Just purchased first out of state property in St Louis

20 Replies

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 

Hi, @John Krauklis ... congrats on your purchase! I'm a local investor here in St. Louis. I love this town, though it can be tricky to find the right spots to invest because things can vary heavily block-by-block. Where in St. Louis did you purchase this property?

John, I think you're on to something.  (I'm secretly jealous that you have all the GC skills because that's what steers me away from tackling projects like this, ha ha.)  Your plan to be there yourself for a while and have your guy stay afterwards completing the work is a great idea.  When you're there in person you'll really get a flavor for the neighborhood and the town as well as the quality of the subs you plan to hire, etc... 

I admire this plan.  In fact, I think I looked at this deal myself a few weeks back.  Not 100% sure but it sounds familiar.  I have no experience with mixed-use (never leased a bar for example), so it wasn't my cup of tea.  

As far as St. Louis itself, I believe there are pockets of rehab and growth happening as we speak.  The goal is to place your properties in the path of that rehab and growth which it seems like you understand and have done with this first deal.  Well done, my friend.  I am rooting for your St. Louis success!

Oh yea,  I forgot to state where it is. It is in Soulard just south of the brewery.  It is a small little pocket that is surrounded by highways and the breweries/ operations. When we went to go look at it, one of the most appealing things was the Budweiser security patrol driving by every 10 minutes.  It used to be the Riverbend restaurant and bar until they decided to move to a bigger location, so the space is successful. 

 I was blown away by the Lemp brewery nearby. The fact that a massive 15 building complex is just sitting there, blows me away. Especially from Denver, this would have a dozen developers putting together bids and plans for it.  I really like the Soulard area and specifically this little pocket. I feel anything about a mile from the city center and near so much potential is a good call. I really liked Cherokee Street with all the antique places and little coffee shops. 

 If this building was in Denver, a few miles from downtown, it would easily go for about $5 to 600,000. That is if it even existed in its current state. I don’t think I have seen a listing with “fixer upper” on it in Denver for about three years now!  

 I have also been fascinated by the single-family and duplexes just south of this area and I’m going to look there while I am in town.    Having all the skills to fix up the place definitely helps. I absolutely love getting into a place that is decrepit and forgot about, then orchestrating the transformation.  It is so rewarding for me and think that you can remodel, produce some good equity. Then be able to rent it and produce some great cash flow is why I am doing it.  Just makes sense. Now to do it while not living there!  

Howdy @John Krauklis

Congrats on the new project. You might be missing a few expenses in your cash flow analysis. Is there a parking area or is all parking street side? Any exterior lighting? My point is you may have common area utility expenses to consider. How about accounting, legal, lease up fees, snow removal, Pest management, or CapEx reserves? Hopefully you have looked at these costs that do eat into your cash flow. Good luck.

Soulard is definitely a great area, and seeing lots of development. Congrats!

John Leavelle,  I am pretty sure I am leaving out a bunch of stuff and my numbers are never that specific. A bit of a downfall but I always feel like i can make it up By doing it myself.  there will be a lot  I have extra expenses associated with the commercial space but once it is up and running I think it will be a huge value add 

 I think the fascination with the commercial space has a lot to do with my willingness to spend a little more on this one.    Maybe someday my wife and I will end up in St. Louis and open around place here    I always think that now Denver so hot and turning over and nothing available, there has to be places like St. Louis that will someday be the next Denver.  This will be a long-term hold for us. 

Sounds cool. The cold vs hot markets usually boils down to population and demand growth differences and underneath that is jobs. 

I like your thinking in finding the revitalizing downtownish mix commercial residential investment. That is what millennials favor today. They want night life within walking distance. 

I might also suggest going 2 hours south with your skills and for easier logistics perhaps.

Good luck!

@John Krauklis Congrats on the purchase! If you're in town and game, I'd like to meet up with you for coffee and talk shop. Hopefully we can get something on the books, please don't hesitate to reach out! 

Soulard is definitely a good area to be in for STL.  It's one of the neighborhoods of the city that is growing instead of declining.  Notice the decline in population, that is why St Louis is cheaper than Denver.  Our reputation to outside areas is that it is high crime and racially strained (from direct talks I've had with a state politician).  If the city could make its residents happy and be more business friendly the area could explode in growth in industrial and real estate markets.  

Congrats!  I always wondered how trash is handled and how water is handled because of the business unit.  

Thought I would give an update on progress of my mixed use property in St Louis. It has been three months since I bought it and everything is going according to plan. Renovations are mostly done and the units are listed for rent. 

https://www.flickr.com/photos/[email protected]/40349356442

The four studios upstairs are completely finished and ready to rent. All four have new kitchens, bathrooms, floors, paint, trim and lighting. 

https://www.flickr.com/photos/[email protected]/39497288035

https://www.flickr.com/photos/[email protected]/39497287455

The biggest extra expense was extensive frozen pipe work. It was bad, copper comes apart after so many freeze thaw cycles. The units are all new now and I hope to get about $600 for each. The front two have a great view of Illinois over the river. All new historic wood windows are in all around. 

Downstairs has been fun peeling back the layers in the bar. It is a lot of fun to work on a public space that will get heavily used once there is a business in it. The exposed brick and the concrete floor helped the most. Reworking the storefront windows and removing all the boarding up was fun. Lots of fresh light in a previously dark space. 

https://www.flickr.com/photos/[email protected]/39497290135

https://www.flickr.com/photos/[email protected]/26523362908

https://www.flickr.com/photos/[email protected]/40394472131

Putting some reclaimed wood on the bar

https://www.flickr.com/photos/[email protected]/40394472681

It’s a nice smaller restaurant/ bar space that has a huge captive work week audience around it. The previous restaurants were rockin but delt with bad ownership. 

The restaurant space will hopefully rent for $2000 a month. I have enjoyed the uniqueness of the mixed use property and is a lot of what makes this project thrilling. I always think you have to be excited about a project to keep your interest in it. I hope to someday have a beer and lunch here when I visit. 

I applied for and received approval for the Missouri historic tax credit program. This will give me 20% back on all work paid for. I think I will be in it for $100K of work when all finished. 

Next up is flooring in part of the downstairs, exterior paint, and building a booth in the front room. I also ordered a new front door for the bar- a 44” wide by 90” tall beast that should be fun to hang!  Will go nicely under the original front transome that looks to have the original glass with the address. 

https://www.flickr.com/photos/[email protected]/39497291385

Numbers:

Fix up: $98,000

Purchase: $104,000

Total investment: $202,000

ARV: $235,000

Yearly. Optimistic

Taxes. 4000. 2000

Insurance. 4000. 2000

Property management 5000. $2000

Utilities. 3000. 2000

Vacancies 4000. 2000

Maintenance 4000. 2000

Mortgage. 12000. 12,000

Total expenses = $34,000. 24,000

Revenue 12 x 4600= $55,000

Income = $21,000 - 31,000 per year

Great post, @John Krauklis ! I like the reclaimed wood on the bar. I'm looking forward to seeing more about the project. 

Some advice about the historic tax rehab -- get some advise from a CPA with experience doing historic tax projects about how to record/file receipts and invoices, if you haven't already. Knowing what your records will need to look like and having a good system in place from the outset to get them that way will make life a lot simpler.

@John Krauklis that remodel looks great. Can you tell me where you found the appliances for the kitchen, and did you stay on budget with the unit remodels? I'll be remodeling a 2 bedroom unit soon and will need appliances, looking to find a good deal. You had estimated 1100 for your kitchen appliances and 2500  total for the kitchen. I'd like to get my units kitchen remodeled at that price, they look similar in size. PM me if you can. 

Cheers! and good luck on the bar and rentals. 

this is awesome. Not only satisfying financially but breathing life into an old building has even more benefits. 

@John Krauklis  Everything was going well with your post until I saw your Florida State car tag. #gatoralumni. But seriously, Congratulations on your STL property and thanks for sharing your journey. 

Donald Shaver, the appliances came from Home Depot during their Black Friday sales. I did stay on budget with the kitchens because I put them together myself. They are small but efficient and gleaming with stainless and granite. 

Tiffany Chandler, the truck belongs to my main worker Chris who went there and is a friend of a friend. But my wife also went there and we are big fans. I have been renting a truck every time I come into town. 

Anyone know of a good commercial mortgage lender in St Louis?  That is my main goal the next few weeks is to start the process of getting financing for it and cash out. 

Thanks. John. 

I've heard great things about Rockwood bank, and Bank of Franklin county. I don't have experience with them yet, but they come highly recommended around town.

Such a great thread, and congrats! I love seeing that building revitalized and given a new life. Excited to see updates on this, as I'm also looking into STL at the moment. Was this an MLS deal?

It was a commercial property that I found on LoopNet. It needed a lot of work so it scared people off I think. With the historic tax credits and a good appraisal, I will be plus $50k on the finished product. Then when it is fully rented, I should be taking in $2000 a month. 

https://www.flickr.com/photos/[email protected]/27180171068/in/dateposted-public/

https://www.flickr.com/photos/[email protected]/39242750180/in/dateposted-public

https://www.flickr.com/photos/[email protected]/39242684500/in/dateposted-public

@John Krauklis I love your enthusiasm with this project. It's infectious! Keep us posted on all the progress and if I'm in St. Louis anytime soon I know where I'm getting a beer!

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