St. Louis rental investment price points

5 Replies

Hello fellow BP’ers! Very quickly, I rehab and sell rental properties in the St. Louis area. I am exploring moving into different price points (better areas) and wanted some feedback from the out-of-state folks. Generally, I have been selling sfr in the typical 35k price range you so often hear about when investing here in St. Louis. While in general the (true and not manipulated) cap rates are pretty dang great in this price range. The first problem is its getting harder and harder to find deals that work. Second, and to be very frank, I feel the higher the rate of return, generally the higher the risk with quality of tenant, crime, just fill in the blank. I just had my first break-in during a build, and it cost me dearly. I know “stuff happens”, but it made me think. I am reaching out to see if there are those that have interest in higher prices points. St. Louis has all kinds of great areas, but NOT in the 35k range. I’m looking to see if there is interest in sfr with cap rates in the range of 8-12%. It allows for better areas, and some appreciation as well, which doesn’t really happen in that 35k window. A typical example would be an 800-900 rental, rehabbed, 50-60k. 1100-1200 rental 80-100k. Feel free to comment good or bad on this subject. I appreciate the feedback and this community in general!

@Tom Echols

I think you could do well in these areas. It sounds like you are offering rehabbed properties in nearly turnkey condition. If you can land investors north of 10% CoC with a reasonable allowance set aside for maintenance, vacancy, and management, it will sell quickly in the right neighborhood.

I believe a bunch of investors are eager to enter the market in the not so shady side of STL, and if you appear to provide a fairly priced quality product in a working class neighborhood, it should work great.

I agree with @Kyle Eckert , while I'm not looking for turnkey properties strictly speaking, if offered a good deal it would be a hard choice. There are plenty of neighborhoods in the area that you can find the 80-120k in a good C to B- class area. 

35k homes in st. louis are pretty dangerous. I think if people understood the areas, they would be willing to spend more to get good cash flow as well as better long term potential. I buy in good school district areas such as O'fallon, Lake St.Louis, and Wentzville and find a lot of competition with hedge funds buying up properties. I don't think you would have trouble selling them if you could find ones that would make the numbers work. I'm always looking for turnkey properties in these areas. 

Hey @Tom Echols I try to stay away from the $35k or less properties in St. Louis since it involves a lot of risk and demands a healthy amount of experience to navigate.  I personally invest in the range just higher with ARVs of $70k or more.  I have found there is a lot of demand for properties in this price point because cash flow is good and the tenant pool tends to be better.

@Tom Echols  As someone who is starting to actively look in the St. Louis area, I couldn't agree with the previous responses more. I think you'll have no trouble whatsoever selling higher priced homes assuming you can market them well and provide potential buyers with clear and concise information on the property. @David Ounanian hit the nail on the head with his comments that you can still see good cash flow and a more "stable" tenant pool. 

@Kyle Eckert had a great point with his COC numbers. I'm not necessarily looking for turn key properties (I prefer to either build from the ground up or force appreciation through renovation), but if presented with a solid property with data points showing what I'm comfortable with, I'd have no problem picking up some of these deals.

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