Best Bargain or Too Good to Be True?

24 Replies | St. Louis, Missouri

I am in California, but I have a daughter who lives in St. Louis, so I might ask her to bird-dog for me.

I found this 2 building, 12 unit apartment on Loopnet.com for $385K. Current rents total to $6600/month. Each unit is 2x1 and from the description, it would seem it needs little or no rehab work. Every way I work the numbers, it comes out smelling like roses, anywhere between $1600 to $2400 monthly cash-flow, depending on unknowns like maintenance, taxes, insurance, and assumed-knowns like property management and capital reserves.

Now, here in California, $350K will hardly buy a 2 br SFR, nevermind an apartment. And I'm noticing even in the St Louis area, multi-unit apartments usually price at million on up.

SO -- am I looking at a misprint? A scam? A money-pit? Or a golden opportunity that somehow nobody but me has noticed? (despite having been on Trulia.com for over 500 days)

Originally posted by @Jim C. :

500 days??? 

I'd go look at it, at the very least it will be a learning experience to why its been sitting so long

Thanks for the reply. I worry about "learning experiences" as they often can be quite expensive! I think I'll see if I can learn from somebody else's experience where possible.

But at least now I know I'm not the only one who thinks 500 days is an awfully long time.

Originally posted by @David Ware :

May depend on where it is located. St. Louis has a lot of war zone. 

Thanks for the reply. The local area crime rate is low according to Trulia.com, but I've also heard many realtors laugh out loud at some of the information available on the popular web-sites. (e.g., the "z-estimate" of market value)

Ferguson is a 15 minute drive to the west, which may have something to do with it. I can't say whether the mess that happened there recently is a counter-balance to the apparent low local crime rate or not.

That's one big problem with investing at a distance. You really do need to get some trusted local experts on your team so you don't snap up something that looks like a great deal and end up getting "snapped" yourself!

Hey Alvin. I'm local here in STL and would like to get into a bigger deal like this sometime soon.  I definitely think that sounds too good to be true though.   If you PM me the street or neighborhood I can give you a little more info on the area.  I was looking at a 4 family that was a fixer upper for about this same price, but it was in a decent area.

@Alvin Sylvain  If it’s the one I’m thinking of, there is good reason to be hesitant.  It’s not a nice area of St. Louis County and your almost guaranteed to have a lot of tenant issues.  FYI,  When I looked at this listing (assuming it’s the right one) it said under contract.   There are quite a few nice investment areas of North St. Louis County (including Ferguson)  that offer good investment opportunities.

People scoff at these deals and while I admit the good ones aren't often on loopnet for 500 days they are around. I purchased an 11 unit for 340k that cashflows between your 1600-2400 a month. In all fairness with the amount we are saving for reserves and cap ex it is closer to 2000 a month but it was a killer deal. Oh and it was not in st louis so defintely not apples to apples just more of a example for all those there are no good deals around people lol. 

Originally posted by @Philip Williams :

People scoff at these deals and while I admit the good ones aren't often on loopnet for 500 days they are around. I purchased an 11 unit for 340k that cashflows between your 1600-2400 a month. In all fairness with the amount we are saving for reserves and cap ex it is closer to 2000 a month but it was a killer deal. Oh and it was not in st louis so defintely not apples to apples just more of a example for all those there are no good deals around people lol. 

 OH I am so jealous!

Congratulations on getting a "Killer Deal"!

Want to be more jealous lol? About the only complaint I have about it is that I never get a late payment because the tenants are too good. 4 of them have been there for 20+ years and 3 have been there for 15 plus years. @Alvin Sylvain

Originally posted by @Alvin Sylvain :
Originally posted by @Jim Chesmore:

500 days??? 

I'd go look at it, at the very least it will be a learning experience to why its been sitting so long

Thanks for the reply. I worry about "learning experiences" as they often can be quite expensive! I think I'll see if I can learn from somebody else's experience where possible.

But at least now I know I'm not the only one who thinks 500 days is an awfully long time.

 It wont cost anything to  a look

Originally posted by @Jim C. :

 It wont cost anything to  a look

It won't cost anything to send out my daughter, who lives in Maplewood. (Except probably she'll want a favor in return! No worries, I helped her buy her house! That's what dads do, isn't it?)

Me, it would cost several hundreds to fly out from LA, plus vacation time, plus car, plus hotel (I can't stay with my daughter, I'm allergic to that mutt of hers).

My first question is how long it has been on the market? If short I will call the listing agent while looking at  crimereports.com, zip code demographics, income.  ST Louie is one of the oldest cities in Mid America, near town center years ago people warned me not to venture there even in the car.  Only suburbs are considered safe to live. A realtor friend family got transferred there she told me even in better suburbs the home price upside potential is low. She buys coast homes for investment and rent in St Louie.  

Originally posted by @Alvin Sylvain :
Originally posted by @Jim Chesmore:

 It wont cost anything to  a look

It won't cost anything to send out my daughter, who lives in Maplewood. (Except probably she'll want a favor in return! No worries, I helped her buy her house! That's what dads do, isn't it?)

Me, it would cost several hundreds to fly out from LA, plus vacation time, plus car, plus hotel (I can't stay with my daughter, I'm allergic to that mutt of hers).

 I didn't realize that

There are probably a small handful of places you could find these type of economics (pure cash flow and little to no appreciation potential unless the cities really rebound) = Detroit and St. Louis would be two of the larger cities and there are a number of smaller rust belt cities also.  

It's due to a combination of negative growth rates (people moving out) and crime and urban decay, etc.  And if nobody has bitten for this listing @ 500 days that really says something.  There may be some ongoing cash flow but I'd model in a whole bunch of conservative estimates: i.e. higher vacancy, rehabbing, much higher than normal capex/maint, etc. and then ask yourself if it's the type of investment that you'd want to sign up for (C- or D class I'm guessing... in terms of ongoing headaches).  

I did a quick search on Loopnet. If it's the one on Diamond Drive in Riverview, this is not a desirable area and can be quite dangerous. There was just a quadruple shooting in Glasgow Village over the weekend for example. This is unincorporated St. Louis County which has been in the crosshairs of county government for several years, specifically targeting landlords. They tried to pass a controversial law that would basically require landlords to evict any tenant charged with a misdemeanor crime. To enforce it, they were pushing a landlord license where you have to pay a fee and list all your properties and then if you didn't combat tenant issues, property upkeep, etc. the way they wanted, they could revoke the license for ALL your properties. So a couple things, clearly there is an epidemic of "problem properties" in this area and the local government has been extremely landlord un-friendly in regards to combating the issues. It's pretty much a stay-away area IMO.

Originally posted by @Account Closed :

 It wont cost anything to  a look

It won't cost anything to send out my daughter, who lives in Maplewood. (Except probably she'll want a favor in return! No worries, I helped her buy her house! That's what dads do, isn't it?)

Me, it would cost several hundreds to fly out from LA, plus vacation time, plus car, plus hotel (I can't stay with my daughter, I'm allergic to that mutt of hers).

 You are too cheap.   Is your lovely girl a RE appraiser? You should concentrate in your area,  Brandon Turner says.............................

Yes, I am too cheap.

No ( ---- puts on his bragging suit ---- ) my daughter knows very little about RE, she's a PhD graduate in some nerosciency stuff that's way over my head. She did however buy her first house in Maplewood at the ripe old age of 29. ( ---- takes off bragging suit ---- )

I can't invest too much in my area. We're talking $385K for a 12 unit apartment in St. Louis. I can afford a regular 25% down for an investment costing that much. In Los Angeles, $385K won't even get you a 1 bedroom condo with a caved-in roof and negative cash-flow.

It was bad enough 2 years ago, but now with the Rams moving back and the new stadium under construction, things have gotten bat guano insane. (and you know there's something else I wanted to say other than "guano", right?)

Originally posted by @Max Householder :

I did a quick search on Loopnet. If it's the one on Diamond Drive in Riverview, this is not a desirable area and can be quite dangerous. There was just a quadruple shooting in Glasgow Village over the weekend for example. This is unincorporated St. Louis County which has been in the crosshairs of county government for several years, specifically targeting landlords. They tried to pass a controversial law that would basically require landlords to evict any tenant charged with a misdemeanor crime. To enforce it, they were pushing a landlord license where you have to pay a fee and list all your properties and then if you didn't combat tenant issues, property upkeep, etc. the way they wanted, they could revoke the license for ALL your properties. So a couple things, clearly there is an epidemic of "problem properties" in this area and the local government has been extremely landlord un-friendly in regards to combating the issues. It's pretty much a stay-away area IMO.

 WOW! This is very important information! No wonder the cap rate is so high, the seller is probably trying to git while the gittin's good.

Thanks very much for this!

Originally posted by @Jim C. :
Originally posted by @Alvin Sylvain:
Originally posted by @Jim Chesmore:

 It wont cost anything to  a look

Me, it would cost several hundreds to fly out from LA, plus vacation time, plus car, plus hotel (I can't stay with my daughter, I'm allergic to that mutt of hers).

 I didn't realize that

No worries, I don't expect anybody to know everything. Just don't mind me while I pick your brain for what you do know!

And I'll gladly share my knowledge, such that it is, whenever it seems it might be useful to somebody.

Originally posted by @Sam Shueh :

My first question is how long it has been on the market? If short I will call the listing agent while looking at  crimereports.com, zip code demographics, income.  ST Louie is one of the oldest cities in Mid America, near town center years ago people warned me not to venture there even in the car.  Only suburbs are considered safe to live. A realtor friend family got transferred there she told me even in better suburbs the home price upside potential is low. She buys coast homes for investment and rent in St Louie.  

 500 plus days, if the websites have any accuracy. Thanks for the tip about crimereports.com, I think I will check it out!