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Real Estate Investing in St. Louis: A Symphony of Opportunity
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St. Louis skyline featuring the famous arch.

Around the half-way point of the great Mississippi river, you'll find the birthplace of Blues - St. Louis, MO. The city (especially in the areas surrounding downtown) is one of the most affordable, yet potentially lucrative for real estate investors in search of cash-flow. It is worth noting, however, that with this potential for great returns comes a heightened crime rate (surprise surprise), which can influence tenant turnover and property maintenance costs. In this blog post, we’ll attempt to balance this classic risk & reward conundrum by listing out some neighborhoods that could (potentially) provide the best of both worlds. Please note that we'll only be considering areas within the city limits, meaning we're not including the more wealthy suburbs just west of the city.

Top Neighborhoods for Investment

  1. Dutchtown While it is true that Dutchtown has garnered a reputation for high crime rates, it's essential to view this aspect in the broader context of urban revitalization. Dutchtown is currently at the epicenter of numerous initiatives aimed at enhancing infrastructure, and ultimately uplifting the community. The neighborhood has quite a large surface area, but it seems as though the safer areas are east of Gravois Ave, north of Taft Ave, and west of Grand Blvd. That said, I want to reiterate how "block-by-block" this city is, so wherever you choose to invest, make sure you Google Street View the hell out of it, and also check it out in person. From an on-market cash-flow perspective, there's not a huge amount of choice, but everything we're seeing is hovering around the breakeven point (-2% to +2% Cash on Cash Return). You know what that means in 2023, right? It's lowball season! So put in some competitive offers, and see if you can pick up a deal. Median house prices are currently around $130k according to Redfin, with Sep. '22 - Sep. '23 YoY appreciation of around 1% (so not much going on there).
  2. Fox Park The spiel here is similar to Dutchtown, but this community is more gentrified. A few restaurants and eateries kept being mentioned during our research including Coffee Stamp, Lona's Lil Eats, and Lucky Accomplice. The area is also home to its namesake, Fox Park, a vibrant and family-friendly park often filled with the laughter of kids. If you're looking to rent to families, this is where you want to be. The cash-flow of properties that are right around the park is negative, but just a 15 minute walk away, we're seeing some roughly breakeven cash-flowing properties in great condition. As for median house prices, we're currently at around $242k, with YoY appreciation from Sep. '22 - Sep. '23 of approximately 8% according to Redfin.
2.8% Cash on Cash Return Property (assumes 20% down, 7.8% interest rate)
2.8% Cash on Cash Return. Assumes 20% down payment, 7.8% interest rate
  1. West End This area might be a bit run down, but don't let that deter you from the potential it holds. The median household income sits comfortably between $60k-$70k, indicating an emerging middle-class population that's eager for revitalization. It's these types of communities where the opportunity for growth is most profound. This is the chance for astute investors to not only contribute to the uplifting of a community but also reap significant rewards in the process. With an enthusiastic and resilient community, the West End could very well be the next hotspot for a flip, or buy-and-hold investment. If you're looking for a balance between location and cash-flow, stay as close as you can to Delmar Blvd, which is home to several amenities such as restaurants and cafes. Wherever you choose to invest, make sure you check out the area in person! Median house price of $109k and 9% YoY appreciation from Sep. '22 - Sep. '23 according to Redfin.
  2. Holly Hills Just south of Dutchtown, you have the charming and safer Holly Hills. This neighborhood is not only in close proximity to several places of worship but also nestles up to the beautiful Carondelet Park, providing a serene environment for tenants. Median house prices are a little higher than Dutchtown at $210k, but still not as high as Fox Park. If you want the best possible balance between amenities, safety and price - it doesn't get much better than this in St. Louis. Known for its strong community spirit and picturesque streets, Holly Hills presents a fantastic opportunity for savvy investors. Here, you can purchase a property, give it a loving makeover and flip it for a profit while improving the neighborhood one home at a time. YoY appreciation rates are at 8.5% from Sep. '22 - Sep. '23 according to Redfin.

Conclusion

In sum, investing in St. Louis real estate offers a blend of competitive pricing, promising appreciation rates, and opportunities for substantial cash flow. That said, the thing to always bear in mind is that cash-flowing cities are only cash-flowing because the properties are cheap - and that's usually for a reason. It's essential to approach this venture with diligence, research, and caution. Sometimes it's better to go for a breakeven property with less headaches (you can always refinance down the line) vs a "cash-flowing" one with a bunch of problems.

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