St. Louis BRRRR?

[Whitney Lares]

Hi there! 

I am a new investor based in California looking to start investing in the St. Louis, MO area where my family lives. I am wondering if anyone has experience with the BRRRR method here. From my research it seems prices have gone up a lot in recent years so I am wondering if this strategy is still a feasible option for someone looking to start with a SFH for 150k or below, adding value with a rehab and getting a high enough appraisal to make it work.

Thanks in advance for any and all feedback! 

[Jake Baker]

@Whitney Lares

I am also based in California and invest out of state in Jacksonville FL. We do 20 Flips/BRRRRs per year there and we use a hybrid approach. It is also very hard to "perfect BRRRR" here, really anywhere. We BRRRR 8-10 per year and the flips supplement the money left in the BRRRRs.

[Nicholas L.]

@Whitney Lares

I don't have experience in St. Louis, but I do have experience BRRRRing in a rust belt city.

I think the challenge has less to do with the rise in prices, and more about how you will supervise a BRRRR from out of state. It's a very hands-on strategy, and the position of "BRRRR quarterback" just doesn't exist - that's you. You have to control all of the pieces on the board.

Every step from out of state is tougher - finding that great deal, usually off market, with exactly the right amount of distress (not too much, not too little.)  Finding a contractor that is high quality, reasonably priced, but also somehow available right when you need them to start - not 4 months later, so you sit paying holding costs on an empty, distressed property.  Finding any other trades or services and coordinating them with your GC.  Making sure the rehab is done within budget and on time and inspecting the work as you go.  And refinancing, getting rent ready, and lots of other things...

You'll need a strategy for all of that, and again, I don't see how you do it from thousands of miles away.

Happy to answer any other questions you have - not trying to be discouraging, just realistic.

[Ko Kashiwagi]

Hi Whitney,

The market has definitely changed and BRRRRs are more difficult to execute, but there are still many investors using the same strategy. I still hear about many activities in the St. Louis area, so I know it is possible. If you buy the right deal, BRRRR should still work, but it may be worth researching more and looking into other areas.

[Whitney Lares]

@Nicholas L.

This is very helpful perspective and I appreciate the breakdown of many of the considerations being out of state. My uncle is a contractor in St. Louis and he has been flipping and renting out houses out there for years. This is why I am considering this area. I am hoping that a solid boots on the ground person whom I trust will help make the process less daunting from afar. 

[River Sava]

Hi Whitney, 

Like Nicholas mentioned, BRRRRing out of state is difficult. However, if you have boots on the ground then that's a different story. Have you looked in markets close to you? Prices in CA are high, but the St Louis market is creeping up as well. Might make more sense to stay close to home as you jump in 

[Nicholas L.]

@Whitney Lares

OK fair enough.  I have to ask - do you plan to go there in person, at least a few times?  Or are you truly going to try to do it yourself completely virtually?

[Steven Goldman]

Hi Whitney: the BRRRR strategy has been significantly impacted by the higher mortgage rates and lower LTVs. You can still buy right, rehab efficiently and rent for good rent. The problem is the refinance at 75 percent of the ARV will not get all of your money out. The challenge is not the DSCR ratio but the amount of money you can exit with on the refinance. Work out your numbers carefully and make sure your ARV and the rent will allow you to exit with most of your initial investment in your pocket. Good luck!

[Jake Baker]

@Whitney Lares

I am also based in California and invest out of state in Jacksonville FL. We do 20 Flips/BRRRRs per year there and we use a hybrid approach. It is also very hard to "perfect BRRRR" here, really anywhere. We BRRRR 8-10 per year and the flips supplement the money left in the BRRRRs.

[Nicholas L.]

@Jake Baker

that seems to be the way to do it - fund the BRRRRs with the flips / keep more than you sell.

do you have a PM / COO person in Jacksonville that everything kind of rolls up to?

[Jake Baker]

@Nicholas L.

Yes I have a PM company that I like. I also have an agent and contractors that walk properties for me as needed.

[John Skaggs]

I'm located in St. Louis and have been helping people purchase BRRRR properties for years. I think it is a very good market for those types of deals, but you might not be able to get all of your money back on the refi as values seem to have gone down a little bit in most areas where people are buying BRRRR properties, such as North County. You're probably going to be in at around 80%, then refi at 70-75%, but you'll get good cash flow and good tenants here. Values should also go back up in the not too distant future.

[Nicholas L.]

@John Skaggs

just curious, with rates so high, at what price points / ARVs are you seeing meaningful cash flow after a refi?

[Jonathan Taylor]

@Whitney Lares I am in the same boat as you. I live in CA bought in STL a few years back, did a traditional BRRR but the prices now are too high numbers on Brrrs to work. My advice (which I am doing now) is offering lower offers on properties that have sat for a while (60-90 days +) and see. Offering too low gets rejected but once you are at the negotiations, then you can make something work.

[Whitney Lares]

Hi @River Sava, I live in coastal southern California so it is near impossible to get something for under 800k any where near me at this point. Looking at St Louis yes they are higher but not anywhere near CA prices from what I have seen. I would love to be proved wrong in this though! I have enough to put down 25% of my own capital from some that I am seeing in St Louis but that won't get me very far in my area unfortunately. 

[Whitney Lares]

@Nicholas L. I am definitely open to going out there but ideally yes I would be doing this as virtually as possible. Another benefit to doing this in a place where my family is though is that it is nice to go out there every once in a while and not have to factor in hotels/places to stay. 

[Whitney Lares]

Hi @Steven Goldman thank you for this -- great points. This is what I am finding in my calculations I have done as well, it seems a big challenge to get all of the money out. 

[Whitney Lares]

Hi @John Skaggs, thank you for this! I am excited to see that you are finding success there. How are you helping people purchase BRRRs? It looks like you are a realtor and a rehabber. 

[Whitney Lares]

Hi @Jonathan Taylor, this is good advice. Are you doing more traditional LTRs now after your first BRRR?

[Nicholas L.]

@Whitney Lares

I have to ask. I know you have family there, but let's start with Step 1 - sourcing the deal. Is that something your uncle is just going to do for you? In general you can't BRRRR something that's on the MLS... so this is where it seems like trying to be 100% virtual just hits a roadblock immediately.

[Jonathan Taylor]

@Whitney Lares I kept my first BRRRRs as LTRs, I know MTR and STR have higher income potential but my goal is time and income, LTRs provide me that and the management of these in STL are much lower monthly % so it works for me. I have clients/investors who do M/STRs but its a full time job for them.

[Hardy Vibert]

@Whitney Lares

Hi I have many investors that live in California that have done BRRRR's In St. Louis, feel free to PM and I will happily share there contact information :)

[John Skaggs]

Quote from @Whitney Lares:

Hi @John Skaggs, thank you for this! I am excited to see that you are finding success there. How are you helping people purchase BRRRs? It looks like you are a realtor and a rehabber. 

 Yes, I'm a Realtor and wholesaler in STL.  Been at it for 21 years.  I'm also a rehab consultant and often do the rehabs for my clients.  

[John Skaggs]

Quote from @Nicholas L.:

@Whitney Lares

I have to ask. I know you have family there, but let's start with Step 1 - sourcing the deal. Is that something your uncle is just going to do for you? In general you can't BRRRR something that's on the MLS... so this is where it seems like trying to be 100% virtual just hits a roadblock immediately.

Why can't your BRRRR something that is on the MLS? You absolutely can, if you're lucky enough to be first to the deal and get your offer accepted before 20 other offers come in. There are just as many people, often the same people, looking at all of the off market stuff too.

I suppose that most of the time MLS listings are over priced, but I've been finding deals in my local MLS for a very long time. It's a grind to find them, but they are there.

[Nicholas L.]

@John Skaggs you're basically making my point - you're local and have 20 years of experience - you'd know a deal when you saw one and also how to potentially beat out other offers.  i just don't see how a new investor does that 'virtually.'

[John Skaggs]

That's why people from all across the world want to work with me as their Realtor in STL.