Recently I took on a client that lives in Philadelphia and has family here. He knew that he wanted to buy rental property in St. Louis because the potential for cash-flow here is greater than Philly because of lower prices. He knew very little about the neighborhoods in St. Louis and needed someone to give him some history and background on neighborhoods to potentially invest in, my specialty. We initially met in March and had a brief discussion about neighborhoods, development, history, and rental property during one of his visits. From there he decided to focus on the historic neighborhoods in South St. Louis; again my specialty. We began narrowing down potential candidates in May and he scheduled a visit to look at property. On a Friday in May we did a marathon showing session and were able to see 13 properties in one day. We narrowed it down
to 3 properties and made an offer on great 4-family in McKinley Heights. Unfortunately, that one did not work out. It was a short sale and the seller’s lender was not willing to work with them at the price they had marketed. He moved on to his next option, which was a sturdily built and large 4-family on Cherokee Street in Benton Park West. Cherokee Street is one of the most interesting stretches in all of St. Louis. It has as much character and culture as any other burgeoning commercial district in the city. The client recognized this right away on our showing. His impression was only reinforced when he visited during the cinch de mayo celebration this year. We wrote an offer and were able to come to an agreement with the seller quickly. The seller had owned the building for 30 years and maintained it very well and our ASHI certified inspector agreed. There were 2 plumbing issues and it needed a new roof. After some negotiating with the seller during our inspection contingency we were able to get them to agree to pay for $9500 of the $10,000 it would cost to work on the plumbing vents, sewer, lateral and roof. As a result the buyer was able to take title to a property that needed no major repairs, in a gentrifying historic shopping district, that will cash-flow by over $1000 a month when fully rented. Also, because of the low interest rates that continue to be available he will be able to pay off the mortgage in 15 years. At that time he will have a property producing at least $2500 a month in rent going straight into his pocket.
He has family in town to help look after the properties but through my network of contacts I was able to refer him to a local property manager, lawn care person, and an electrician within the 1st week. Not only that, but during the inspection resolution we convinced the seller to use the roofer and plumber that I normally refer out to my network in order to get the deal done. These contractors agreed to be paid with the seller’s proceeds at closing so neither the seller or buyer had to come up with the money for repairs out of their pocket. The work was done prior to closing. The seller and the buyer were both thrilled with the work and the contractors were happy to have work coming from a reliable source and be paid just a couple days later. Many contractors are fine with this arrangement as long as they are told at the outset. Once you have a relationship with them they are happy to do favors as long as the work keeps coming. Experience tells me that it will….I have yet to sell a house that was in absolutely perfect condition.
The buyer was intent on looking for more good deals and we have been looking steadily since. Over the weekend he was able to get 2 more properties under contract, one is just a block over from the 4-family he bought earlier this month on Cherokee. Both properties present the potential for great cash flow just like his Cherokee 4-family. This particular buyer was able to put 25% of the purchase price down which is a requirement
for investment property in today’s Fannie Mae lending guidelines. Investors who are in a position to do this stand to cash-flow tremendously on a monthly basis. Using my network of professionals was a key for this particular buyer. It allowed us to streamline the buying process for him and navigate some difficult negotiations with the seller over repairs. I will continue to offer him and my other clients referrals from my network of professionals and contractors because it make their lives easier! He will continue to live in Philadelphia and expand his rental portfolio in the St. Louis. It makes me feel good that I can play such key role in such a delicate situation for an investor. Many don’t have the nerve to try something like this and I’m happy to do all I can to ease nerves in this situation while setting my client up for long term success.
Working with out of town buyers or investors has its challenges but with the right knowledge of the process and contacts to help navigate the deal investing in St. Louis from a different city is a very realistic and potentially profitable prospect.