managing properties of their own. @Peter MacKercher is our agent and property manager and would fit the bill for you. Good luck!

Hey Ryan, sounds like a neat opportunity. Cherokee St/Benton Park is not an area of focus for me, but I have looked at property down there and we get dinner down that way every couple months at Byrd & Barrel. In general my thought would be to stay north of Potomac. As Kyle mentioned Gravois Park is a rough area. In typical St. Louis style, Cherokee St and the few blocks either side of it have seen a lot of investment, but one of the worst areas is just south of there. Like Bob said, these 'edge' areas are where investors without local insight can get into trouble.

At the corner of Ohio & Potomac you're right on the edge, but I think being toward the east end is better than the west end where the investment peters out closer to Gravois. I noticed on Streetview there is a vacant lot/parking lot right at Ohio and Potomac. You might reach out to the local STLPD substation and ask if that lot has been a problem for drugs or anything else. There is also a daycare on the NW corner so at least you'd have some activity nearby most of the day.

We use a property manager, but I still stick to neighborhoods I would be comfortable going to on foot after 10 p.m. if I had to collect rent/fix something etc. I'm comfortable taking my family to Cherokee St. during the day (Earthbound Beer is great!) but after dark I've never felt too comfortable. If you plan to manage yourself this is an important consideration. Maybe swing by the property and cruise the adjacent blocks a couple times after the streetlights are on and see how you feel.

If you like them other than the issue with showings, maybe have a come to Jesus meeting and tell them it's unacceptable and there will be a change made if it happens again. If their response is anything less than apologetic then move on. Even if they're growing and understaffed at the moment, they must have a brother/sister/cousin/parent in town they could ask to help out with an open house style showing. "Too busy" is a lazy excuse IMO.

Hi Chris! I would check out Crime Reports dotcom for more granular data. Like someone said above, a lot of times petty crimes can skew the hot/cold zones. The crime reports map allows you to filter by type of crime, time of day, and time period (past week, past 3 months etc.). Obviously violent crimes like murder, assault, and robbery are more concerning than property crimes. Also check on the specifics of each incident. A lot of the assault incidents are simple assault/domestic which should be less concerning for you as a landlord than assault with a deadly weapon. When you filter the data down like this, it becomes a lot clearer where the no-go areas are vs. fringe/transition areas where you might get some car break-ins overnight, but you're unlikely to get mugged.

I live and invest in St. Louis city so if you want more information on specific neighborhoods or properties, shoot me a DM. Good luck!