All Forum Posts by: Michael Shear

My wife and I purchased a four unit apartment in STL. Purchase price $85000. The market rent in the area is $500, but we knew that we could place value in the apartments by cleaning up, installing electric appliances, new cabinets, and some tile work. I, myself, only did the appliance work. The rest was done by a handy man. Due to FHA loan we are only able to rent out 3 units. With some creative marketing and being what I feel is great landlords we have rented out 2 units for $575/month. Only one more to go! This being our first house we assumed it would be a little slow, but we have put in four full 40 hour weeks (after full time work at my real job) into cleaning, painting, installing a new door, bringing in new appliances, and many other things. Believe it or not we have found out a lot about ourselves and our ability to learn new things and do them well. Unfortunately, we forgot to take the time to take before and after pictures, but we will attach some current pictures. Not only did this teach us new things about ourselves, but it also stretched our marriage in the time that we were actually at home. Mostly working 8am-11pm everyday for a month straight (including weekends) was hard, and I now know how some people feel that have been doing this type of work for their whole lives. Next stop is to refinance and repeat, but this time we will be looking for a real house hack Du-plex that we will live in and rent out the other. This is my first step to financial freedom.

Now I am going to go into everybody’s favorite part, the finances.

The return on investment must be worth it. So for instance I will not take anything that is below a 15% yearly return. with FHA loans it makes every thing look good because the cash to get in is super low. So what I did is look at what the profit after mortgage payments. My mortgage + other expenses (Ins, PMI, HOA, taxes, water + trash) is roughly $825 a month. Once fully rented out (3 units at $575/mo = $1725) Profit = $900 Return = 109%. Now this return assumes I don't have any monthly expenses. Don't be fooled because you will. Bigger pockets suggest a 50% rule which means that you will use 50% of your profits towards overhead expenses (vacancy, maintenance, lawncare, etc.) Since I have already put a lot of work towards maintenance, I am saving 25% of the profit to use towards overhead and put it into a savings so when something happens, the money is ready.

25% of $900 = $225 (Saved towards overhead per month.)
75% of $900 = $675 (MY POCKET!)
$675/$825 = 75% Return (Well above what I had first calculated)
Obviously, I cannot wait till I can get it refinanced and rented out fully.

With this being said. I am using $500 a month to save towards my next home purchase and I will continue to do this till I have my goal of 4 properties. At this point I will be resetting my goals and looking at something different since most of my returns are coming from sweat equity, and I don’t want to turn this business into another job. I want to run a business instead of running myself into the ground.

Nichole,

Thank you for your fantastic post. I find that all of the best stories, if not all true stories, always have a rollercoaster ride built in. I tend to be extremely skeptic of anyone that gives post about hitting the jackpot 8 times in a row without failure. You never know how you will react when you go from having something to losing it all. I think that it shows a real winner when they are so close to achieving what they want and then it goes away completely, yet they get back up and go back after it again. Usually the second effort leads them to the real success that they were looking for if not 10x'ing the first goal.

My wife and I just purchased a four family flat close to Chipewwa and Gravois in St. Louis. We are wanting to put on 4 new entrance doors. I was hoping to have it done in the next 2 weeks. It looks as if there may be some reframing to do to install pre hung doors. Any help would be fantastic.

@David Zheng This is awesome bro! I am closing on my first property (4-Family) in 2 weeks on Hydraulic. Would you be willing to possibly give me some tips on renting out/screening tenants in St. Louis?

@Chris Titcomb I have a question to add to this, if you dont mind taking a swing at it. I am an Missouri investor living in Illinois. Should I create my LLC in IL or MO. I noticed that IL is $500 compared to $50 in MO. At the same time though, I see that once you have a "Master" LLC in IL that it is a one time fee and you can continue to create "Sub" LLC's under the "Master" without having to pay the fee again. Maybe I am looking into it completely wrong though.
1. Is my assumption of one time payment for Illinois correct, or do I have to pay the $500 fee every time I create an LLC.

2. If I do choose to go with MO would it be subject to IL taxes? I assume that it would be an entity of its own outside of me.

Following

Devin,

I am a local in Fairview Heights. Although I have not been able to find any deals that meet my requirements I have had a lot of success in talking to people and meeting many good people. My wife and I are in the process of saving up to be able to have a down payment available when talking up deals. I don't feel comfortable enough to make offers without having the money myself. One thing that I have found out is that Belleville specifically is very rental friendly.  The homes are usually a 2BR /1BA and rent for $550-750 depending on location and amenities. If you can find a 3BR, I think that the rent goes up, but not much over the previously mentioned rents. Shiloh, FVH, Swansea seem to be more of the "new developments". I have yet to find a home that makes the numbers work due to prices being so close to market value. 

I hope that this helps you in your search. My experience may be a small sample, but I do believe this is a fair evaluation of the area. If you would like to know more just let me know. I have a guy that has worked the area and does multi-family units. I believe he just acquired a 4 plex in Belleville. @James Syed. He may be able to help you more with the multi-family.

Many Blessings,

Michael Shear

@Jay Hinrichs,

I would love to take on this opportunity if you are still looking for a new investor. I live in Fairview Heights, IL and I work in St. Louis on North Grand.  So far I have not been able to pull together a deal, but I have been actively calling, seeking, and searching through properties on a daily basis. If I am someone that you are looking for and in the St. Louis area I am ready to jump and do whatever is needed RIGHT NOW. Please send me a msg and I can get on the phone with you asap.

Travis,

Great to meet you and welcome to BP! I am a previous resident of Southern Illinois. I graduated from SIU Carbondale and grew up in that area as well. Your information is correct. My experience in that area is that Carbondale is great for rentals if you are looking for student living, you would have to have a good strategy for that of course. Marion and Carterville are the quickest growing cities in that area. The school systems are great, but I doubt that the real estate market is as hot as many may say. Although the prices are "low" this is very relative to the area as a whole. Keep your eyes peeled on the coal mining and union workers work force. As long as those are strong that will be a market place for homes. I really hope that this helps! Much luck and blessing to you and your wife on your new futures in Southern Illinois! It is an absolute must to go hiking at garden of the gods, wine tasting trail, and watch SIUC womens Volleyball.

This is absolutely fantastic! Congratulations on your first properties. I wish nothing but excellence for you. The hardest thing I have found to getting into real estate is making the first move. It will be nothing, but up for you from here.