St Louis Investment Property – Millstone

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: $104,900                               St Louis investment property Millstone
  • Rehab Estimate: $3,000
  • Address: Millstone Dr, Florissant, MO
  • Beds / Baths / Sq Ft: 3 beds / 2 bath / 1,734 sq ft
  • Property Description:  This is a full brick ranch with a two car over-sized attached garage, three bedrooms and two full baths. The property is in very good condition and has 1734 sq ft. All the rooms are spacious. The family room is 24 x12 and includes space for a breakfast area, it also opens to a 18 x13 sun room overlooking the back yard and brick patio.

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: $1,250/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 above the average size range, so we have assumed rent of $1,250 per month. 

$1,250/mo is affordable when compared to the area’s median income which is over 41.4x the monthly rent.  There should be a large group of area residents who can comfortably afford the proposed price.  

ANNUAL EXPENSE EXPECTATIONS: $8,195 (55% OF GROSS RENT)

  • Property Taxes: $2,049
  • Insurance: $1,250
  • Property Management: $2,188 (assumes 1.75x monthly rent)
  • Vacancy: $833
  • Maintenance: $1,250
  • Other: $625

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: $104,900
  • Rehab: $3,000
  • Closing Costs: $3,147
  • Total Investment: $111,047
  • Financed Amount: $83,285
  • Cash Investment: $27,762
  • Annual Revenue: $15,000
  • Annual Expenses: $8,195
  • Interest: $4,164
  • Net Income: $2,641
  • Annual Return: 10%
  • Annual Appreciation: $2,098
  • Total Return Potential: 17%
At Recommended Price

  • Purchase Price: $100,000
  • Rehab: $3,000
  • Closing Costs: $3,000
  • Total Investment: $106,000
  • Financed Amount: $79,500
  • Cash Investment: $26,500
  • Annual Revenue: $15,000
  • Annual Expenses: $8,195
  • Interest: $3,975
  • Net Income: $2,830
  • Annual Return: 11%
  • Annual Appreciation: $2,098
  • Total Return Potential: 19%

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 ~$2,098 is a reasonable expectation.  Here the listing price of $104,900 is pretty good. I would start with an offer of $100k, but this property is attractively priced.

Note that this property will also benefit significantly from deducting annual depreciation of $3,719/yr.

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

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