All Forum Posts by: Lynne Hart

Hi Brandon, you probably don't need another answer BUT I'm a Realtor and an investor.  As a realtor, my client base is nearly entirely investors, of all types.   I would imagine that a good 50% of my clients are investing in St. Louis Missouri from out of state.  They are buying and holding multifamily apartment buildings that are then managed by a property manager.   Just like many of the others have said, the driving factor in my clients choices to invest in St. Louis from another state is that our price points are very low, especially when compared to other major cities and/or coastal areas.   Our returns tend to be a bit higher as well.   Typically we're looking at about a 4-11% cap rate, which of course is dependent on the location and condition of the building.   As an example, you can get a 4 unit building in a C neighborhood roughly around $250,000.  I have a 12 unit currently on the market at $899,000 with an 8% cap rate.   This year a client of mine got 19 units turnkey for $995,000 and it was somewhere around an 9% cap if I remember correctly.   Hope that's helpful!

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $167,000
Cash invested: $80,000

This property is part time home and part time short term rentals and is in Puerto Rico (the state field doesn't allow for PR even though its a US Territory). Bought right after hurricane maria, and started to clean up after a couple who could no longer care for the property left. We bought 2 more acres next door when we heard developments may be coming to the area, to secure our tranquility.

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

I've been visiting Puerto Rico for decades and love it. I had a goal of having a home in the Caribbean by the time I turned 50, and achieved it at 48! Every property I have is a cash cow in one way or another.

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

Networking and relationships. It was a FSBO. Negotiated through telephone calls and with a mortgage broker. Yes, the mortgage broker wrote the one page, double spaced, contract that included 2 languages with which I bought this house. I then used her format to write a contract to buy the neighboring 2 acres a year later.

How did you finance this deal?

A conventional loan from a PR lender for the purchase. Cash for the land and improvements.

How did you add value to the deal?

We had one acre of land cleaned and cleared, added a fence around it with an elecric car gate, converted the lower level into a King Suite with kitchenette, french doors and a patio, painted, changed some vanities, added an outdoor kitchen to the gazebo, with some terra cotta tile, added solar power and internet - and so much more!

What was the outcome?

This home is now a vacation rental that can be rented as the whole home, sleeping 8, or more if you do air mattresses, or each floor is indpendantly rentable on its own. I live here part time when in Puerto Rico.

Lessons learned? Challenges?

Buying in PR is not for the faint of heart, and only for people that truly love the island and its culture. Anything you may normally expect to be the case in a real estate transaction can not be expected here. Everything is relationship based, and I wouldn't have been able to do this without very good local connections and a life partner who is a general contractor, fluent in spanish.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I did not. I do have a loan officer I can recommend and various real estate agents, most of which cater to their own listings and do not work with buyers outside of their own listings.

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $90,000
Cash invested: $50,000

4 family building purchased in distress in Mount Pleasant neighborhood, previously owner occupied for quite some time, the owner could no longer care for it.

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

I had watched this building for some time as it had been over priced and was visibly in poor condition. I was travelling when it occured to me that It had been long enough, I could likely negotiate a lower price. I regularly help out of state or country buyers purchase property, so I figured I should buy one that way myself, sharpening my skills for this class of buyers. 2 birds one stone!

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

A team member of mine did a video walkthrough, and a collegue went along to do an informal inspection. We estimated it needed a new roof and sewer, not to mention an extraordinary cleanout job before rehab. I set the price that I would be willing to buy it, and with no competition, we negotiated over a few thousand dollars. I had a sewer inspection to confirm the gravity of the issue ($7000 sewer job awaited us) and negotiated back down. Purchased and closed from out of the country!

How did you finance this deal?

I used a conventional loan for the purchase, and cash for the renovations.

How did you add value to the deal?

We prettied her up, gave her a new sewer, new roof, new garage roof, cleared out a ton of junk, and put this into production in 2020. Al 2 bed 2 bath units with updated open kitchens and modern baths, some with deep tubs! A 3 car garage in the back is just waiting for us to add electric doors and rent it out.

What was the outcome?

4 units renting at $850 each with remaining opportunity for the garage.

Lessons learned? Challenges?

My tenant selection at first could have been better, or I could blame covid, we turned most of the tenants over within the first year and are stabilizing in the 2nd year.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I was the agent, with the help of a team member. I used one of my favorite lenders for the deal (i have several repeat lenders, depends on the deal), and I would always recommend various professionals, depending on what your needs are!

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $110,000
Cash invested: $40,000

4 Units, Shotgun with 3 rooms each. Purchased with 2 tenants in place. Updated 3 units and put into production in 2021. Chugging along nicely even with smaller units. Gross is about 2400 monthly.

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

I had unexpectedly sold a building and using a 1031 exchange to move to the next building. Its not ideal, but its a nice solid little invesment that will be even more interesting in the next 5 years or so.

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

I'm a real estate agent and investor, this one I happened to find on the MLS.

How did you finance this deal?

1031 Exchange

How did you add value to the deal?

Updated 2 units, tweaked another, tuckpointing, new roof 2020 and alot of cleanout.

What was the outcome?

Cashflow!

Lessons learned? Challenges?

I'm satisfied with this investment for the price point, but I wouldn't want a portfolio full of 3 room shotguns. One is enough. :)

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes, Lynne Hart (me) is my real estate agent and I would be happy to connect my clients with any of the trusted professionals I use on my own transactions!

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $44,000
Cash invested: $100,000

Found this one talking to the neighbors, owner was in trouble financially and not responsive to calls - but connected me to his attorney, who was negotiating a short sale. I hired that lawyer to negotiate for ME to purchase it. Best $3000 I ever spent. I was willing to pay up to $65,000 but he suggested $44,000!

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

This is already the sector I was in. I had my team of contractors ready to go and we had been flipping a house a year or so but what I really wanted was cash flow. This was the first 4 family renovation I took on "on my own" and it felt big but was so exciting!! The building was solid, but smelly, ugly, and neglected.

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

I own and live in the building next door, and make a habit of talking to my neighbors regularly. The only renter remaining in this building spoke to me regularly and mentioned that the owner wanted to sell the building. I was already (always am) on the market for a good deal, and this must be one of the best ones I've gotten so far!I I already had the owners contact information, Called repeatedly, left messages - stated I wanted to help - and finally he gave me the lawyers information.

How did you finance this deal?

I had done a cash out refinance of another deal - and then later did the same with this one.

How did you add value to the deal?

We updated everything cosmetically using mid grade but classic looking cabinetry and appliances, serviced the HVAC, replaced electric panels, added a privacy fence, cleaned up the exterior, removed a few walls (not structural, just cosmetic walls) to create kitchens open to the living space.

What was the outcome?

The property just appraised and refinanced at $257,000, so I pulled my cash out of it in a refinance it on a 30 year mortgage at 3.875% so a $1000 payment which includes taxes and insurance - and the property generates $3095 monthly.

Lessons learned? Challenges?

I'd never negotiated a short sale before and the bank was not easy to work through. Paying the sellers lawyer to also represent me in the negotiation may not have been necessary but spending that $3000 saved me possibly $20,000. I have to re-learn this lesson often...... pay for other's expertise. Yes, you can do it yourself but its so much better in many cases to learn from and / or pay others to do what they do best.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I'd definitely give recommendations to lenders, the lawyer etc and am happy to be the real estate professional for anyone else. I prefer to do personal recommendations because matchmaking is often specific to the situation.

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Saint Louis.

Purchase price: $104,000
Cash invested: $150,000

Short sale 4 family purchased and now updated in the historic Shaw Neighborhood. Renting at 500/unit originally, now at 950-1050

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

This was my first multifamily purchase in 2012.

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

The real estate agent (this was before I had my license) I had at the time was aware of this property coming onto the market as a short sale.

How did you finance this deal?

Conventional Financing on a 30 year loan

How did you add value to the deal?

Renovated all of the kitchens and baths, opening some kitchens to living areas and converting the upstairs units to have the front room qualify as a second bedroom, if desired by tenants.

What was the outcome?

The building cash flows steadily and has awesome renters. Its current ARV in 2022 is about $550,000 but I wouldn't sell it because I love the cash flow so much!

Lessons learned? Challenges?

This building was my first official project so I learned lots about working with contractors, construction, what things cost and how to manage tenants.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

These days I am my own real estate professional, I got my license because I found many of the agents I worked with weren't investors themselves. I learned a ton by beginning to sell real estate for and to others, and these days I work almost exclusively (there are exceptions) with investors, many of those who invest in apartment buildings like these and bigger!

Hi - the amount of return on your investment varies based on the location and condition of your property.  Pretty much all over the US right now, inventory is tight tight tight, and prices are way higher than they were even last year, so cap rates are lowering.   That said, in my region (St. Louis Missouri Metro area) the average cap rate is different based on building / neighborhood class and can even waiver between 'micro' areas.  In an A class neighborhood, these days you're looking at a 4-5%, but in a C neighborhood around 8-9%.  A couple years ago this was 12-13% if that helps to understand how things have changed.  Our inventory is somewhere between 20-40% lower than just what it was last year (depends on property type), and there are more buyers on the market, perceivably trying to beat the interest rate hikes.  There are 20-30 buyers per property, even on appropriately priced property (meaning it doesn't look like there's any room to go higher) - and even then we are waiting on the data to see exactly how much higher the building sold.  (This isn't a case of someone not properly pricing to attract lots of offers, its experienced agents, pricing on where they think it would reasonably sell, and pushing that high)  Our barriers to entry are lower (a 4 family in a C neighborhood might roughly sell at around 250,000), and the returns are better than some other cities, but yes, there are some areas and buildings that sell at a rate that it doesn't make sense to buy unless you just want a very secure investment and perhaps are focusing more on long term appreciation over cash flow.   Every investor has their game, so whats not right for you might fit someone else!!  Hope I provided something helpful!





 

Hi there - what is your favorite tool to find property owner contact information. Especially if they are an entity like an LLC or corporation? I need to do some farming and circle prospecting for specific buildings and be able to contact (not via another postcard) their owners. What types of services or tools do you use to be able to call, text or email? (I do have my own client buyer list, but need to find owners of buildings to which I am not connected)

For under 4 units I use Amanda Baker at Delmar Financials and if you contact me in a message I'll give you her information.  For 5+ I typically use Ed Campbell at Jefferson Bank and Trust, or in some cases Eric Kappelman at Citizens, it kindof just depends on the scenario.  

Disclaimer:  I am not a construction professional, but I am a realtor and an investor with hundreds of 1900+ year old buildings in my experience.  You'd be hard pressed in the city of St. Louis to not see "small leaks in heavy rain" or some sort of indication that there may be dampness during heavy rain.  While I can't be sure this is the case iwth your building - as there are some problems that need to be taken care of - be sure you're not taking a sledgehammer to a thumbtack.  There's likely a moist corner in every building I've ever owned or sold.  Most of the time, its just a little masonry and hydraulic paint sealing to maintain inside, and sealing outside, ensuring water is being directed away from the house and not pooling, and that water isn't 'cascading down the building somewhere due to clogged gutters.  If really necessary and there's a serious foundational issue Adams Foundation Repair is who I would call - but most normally I have proactively taken the approach above to dry my basements.  AND I would rarely consider that a basement of this age is a place one would want to expect to be bone dry, and 'finished' - they just weren't intended for this use.     Best wishes, let me know if I can provide further input!