Brand new member here. Lots of great discussions! I am hoping you can help. My Wife and I owned single families years ago. We have been away from it for awhile and are getting the itch to get back in. Only this time, the advantages of multi families have peeked our interest. My issue is pulling the trigger on the properties in the city. I am just hesitant for the obvious reasons - safety, hassle, etc. Should I just ignore this hesitation and just do it? Just give me some advice to make me feel better about it please. because the number work well on alot of these properties. I gues there is value in no headaches though. Thanks in advance for your thoughts.
Do your homework before diving in. Meet some people who are friendly and already operating in that space (here is a good start). Almost all of the 4-families in STL are 75+ years old, so you will always have old house headaches. May need updates, "what the heck where they thinking?", etc. Just build those numbers into your calculations and you should be fine there.
As you mentioned safety as a concern, the most important factor in your search should be neighborhood. St. Louis is spotty, with a lot of the sketchy neighborhoods having a lot of multi-families for sale. Talk to people and find your target areas you are interested in, then pursue a property there.
I would and have given up return on investment to get a property in a desirable neighborhood. To me it's worth it for the piece of mind.
UM grad here. If I buy multi-family it would have be for income by having heavy down. Is Wash U, UMSL a good opportunity with a property manager. I prefer a newer unit in a good neighborhood. Maintenance, safety and late payment can hit you simultaneously.
@Matt Conrad I think it's important to know your risk tolerance as with any investment. The higher the risk, the higher the potential reward. There are several advantages/disadvantages in investing MFs vs single families which I'm sure you are aware of. Only you know, what your risk tolerance level is . Gather as much information as possible, and then only invest when you're 100% comfortable.
I own and manage property in St. Louis City. I usually do recommend your first property to be a 2-4 family. It is just that if you have a few vacancies you can still usually cash flow. If you had a single family, you would have to eat it during vacancies. It will be more work and management though than a single family. You have multiple tenants, some more things to fix, etc. It does help that is all in one location though. City taxes are lower and passing occupancy is easier than the county. Usually if it is your first deal though, I feel most people can handle it. However, what everyone says is right. It is up to you to determine what you think you can handle. Good luck!
Thanks to all of you for the replies. Good information! I will definitely have to determine our risk tolerance. Some of things that help is if I know about the current rent rolls and vacancy rates. In addition, updates to the major systems of the property. Knowing that these are good, helps our comfort level. Am I on the right track there? Sometimes - this information is in the listings, sometimes not. What, in your experience is the best way to obtain so that I can analyze accurately BEFORE making an offer? Thanks again for your input!
Sorry for all of the questions -
I just got a quote for insurance for one of the $80000 South city buildings for 3200/year! All the standard coverages. She says that because the replacement is so high - that is why the premium is so high. Does this sound right?
I invest in South St. Louis. Let me know if you want to grab coffee or lunch some time and share ideas.
Regarding insurance, most vendors are going to quote you replacement cost. I don't do this because the cost is crazy and will kill cash flow (plus who wants to replace a rental should it burn down). I insure for the value of the building but not a lot of insurance companies will do this. For my 2s in south city, I pay about $800 each/year. The insurer is Foremost but I am sure there are others out there. I'd find a good broker (not an agent) and they should be able to guide you on your options.
Hi @Matt Conrad I echo what was said above by Eric. Use an insurance broker that can shop multiple providers. I can refer you to the one I have been using for the last 5 years and they have been great. Also if you need rental comps I can subscribe you to the MLS feed. Just shoot me a PM and I'll get you setup.
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