Just purchased first out of state property in St Louis
Hi all. I am a real estate investor and contractor in Denver with a few large single family short term rentals near downtown. I just closed on a mixed use, five unit property in St. Louis that I paid cash for. I plan to use the BRRRR strategy to get it stabilized and my money back out. It is a bar/restaurant space below and four studios upstairs. 3600 sf total.
Why St. Louis? I was there last month visiting my family and was checking out Zillow like I usually do. I was shocked at the prices that I found near downtown. St. Louis has an amazing stock beautiful turn-of-the-century solid brick buildings. I found this property because it is my favorite commercial property type. It has a corner bar/restaurant on the main floor and living space above. It is all boarded up and in need of lots of fix up. I was amazed that there are so many properties for sale that are boarded up and ready to be renovated. In Denver you would never find that because it would go right to the realtors friend or they ate people that of been hounding the property owner about buying it
People in Denver always say that they wish they could’ve bought these places 15 years ago when they were dirt cheap. Well that is my bet on St. Louis that these places are dirt cheap now and in 10 years they will be worth a lot more. It is amazing to me that you can pay cash for a five unit that just need some basic work done to it, fix it up, then the return on investment is incredibly high.
In Denver, it is difficult to buy single families or multi units and get back what you would be paying on the mortgage back in rent. Whereas in St. Louis it seems quite easy to get good cash flow going out of properties. In Denver you may get twice the rent but you pay way more per door in purchase cost, say 4-8 times.
As for the out of state, that is new territory for me and i think i have a handle on it. At least it will be a challenge. As a contractor, I can pretty much do anything to a property that needs to be done. I will be in St. Louis for a full week to get as much done that I can. Then i will have one of the guys that works with me here there for two weeks and a local friend of a friend who lives in St. Louis be there to work on it. That combined with a few subs like drywall, HVAC, flooring, I think it will work out.
Here are my numbers:
St Louis budget
Repairs:
Roof. 8,000
Upstairs
Kitchens. 2500 x 4 = 10,000
(Cabinets 900)
(Appliances 1100)
(Counters fixtures 500)
Bath 1000 x 4 = 4000
(Toilet, vanity mirror faucet 500)
(Shower pan, valve 500)
Floors. 6000
Drywall, Trim 4000
Doors, locks, 1000
Paint. 4000
Lights. 1000
Misc. 2000
Total upstairs. 32,000
Downstairs
Baths. 4000
Floors. 7000
Drywall paint. 6000
Windows, glass. 2000
Accents, wood, etc. 2000
Lights. 1000
Misc. 2000
Labor. 3000
Total downstairs. 27,000
Unexpected 10,000
$77,000
Purchase: $104,000
Total investment: $181,000
ARV: $220,000
Yearly
Taxes. 4000
Insurance. 4000
Property management 6000
Vacancies 4000
Maintenance 4000
Mortgage. 10000
Total expenses = $32,000
Revenue 12 x 4000 = $48000
Income = $18,000 per year
I feel there may be some more costs to come once I get into things but that’s ok. Right now with a mortgage where I get back 75% of the value, that is getting back everything I have put in. If i have to keep $10-15K in to for additional repairs, I’m ok with that.
Right now the numbers look great and I am excited to see how a cheap market with cash purchase investment works out.
What do you think?
John