Multi Family investing near Cherokee St.

9 Replies

I'm a newbie to the investment world and ready to finally get serious about purchasing my first multi family rental property.  I lived in South City St. Louis for about 9 years until about 2 years ago, so I know St. Louis can be different from block to block.   I was able to find an off the market 4 family within two blocks south of the heart of Cherokee st.   It is currently rented and on paper the cash flow looks great.

Does anyone have any thoughts about investing in this area?

When I was living in South St. Louis a couple years ago, there seemed to be a lot of development and rehabs in the Cherokee st area, which is a good sign, but do you see this trend continue?  

This is my first rental so I'm stuck trying to find a place that I can afford, but also be in an area where there is a possibility to have decent tenants and hopefully some long term growth.  

Any thoughts from local investors on this area would be greatly appreciated.

Thanks,

Ryan

I've had the same thoughts about Cherokee St. It really depends on the block. Some have more potential and some will be rehabbed much quicker than other blocks. It depends what the housing stock is and what condition it is in. Are there lots of boarded up houses falling apart? REALLY falling apart? Might be harder for that to be rehabbed. Are there larger buildings or smaller buildings? People like to rehab the larger ones over the smaller ones etc. The east end seems to be rehabbing faster than the west end because that is where the activity is on Cherokee St.

If this is your first property, you're going to have to learn tenant screening and be on your A game 100% of the time in this area. The area you're talking about I refer to as "Where out of state investors go to die." Lots of investors, especially out of state investors, buy here because of the siren song of high returns only to never actually see those returns because of non-paying tenants, continuous repairs and vacancies. I'm not saying those returns can't be made there, just that it's tough and requires work.

Make sure your "off market" deal is actually a deal. I subscribe to several emails and their off market "deals" are only off market because they could never get that much on the market. They are just hoping someone will pay that much for it. 

Also, for your first property, don't expect to make money. And what I mean by that is, when I started, all the rent went into an account and the expenses came out. Yes I made money but the account never seemed to grow very much. As the balance inched up, then taxes were due. Or insurance, or an AC repair.... It wasn't until I got to #6 that it finally felt like the account would actually grow every month. Just go in with realistic expectations, don't expect to be able to spend an extra $1,000 a month because now there is $1,600 of rent coming in. That money won't be there.

Good luck! Go in prepared and landlording can be a great experience.

Bob

@Ryan Carr

Hey neighbor!  Bob above gives some good advice.  Gravois Park is the area just south of Cherokee St. and it is one of the roughest areas of south city, by my estimation.  Tenant shenanigans and property damage will be your biggest money pits.

We bought a 2-family in Dogtown last year and it has been great.  The building itself is hideous, but it has potential and already cashflows.  Zero tenant issues so far.

For your first property, my advice would be keep saving until you find a place in a better part of town.  Something stable with lower chances weird crap happening so you can get your systems in place for running a rental business. (It took a lot more effort to get in place than I thought it would, and I'm still working on ours)

Another good option would be to partner with someone already invested in the area and observe and learn.  

Bob - thanks for responding and all your insight and information.  Greatly appreciated.  I definitely understand this will be a long process of learning.  Luckily i have a full time job, so I’m not relying on any of my investments for income.  I’m planning on slowly building a buy and hold portfolio by rolling over any/all of the money I make with my investments.  

Kyle - good to see you on here old neighbor!  Small world.  I didn’t know you were an investor.  We will have a lot more to talk about next time we see each other.  

I just went and visited the property.  It is on the eastern side of Cherokee St near Potomac and Ohio.  It’s on a block with only a few other houses, most of which are larger 4 family, so its not on a busy street with a bunch of non-maintained homes and cars.  It's across the street from a hospital and the other half of the block is a warehouse.  There is also plenty of street parking bc of the few homes. This particular building was brought to my attention from my realtor who has a relationship with an investor open to selling some of his properties. 

This property  is currently fully occupied at $550 per 1bd/1bth unit.  One of the tenants has been there for 8 yrs, and another for 3.  I met two of the tenants, one of which is the tenant that has been there for 8 years who has kept his unit looking nice.  The owner gut rehabbed this when he bought it about 9 years ago, so plumbing and electric is updated, and all units have central HVAC.  Everything has been updated within the past 9 years, so nothing is too outdated and nothing needs to be immediately upgraded/changed.   I walked through with the property manager who said he knows the least about this property than any other of the owners properties because there have been such few issues.   

When I run the #'s at asking price (which I think I can get for less), with 6% vacancy, 15% Maintenance & Cap Ex, & 9% Management fee (of which I plan on managing myself), I'm still cash flowing around $700 per month.

With a nicely maintained bldg on a quieter street near Cherokee st, all the larger building systems updated, 2 solid long term tenants, and a good monthly cash flow  makes this a very tempting purchase for my first property.  My only fear is if the area can support an exit strategy if managing this property becomes too difficult or not profitable and I want to sell.  

Lot of things to think about, but I'm already having a lot of fun.

Kyle - we should try to get together sometime

Thanks,

Hey Ryan, sounds like a neat opportunity. Cherokee St/Benton Park is not an area of focus for me, but I have looked at property down there and we get dinner down that way every couple months at Byrd & Barrel. In general my thought would be to stay north of Potomac. As Kyle mentioned Gravois Park is a rough area. In typical St. Louis style, Cherokee St and the few blocks either side of it have seen a lot of investment, but one of the worst areas is just south of there. Like Bob said, these 'edge' areas are where investors without local insight can get into trouble.

At the corner of Ohio & Potomac you're right on the edge, but I think being toward the east end is better than the west end where the investment peters out closer to Gravois. I noticed on Streetview there is a vacant lot/parking lot right at Ohio and Potomac. You might reach out to the local STLPD substation and ask if that lot has been a problem for drugs or anything else. There is also a daycare on the NW corner so at least you'd have some activity nearby most of the day.

We use a property manager, but I still stick to neighborhoods I would be comfortable going to on foot after 10 p.m. if I had to collect rent/fix something etc. I'm comfortable taking my family to Cherokee St. during the day (Earthbound Beer is great!) but after dark I've never felt too comfortable. If you plan to manage yourself this is an important consideration. Maybe swing by the property and cruise the adjacent blocks a couple times after the streetlights are on and see how you feel.

We're currently doing a fix n flip a block north of Cherokee on Michigan. And looking at rentals in BPW. Personally your deal sounds like it has potential. I like to stay within 1 block of Cherokee if it's south. And being on the west end is better. Good luck. 

I used to live on California, right off Juanita. I was single and lived alone, I never had any concerns coming home at night, I felt safe.  This was less than 3 blocks (north of) from Cherokee St.  I have also been looking at property to invest in within that area.  I agree that BPW is probably the best, unless you get an amazing deal in BP (hard to find).  Right now single family homes in BPW area after being rehabbed are seeing great returns when selling.  Not too sure how the rental market is, but sounds like the deal has good potential.  My boyfriend actually lives in Gravois Park, I feel safe where he lives as well but I agree staying within a block or two of Cherokee and closer to Jefferson is your best bet.  Also, checking the other vacant homes in the area and even checking the city website to see who owns those home, if the city owns them and there's more than one I may be concerned.  If they're owned by another company you may reach out to them and determine what their intentions are for the home, maybe they recently purchased to rehab which could be great for you. Good Luck, would love to hear what you've decided and how it went. 

Does anyone  have experience or suggestions regarding Miami Street, North of Gravois Avenue and West of Gravois Plaza? I've been looking in that area, but it appears that it might be on the edge of some crime-filled areas, similar to what has been stated about Cherokee above.  I'm looking for my first multi-family investment opportunity from out of state.  I grew up in St. Charles (family is still there), but I now live in Utah.  The affordability and potential cash flow looks so much better in St. Louis than in Utah right now. However, as stated above, I don't want to make a mistake and end up "Where out of state investors go to die."

@David

If you're one Miami north of Gravois and Chippewa, and west of Gravois plaza, you are in tower grove south. Now Miami is Tower Grove "far" south, but still not a bad area. You're correct though, it is close to a crime area (south of Gravois and east a few blocks), but I would invest there. Just be extra cautious with tenant selection. 

Good luck