St Louis Investment Property – Waterford

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: $99,000                               St Louis investment property
  • Rehab Estimate: $3,000
  • Address: Millstone Dr, Florissant, MO
  • Beds / Baths / Sq Ft: 3 beds / 2 bath / 1,457 sq ft
  • Property Description: Seller financing available, no bank qualifying. Spacious house with recent updates that include a new roof, fresh paint, and a new air conditioner. This is a well kept home on a corner lot, featuring 3 large bedrooms, 2 full baths (both on the main level), an updated kitchen, hardwood floors, full basement, and garage with electric opener.

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: $1,200/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 within the average size range, so we have assumed rent of $1,200 per month. 

$1,200/mo is affordable when compared to the area’s median income which is over 43.1x the monthly rent.  There should be a large group of area residents who can comfortably afford the proposed price.  

ANNUAL EXPENSE EXPECTATIONS: $7,636 (53% OF GROSS RENT)

  • Property Taxes: $1,736
  • Insurance: $1,200
  • Property Management: $2,100 (assumes 1.75x monthly rent)
  • Vacancy: $800
  • Maintenance: $1,200
  • Other: $600

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: $99,000
  • Rehab: $3,000
  • Closing Costs: $2,970
  • Total Investment: $104,970
  • Financed Amount: $78,728
  • Cash Investment: $26,243
  • Annual Revenue: $14,400
  • Annual Expenses: $7,636
  • Interest: $3,936
  • Net Income: $2,828
  • Annual Return: 11%
  • Annual Appreciation: $1,980
  • Total Return Potential: 18%
At Recommended Price

  • Purchase Price: $95,000
  • Rehab: $3,000
  • Closing Costs: $2,850
  • Total Investment: $100,850
  • Financed Amount: $75,638
  • Cash Investment: $25,213
  • Annual Revenue: $14,400
  • Annual Expenses: $7,636
  • Interest: $3,782
  • Net Income: $2,982
  • Annual Return: 12%
  • Annual Appreciation: $1,980
  • Total Return Potential: 20%

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 ~$1,980 is a reasonable expectation.  Here the listing price of $99,000 is pretty good. I would start with an offer of $95k, but this property is attractively priced.

Note that this property will also benefit significantly from deducting annual depreciation of $3,539/yr.

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

Leave a Reply

Your email address will not be published. Required fields are marked *