Investing in St. Louis real estate can be highly lucrative given the city’s affordable housing prices and stable rental demand. The metro area provides beginner real estate investors ample buying opportunities across different property types. However, conducting thorough market research beforehand is crucial to maximizing your investment returns. This article explores the fundamentals of investing in St. Louis investment properties and strategies to secure ideal assets.
St. Louis Offers Accessible Home Prices Compared to National Averages
St. Louis home values are far below national averages, creating an attractive buy-in point for investors on a budget. The median home price in the metro area is approximately $175,000, according to Zillow. This is dramatically lower than the national median of $325,000. Investors can acquire properties in decent condition often for under $100,000 in many St. Louis neighborhoods. The relatively low purchase prices enable buying rental properties with higher cap rates. You can aim for 8-12% cap rates on your acquisitions in most submarkets.
Look to North County and South City Neighborhoods for Value Purchases
Seasoned St. Louis real estate investors often target more affordable neighborhoods in North St. Louis County and South City to find discounted properties with strong cash flow potential. Areas like Northwoods, Bellefontaine Neighbors and Spanish Lake in North County provide sub $100,000 homes that can rent for $800-$1,200 per month. South City neighborhoods including Bevo Mill, Holly Hills and Tower Grove East also offer great value buys with median home prices around $120,000-$180,000.
Focus on 2-4 Unit Multifamily for Easy Management
Small multifamily properties with 2-4 units are highly popular investment vehicles in St. Louis due to their ease of management. The metro area has a large supply of smaller multifamily buildings, unlike other markets dominated by large complexes. This allows investors to efficiently self-manage their properties. Target duplexes, triplexes and quads selling for $125,000-$275,000 in improving neighborhoods close to major employers and transportation.
Rehab Retail and Mixed-Use in Revitalizing Areas
St. Louis has several up-and-coming neighborhoods with old street-level retail and mixed-use spaces presenting rehab opportunities. Investors can modernize these vintage properties to cater to today’s retailers andelevate entire shopping districts. Focus your search in transitioning areas like The Grove, Cherokee Street, South Grand and along Manchester Avenue. Many spaces sell for under $200 per square foot before renovations.
Know the Risks of Outlying Suburbs and Underserved Areas
Some deep North County suburbs further from downtown and underserved neighborhoods can appear attractively priced but hide potential pitfalls. Make sure to run detailed cash flow projections factoring higher vacancy rates and property management challenges typical of lower-income areas. Also screen for any environmental issues in older industrial suburbs. Not all cheap deals pencil out once all costs are considered.
Hire a Sharp Property Manager to Handle Logistics
A top-notch property manager is essential for profitable out of state investing in St. Louis real estate. They will handle all maintenance, tenant screenings, leasing and rent collections on your behalf. Property management fees normally range from 8-12% of monthly rent. Build relationships with multiple established management firms to access exclusive inventory.
St. Louis provides no shortage of lucrative investment opportunities given its affordability and market stability. Just be sure to target the right neighborhoods, properly vet deals andpartner with an experienced local property manager. With the right strategy, St. Louis real estate can deliver strong recurring cash flow and equity growth for out of state investors.