What $60,000 buys in North County, St. Louis

Real Estate Deal Analysis & Advice
12yFollow

What $60,000 buys in North County, St. Louis

Gunnar Teltow
Investor · Austin, TX · Member since 2013 · 112 posts · 57 votes

After talking to a few potential lenders, it looks like they all require a $50,000 minimum property value for it to be eligible for financing. So we had to move upmarket (such as it is) in North County!

Instead of buying $30,000 houses that rent for $700, we're now buying $50-60k houses that rent for $1,000 or so. The tradeoff for the weaker cash flow is better quality tenants and some appreciation potential. Here's what $60,000 will buy you (closed on it last Friday):

  • 9638 Chicago Heights Blvd, St. Louis, MO 63132
  • 4/2
  • 1,560 SF
  • rented to a quality tenant with two cats for $995/mo., which is about $100 below market but she would like to stay and has been great with upkeep and timely rent payments
  • $57,786.45 per HUD-1, plus some commissions to my local agent and the inspection
  • even with all-equity, this is a great investment property. After financing, it will become a cash cow of epic proportions.

This deal came to us because a large private equity shop backed out of the contract so we stepped in. This is unit #31 in our portfolio. The point of this post is to encourage everyone who is thinking about it but hasn't pulled the trigger: get started, get out there, and the deals will start finding you :)

4Reply
31 views

Most Popular Reply

Daniel B.
Rental Property Investor · Saint Louis, MO · Member since 2012 · 115 posts · 42 votes
12y

@Gunnar Teltow However much you are estimating for Vacancy/credit loss, I would increase it. I own 3 in North County (all west of Lindbergh). I also have some relatives that have about a dozen more in the same area. The numbers in North County are great on paper and the real returns are still good, but just be sure to budget for higher costs when it comes to vacancy/credit loss and the amount of money you will spend in between tenants. If they are being evicted or leave before they are they all leave it trashed and it will need more than just new paint. I had a tenant that was making $50,000 plus a year, lost her job and then couldn't find anything that paid remotely close to it, she went from a great tenant to leaving the place trashed and moving out early. This seems to be a recurring theme in the area as other investors have had the same experience. Any time they lose a good job it's extremely hard to find another one that pays remotely close.

People seem to migrate west when they can and then make the jump out to St. Charles when they can afford it. There are always pockets of good and bad areas, general rule of thumb we stay west in Florissant. Good Luck!

2Reply
See this reply in the discussion

22 Replies

Jump to latestLatest
  • Ryan Dossey
    Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
    12y

    I'm from the St. Louis area so find this very reassuring. Looking to find my first property here sometime soon. I didn't know about the 50k min. so that's definitely good information to know. Thank you!

    0Reply
  • Gunnar Teltow
    OP
    Investor · Austin, TX · Member since 2013 · 112 posts · 57 votes
    12y

    @Ryan Dossey you live in a great metro area for cash flow investing! A good strategy might be to look for a nice duplex (not necessarily North County) and live in half of it. The $50k limit only applies for loans from B2R, FirstKey, Colony etc. Those shops won't do a loan smaller than $500k, and some of the terms will not work for a new investor like yourself. Your best bet may be to go to your local credit union or bank and see what kind of loans you may be able to get for an investment property. Good luck!

    0Reply
  • Richard F.
    Real Estate Investor · Henderson, NV · Member since 2011 · 87 posts · 22 votes
    12y

    @Gunnar Teltow Congratulations -- thats a nice looking property with good "curb appeal"

    0Reply
  • Chris Winterhalter
    Investor · Chicago, IL · Member since 2009 · 566 posts · 274 votes
    12y

    @Gunnar Teltow

    Be very careful buying in North County as the long term trend in many North County sub-markets doesn't look good. You are probably safe with this property however the further NE you get, the worse it can be. You have the right idea jumping up in price point because many of the lower cost rentals are in very challenging areas.

    0Reply
  • Jassem A.
    Investor · PA · Member since 2013 · 1k+ posts · 602 votes
    12y

    Some lenders will lend under 50k but they are harder to find. I know PNC offered a sub-50k (I think it was 35k) mortgage to me a few years back. Otherwise an equity loan or line of credit is generally the way to go for the cheaper properties unless the seller is willing to finance at a decent rate.

    0Reply
  • Gunnar Teltow
    OP
    Investor · Austin, TX · Member since 2013 · 112 posts · 57 votes
    12y

    @Richard F. thank you! I thought so too. That door is much nicer than the one on my own house :)

    @Chris Winterhalter you're right North County is very granular, and certainly not a growth hotspot. We'll be keeping a close eye on rental rates and vacancies, but for now we haven't had issues with either of those even in the cheaper areas like Riverview, Normandy, and Berkeley (we will not buy anything in Castle Point, but that's about the only place we really don't like at any price).

    Most of these rentals will pay back all equity within 6-8 years (even if not refinanced) and after that it's pure profit for as long as people are going to be around to rent in the area, which will be a long long time because nothing ever seems to change quickly in St. Louis.

    0Reply
  • Daniel B.
    Rental Property Investor · Saint Louis, MO · Member since 2012 · 115 posts · 42 votes
    12y

    @Gunnar Teltow However much you are estimating for Vacancy/credit loss, I would increase it. I own 3 in North County (all west of Lindbergh). I also have some relatives that have about a dozen more in the same area. The numbers in North County are great on paper and the real returns are still good, but just be sure to budget for higher costs when it comes to vacancy/credit loss and the amount of money you will spend in between tenants. If they are being evicted or leave before they are they all leave it trashed and it will need more than just new paint. I had a tenant that was making $50,000 plus a year, lost her job and then couldn't find anything that paid remotely close to it, she went from a great tenant to leaving the place trashed and moving out early. This seems to be a recurring theme in the area as other investors have had the same experience. Any time they lose a good job it's extremely hard to find another one that pays remotely close.

    People seem to migrate west when they can and then make the jump out to St. Charles when they can afford it. There are always pockets of good and bad areas, general rule of thumb we stay west in Florissant. Good Luck!

    2Reply
  • Chris Winterhalter
    Investor · Chicago, IL · Member since 2009 · 566 posts · 274 votes
    12y

    @Gunnar Teltow

    @Daniel B. is correct in his comments. Turn over costs are much higher on C class single family houses. Especially because all properties require re-inspection in St Louis County and City whenever a tenant turns over. Also certain small North County municipalities can make occupancy grueling while making ridiculous demands. You definitely have the right idea when stepping up a notch in the North County area. I think you will see lower returns on the "cheap" rentals over the years when factoring in turnover, vacancy, theft, and vandalism. The lower cost rentals always seem to take up more of your time even with a solid PM in place. Also be careful of school districts...so many school districts in North County have lost their accreditation or are rated really low. This can hurt an area over the long term.

    I definitely don't want to be a downer to the thread. I congratulate you on the great success you've had in St. Louis to date and wish you all the best in the future. I'm mainly telling you these things from my own personal experience. I too was tempted by the low prices and high rents. It can work for the right type of owner/manager that wants to get their hands dirty. However it can be tough for the out of area owner. Don't get me wrong I like a few areas of North County; Florissant and Overland are solid rental markets (among others) however a lot of North County is not in the path of progress.

    2Reply
  • Gunnar Teltow
    OP
    Investor · Austin, TX · Member since 2013 · 112 posts · 57 votes
    12y

    @Daniel B. & @Chris Winterhalter thank you very much for your perspective. I'm coming around to that point of view and will not buy the C-type property we mostly own currently unless it comes with seller financing.

    Most of our properties came in the 25-pack we bought in November, and the property manager definitely has had his hands full with those. We only have $200k in that portfolio due to the outrageously good financing terms the seller provided, and my plan his to get that amount to zero buy selling some of the nicer properties over the next year or so. But even failing that, the rent cash flow will get us all our money back withing three years so our risk is limited.

    We've had several tenants (who came with the properties) stop making payments, and I fully expect several thousand dollars of rehab for each one. Another property just burned down. On the plus side, 3 of the 5 that were vacant have been rented.

    In summary, you're both right! It'll be all upmarket from here.

    0Reply
  • Ryan Billingsley
    Investor/Realtor · Wentzville, MO · Member since 2014 · 846 posts · 431 votes
    12y

    Awesome find! I want one just like it! Thanks for showing us the potential in our area! Looks like a great find!

    0Reply
  • Doug P.
    Investor · Kitchener-Waterloo, Ontario · Member since 2008 · 1k+ posts · 1k+ votes
    12y

    Nice deal Gunnar! I hope you really appreciate how great it is to be a landlord in your market. That house in my market would be $250-$300k and rent for $1,300-$1,500. I honestly don't know why anyone would bother to be a landlord in my area, you have to put 50% down just to breakeven on your cash flow, so you have ~$150k sitting dead in the hope that the house will appreciate.

    0Reply
  • Gunnar Teltow
    OP
    Investor · Austin, TX · Member since 2013 · 112 posts · 57 votes
    12y

    @Doug P. thank you! I feel your pain. I live in Austin so same situation here. That's what let me to invest in St. Louis. I hear there are many other good cities to invest in for cash flow, like Kansas City and Indianapolis.

    0Reply
  • Engelo RumoraBusiness Member
    Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
    12y
    Originally posted by @Gunnar Teltow:
    After talking to a few potential lenders, it looks like they all require a $50,000 minimum property value for it to be eligible for financing. So we had to move upmarket (such as it is) in North County!

    Instead of buying $30,000 houses that rent for $700, we're now buying $50-60k houses that rent for $1,000 or so. The tradeoff for the weaker cash flow is better quality tenants and some appreciation potential. Here's what $60,000 will buy you (closed on it last Friday):

    • 9638 Chicago Heights Blvd, St. Louis, MO 63132
    • 4/2
    • 1,560 SF
    • rented to a quality tenant with two cats for $995/mo., which is about $100 below market but she would like to stay and has been great with upkeep and timely rent payments
    • $57,786.45 per HUD-1, plus some commissions to my local agent and the inspection
    • even with all-equity, this is a great investment property. After financing, it will become a cash cow of epic proportions.

    This deal came to us because a large private equity shop backed out of the contract so we stepped in. This is unit #31 in our portfolio. The point of this post is to encourage everyone who is thinking about it but hasn't pulled the trigger: get started, get out there, and the deals will start finding you :)

    Numbers look great Gunner

    These types of properties should be foundations to every investor looking at building a substantial portfolio.

    I Midwest by far offers the best value for investing IMO

    We are based in Toledo and have bought 9 properties in the last 4 weeks.

    Solid B class properties and areas going for around $40,000 - $45,000 with rents of between $700 - $800pm.

    Thanks for reading and have a great day.

    Podcast Guest on Show #89
    Oz Realty4.5367 Reviews
    WebsiteView Page
    1Reply
  • Lynn Currie
    Investor · Austin, TX · Member since 2013 · 452 posts · 309 votes
    12y

    @Gunnar Teltow

    Thanks for sharing. I love what you're doing!

    1Reply
  • Frankie Woods
    Investor · Arlington, VA · Member since 2012 · 1k+ posts · 491 votes
    12y

    2 of 3 of my deals have fallen thru in S.County @Gunnar Teltow . Inspections ruin my life :/. Actually, they've probably saved me a lot of pain haha.

    0Reply
  • Frankie Woods
    Investor · Arlington, VA · Member since 2012 · 1k+ posts · 491 votes
    12y

    You give me hope though!

    0Reply
  • Gunnar Teltow
    OP
    Investor · Austin, TX · Member since 2013 · 112 posts · 57 votes
    12y

    @Frankie Woods yeah I feel your pain, happens to me a lot, too. Usually some agent-turned-rehabber just slapping on some paint and hoping that a buyer will come along who doesn't do an inspection.

    Earlier this year I had a guy who was too cheap to winterize or heat the home so when we inspected it, several pipes inside the walls leaked like Swiss cheese.

    1Reply
  • Matthew Parrott
    Rental Property Investor · South Bend, IN · Member since 2014 · 43 posts · 25 votes
    11y

    I just saw this thread, and haven't heard of people talking about c class properties or b class properties, and wasn't exactly sure how to search for that information. Can someone give me an overview on how properties are classed?

    0Reply
  • David Goings
    Specialist · Columbus, GA · Member since 2016 · 146 posts · 54 votes
    10y

    @Gunnar Teltow Very late getting to this thread. 

    I have a property you might be interested in, located within the St. Louis Overland county area. Well within your North County parameters outlined above. 

    I purchased a rental in the Overland area around the time you invested in the Chicago Heights Property. I would take this project on my self but life has me out of town for the foreseeable future. 

    PM me for the details, 

    Thanks! 

    - Dave 

    0Reply
  • David Hart
    Camarillo, CA · Member since 2013 · 27 posts · 3 votes
    9y

    @David Goings Have you offloaded the Overland property you mentioned above? If not, I'd be interested in taking a look. PM to discuss further. 

    0Reply
  • David Goings
    Specialist · Columbus, GA · Member since 2016 · 146 posts · 54 votes
    9y

    @David Hart that property has been sold. But if you are serious about purchasing in the area please in box me so we can chat. 

    Thank you, 

    - Dave 

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free