St Louis Investment Property – Lockwig

Today I’m analyzing a 3 bedroom St Louis investment property located in Florissant, MO.  Florissant is a second-ring suburb of the St Louis metro area.  Take a look at my analysis of this property and let me know if you agree.  You can also send me an email with additional questions or to learn more about this property.

ST LOUIS INVESTMENT PROPERTY OVERVIEW

  • Market: Metro St Louis Area
  • Listing Price: $89,900                               St Louis investment property Lockwig
  • Rehab Estimate: $8,000
  • Address: Lockwig Trail, Florissant, MO
  • Beds / Baths / Sq Ft: 3 beds / 2 bath / 1,238 sq ft
  • Property Description: Fantastic family home! Key features include a sun-filled living room, kitchen with solid cabinets connected to the breakfast room, opens up to a large family room and screened sun porch, the master bedroom has a spacious walk-in closet and full bath, the partially finished basement includes a large family room with a bar, great home for entertaining. Major systems have been updated.

NEIGHBORHOOD GRADE: C

  • Median Income: $51,707
  • Poverty Rate: 11%
  • Unemployment Rate: 12%
  • % with Bachelor’s Degree: 27%
  • % of Renters: 33%

The zip code 63033 is average for the St Louis metro area based on key economic factors including median annual income and the poverty rate.

RENTAL PRICE EXPECTATIONS: $1,100/MO

The vast majority of rental properties in this area are 3 bedrooms. These homes generally rent for $1,100 – $1,300 per month with a median of $1,200.  This investment property is in the average size range, so we have assumed rent of $1,100 per month. 

$1,100/mo is very affordable when compared to the area’s median income which is over 47x the monthly rent.  There should be a large group of area residents who can comfortably afford the proposed price.  

ANNUAL EXPENSE EXPECTATIONS: $7,083 (54% OF GROSS RENT)

  • Property Taxes: $1,665
  • Insurance: $1,100
  • Property Management: $1,925 (assumes 1.75x monthly rent)
  • Vacancy: $733
  • Maintenance: $1,100
  • Other: $550

The expenses for this property are generally in-line with industry standards with the exception of property taxes, which are below the typical 2x rent.  Since this is a C-level neighborhood I have assumed 1 month of vacancy every 18 months and ~.5 month of cushion for unexpected expenses.

Property management is set at ~1.75 months rent.  This factors in regular monthly management fees along with various other new tenant and lease renewal fees that companies may charge.

FINANCIAL SUMMARY

At Listing Price

  • Purchase Price: $89,900
  • Rehab: $8,000
  • Closing Costs: $2,697
  • Total Investment: $100,567
  • Financed Amount: $71,920
  • Cash Investment: $28,677
  • Annual Revenue: $13,200
  • Annual Expenses: $7,073
  • Interest: $3,596
  • Net Income: $2,531
  • Annual Return: 9%
  • Annual Appreciation: $1,798
  • Total Return Potential: 15%
At Recommended Price

  • Purchase Price: $87,000
  • Rehab: $8,000
  • Closing Costs: $2,610
  • Total Investment: $97,610
  • Financed Amount: $69,600
  • Cash Investment: $28,010
  • Annual Revenue: $13,200
  • Annual Expenses: $7,073
  • Interest: $3,480
  • Net Income: $2,647
  • Annual Return: 9%
  • Annual Appreciation: $1,798
  • Total Return Potential: 16%

MY RECOMMENDATION

I have analyzed this St Louis investment property assuming a financed purchase.  With a neighborhood grade of C , I would normally target a minimum annual return of 12% with an additional 3% margin of safety.  I think 2% annual appreciation of ~$1,798 is a reasonable expectation.  Here the listing price of $89,900 is pretty good. I would start with an offer of $87k, but this property is attractively priced.

Note that this property will also benefit significantly from deducting annual depreciation of $3,425/yr.

Want to place an offer or learn more about this property?

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