All Forum Posts by: Michelle Eisenberg

I also live in the California Bay area, and I am just starting investing in St. Louis. What school is your son going to be attending? 

I lived in St. Louis for 10 years, and I went to Wash U, so although I don't have specific advice for a realtor, if your son will be going to Wash U and if you would find it helpful to hear about the neighborhoods that are most popular with students (undergrads and grad students), I'd be very happy to chat more. 

Looking back, I really wish I had started investing while I was still living there, but hindsight is 20/20. Good luck!

Welcome to the BP forums. I'm a new investor in St. Louis (South City), and I'm about to close on my first SFR. I live in the California Bay Area now, but I lived in St. Louis for about 10 years, and I can see myself moving back to St. Louis someday.

I'm curious to hear about your experience owning investment condos. It seems like there could be a lot of positives, but also some drawbacks. What have been some of the pros and cons of investing in condos for you so far?

@David Light Thanks for your reply. What you said about the BRRRR strategy makes a lot of sense. I have thought about trying to go that route. In 6-12 months I'll have saved enough again for a downpayment/repairs, so maybe I should just wait until then and find a property that I could BRRRR. Like you said, that way I also wouldn't risk something happening in life that would suck up money and prevent me from finishing the repairs.

I'm new to real estate, and I have my first property under contract in St. Louis. This one is tying up almost all of my money right now, but I just found another potential property in St. Louis that could provide a very good cash-on-cash return. My first thought was that there's no way I could make it work because I don't have enough money for a down payment. Then I switched to thinking about how I could make it work, and I came up with a potential creative finance offer that I think I could make work. Being relatively new to this, though, I don't know whether it would actually be a good deal for me (the current owner likely wouldn't accept it either, but I'd potentially be willing to try making an offer if my idea sounds reasonable). I'm looking for any advice you may have about my idea for structuring it, and I'm open to any other ideas you may have. I'd like to build up my creative financing skills whether this one works out or not.

The house last sold in 1995 for $34,000. If the owner hasn't refinanced, I calculated that they'd likely still owe around $13000 on the loan if they had a 30 year mortgage and they made the regular payments each month.

I started with the conventional financing route. Here are the number for that:

List Price: 59,000

Market Value: ~$61,000

Repairs/make ready: $10,000

3 bed/1 bath

Taxes: ~$38/month

Down Payment at 20% (no creative financing): 11,980

Mortgage at 5.5% interest: $272/month

Replacement reserve: $75/month

Cap X: $75/month

Utilities: 0 (paid by tenant)

Property management: 9% of rent plus 1 month rent for tenant placement

Estimated rent: $950/month

Monthly Income after expenses: $169/month

Cash on Cash Return: 9.2%

This would fit my investment criteria in terms of what I'm looking for, but as I mentioned above, I don't have the money for a down payment or the repairs right now. So here's what I came up with as a potential offer:

Seller financing at 8% interest only for 2 years with balloon payment. Then refinance out using a conventional loan and pay the seller.

It would take me ~6 months to built up all of the money I would need for the repairs. Based on my calculations, I would lose around $2172 the first year because of the time needed to build up the money for repairs and then make those fixes. I could consider a personal loan for that money as well, which would let me rent out the unit faster but would require larger monthly payments.

During the second year of interest only, the unit would be rented (accounting for up to 1 month of vacancy), and I would make $496 that year.

At the end of the second year, I would refinance, and if the value of the house appreciated at ~2%, I would owe the seller around $10,000 after the refinance. I would have enough money at that time to pay that amount. Starting in this third year, after the refinance, I would make $2032 a year after all expenses, which would amount to ~20% ROI based on the $10,000 paid to the seller and ~9.2% ROI based on the full $22,000 put in (including repairs and money lost in the first year). By that time, I'd have saved more than that amount, so I'd have no trouble making this payment.

I'm very interested to hear your thoughts about this structure. I'd be happy to provide more information about how I got to these numbers if that would be helpful.

Thanks in advance for your advice!

-Michelle

@Thomas Powers It's nice that you live locally. There are definitely challenges to investing from out of state, but it seems to be working out so far. I have a great agent who has made the process much easier.

I decided to invest in St. Louis because I lived there for ten years before moving to California. Northern California is too expensive right now to make buy and hold work--rent is really high but not high enough to even cover the cost of the mortgage in most cases. Since I like St. Louis and have family and friends there, it makes a lot of sense to invest there. As I'm sure you know, property isn't too expensive, it's possible to find a good number of properties in good areas that satisfy the 1% rule or greater, and given how many good universities and companies are in the area, I don't see the city declining anytime soon. It wouldn't surprise me if I end up back in the St. Louis area at some point, too.

Welcome to BP! I live in the California Bay Area, but I just put in an offer on my first property in St. Louis, so we'll see how it goes. Do you live in the St. Louis area or are you investing from out of state?

@Ciara Coleman I found out more about Homestyle Renovation loans yesterday. Here's what I found out. Feel free to send me a private message if you'd like to know who I spoke with. I don't know whether I'll end up using this option, but I'm really glad to know that it exists.

The rates are higher than for conventional mortgages, but down payments can be as low as 15%. For investors, you can only finance a single family home. For owner-occupied, it can finance up to a four-plex.

With this type of loan, renovations cannot exceed 75% of sales price + renovation, or the appraised value, whichever is lower. That means that if a property is priced very low, it can be hard to get enough money for the extensive renovations that would be needed. On the other hand, it can fund moderate renovations, it seems.

It allows for four draws to pay contractors, 10% draw in the beginning, 2 progress draws, and a final draw after the final inspection. You can only have up to 3 contractors named for the project, so it pretty much requires having a general contractor. The general contractor then communicates directly with the bank to get the draws.

I was told that it's typical for the loan to be able to close within 30-45 days, so slightly longer than with conventional mortgages. The interest rate on the loan also varies slightly depending on how much time you budget for renovations (45, 90, or 180 days). The loan also can't be refinanced until 6 months following the renovation completion date. 

@Rob Hood I'm just starting out, and I haven't bought my first property yet. I'm primarily looking in South City, though.

@Ciara Coleman It definitely makes sense that it would be difficult to move around a lot with work and a young son. Congratulations again on getting started. It sounds like you were able to do a lot with $12,000. Did you hire a general contractor, or hire specialists and manage the project yourself? If I end up doing renovations, I'll definitely need to hire a general contractor, and I haven't started the process of finding one yet.

The homestyle renovation loan is similar, but a bit different from a 203k loan. Unlike the 203k loan, which is only available to owners who plan to live in the property themselves, a Homestyle loan will finance investor owned, but not occupied, single family homes (nothing bigger, though). I think I got a lead on finding a lender for this type of loan today, but I have a more in depth conversation scheduled for Friday, so I'll know more then. If it works out, and if it would be helpful, I'd be happy to let you know more about the lender.

My degree is in Psychology. I'm mostly in research, but I also do some clinical work. I wasn't in the school of medicine, but I know someone who graduated a few years ago from OT at Wash U who had a great experience in the program as well.

@Adam Barlow Welcome to Bigger Pockets! I'm just starting out in real estate myself, and I also live in the San Fransisco Bay Area. I'm planning to start investing in St. Louis in single family homes. Also like you, I am planning to eventually move into small multi-family properties. Your reasons may be different, but I'm planning to start with SFH because the downpayment money I have saved is enough for a SFH but probably not quite enough for a duplex. I can't easily house-hack from here because even the smallest of multi-family properties in the Bay Area are quite expensive and the price-to-rent ratio is way too high to make it a good long-term investment (at least from what I've seen).

Good luck as you get started. We're probably in about the same boat in terms of experience, but if you decide to go forward with investing in St. Louis, I'd be happy to share what I've learned so far.