House #2, How I Bought My 1st Out Of State Property
Look at this little cutie! How could you not fall in love?
Hi Everyone!
I just got off a consulting call where we talked all about how to buy out of state, and I get asked about how I research and my techniques for this often, so I thought I would finally share them with you here. Here’s the story of how I bought my first house in St. Louis:
Why St. Louis?
St Louis is really underrated in my opinion. I am a huge fan!
It was 2015, my bestie from High School had moved to St. Louis 5 years earlier and had been raving about it ever since. My mother had passed away the previous fall and I was finally feeling ready to get out of town and see some people close to my heart. I called her up and she said, “Great, because we are getting married! Come in June.”
I went out there for the wedding, which consisted of one day running errands around St Louis and then 3 more in the countryside, enjoying the beauty of a nearby State Park. At the reception, during the usual, “what do you dos”, I shared that I had been running a couple Airbnbs in Boulder and that had become my Full-Time gig. People loved the topic and beginning telling me how their friends were doing it locally and were successful with it. They also began to tell me how affordable their homes were. I knew my friend paid low rent ($400 to rent a room in a shared apartment), but they were telling me that they had $300/mo. mortgages on 3 bedroom homes with front and back yards! What?!?
Coming from Boulder, where you couldn’t find a dinky apartment under 200K (at the time, 300+ now), that was a revelation. During all the wedding chit chat, my wheels starting turning and I began collecting contacts. I decided right there and then that I would come back and buy a house!
Here is Handyman Jeff and i'm behind him in the ball cap =)
Another bonus that happened for me on that Wedding camping trip, was that I met my amazing, life saving handyman! He was just another wedding guest and a really cool guy. You never know who you will meet having a drink around a campfire.
Research (once I got back home)
Interviewing Other Hosts
I collected a contact from a friend of a friend who was open to talk about her Airbnb and called her up. She told me how they were renting just a room in their house by Washington University and it was covering their rent (they didn’t own). I asked her about her rates, demand, type of renters (why people were coming to town) and what parts of town she thought would make good rentals.
2. Scoping out Neighborhoods
One of the neighborhoods I scoped out was Benton Park West
I took her recommendations and asked a few other friends. From there I researched the neighborhoods online and found that a lot of them had little local websites. They told me a little bit about the area, I learned the outlines, and looked at crime maps on Trulia.
*St Louis is a complicated town and it changes a lot street by street, so I found I really had to study what areas worked, what others didn’t, and where their boundaries were.
3. Checking out listings
Next I started scanning Redfin.com, my favorite MLS-like website. I find it is closest to the true information on the MLS, clean and easy to read, plus it gives a lot of excellent extras like school ratings and walkscores. I began looking for homes for sale in the neighborhoods I had mapped out. I knew I wanted something already fixed up and ready to rent, because my intention was not to do any work on the place; it was just to arrive, get it furnished and get rolling!
I decided to zero in on areas around Washington University as my host contact recommended. From my experience in Boulder, CO which is also a college town, I knew that a college provided a lot of rental traffic. Kids checking out the school, parents, visiting professors/speakers, and lots of events. Plus, this school had a highly rated medical school attached to it, so that brought in patients, traveling nurses, etc. Another thing I like about college areas is that I feel like students care less about what their neighbors are up to than little old ladies in the suburbs.
At the time, I didn’t really consider St. Louis’ intense weather (my friend didn’t own a car for the first few years and used her bike to get around), so I thought I needed a place with a good Walkscore so people could have the more Urban City experience. I was looking for a place with around a 70+ score. The place I settled on was a 68. Although I’ve since learned that most travelers will still drive or Uber, the close proximity to bars and restaurants has certainly won me bookings!
4. Finding the One
When I returned to Boulder from my trip, I knew I wanted to buy a place and yet, I wanted to make sure I was making a grounded decision, rather than an emotional one from my place of grief. I talked about it with friends and family, studied the neighborhoods online, and looked at listings here and there. During this process of testing the waters, a friend I had casually mentioned my idea to told me he knew an agent in Boulder, who was licensed in both Colorado and Missouri, and grew up in St. Louis.
I got linked up with this agent and decided to actually buy a place. I always suggest finding the homes yourself, you can set up alerts on Redfin or go the extra mile and try to find things on craigslist/through direct mailings, etc. It was the second home I zeroed in on, I just seemed to have an intuition about it. The agent sent his brother who lived locally, to drive by. It was definitely a B- neighborhood, and yet, the area showed signs of gentrifying so I took a chance on it.
*After this first deal, I switched to a local agent, so he could tour the homes for me and take videos.
5. Due Diligence
Walkscore: 68
Rentometer / Craigslist: I could rent long term at $850/mo (still giving me a 10%+return)
Trulia Crime Map: Lowest Crime Area
Google Maps: 15min from Airport, 18mins to Sports Fields/Convention Center, 4mins from Washington University, 2mins from The Loop a cool walking street with Restaurants, Bars, Movie Theater, & Music Venue.
Google Maps - Street View: decent cars on the street, no junk in the yards, no abandon buildings/boarded up homes.
Airbnb/Airdna for price comparison - At the time, July 2015, there weren’t any listings in my neighborhood so I took a risk but it has paid off.
Once we got it under contract, I had an inspection done. This is the most important step and what made me comfortable buying sight unseen. I knew that having me walk through the home wouldn’t mean much since I didn’t know anything about furnaces, water heaters, appliances, roofs, etc. I let the inspection do the talking.
If you haven’t done an inspection before, they can be a little intimidating because they always come back with a laundry list of things to do, in a 15+ page booklet. What is important is that you can sort out if they are small things or big things. Essentially I want a house in good shape and ready to go, so I am looking for water heater, furnace, roof, A/C (if there is one), electrical, and foundation to be in good shape. Luckily I had my rockstar Handyman (from the wedding) look over the Inspection Report and he agreed to come by the day of closing and do all the little items (there are always little things that need buttoned up).
Financing
I’ve been debating on whether to include this part, but I know people get hung up here a lot so it’s nice to be transparent.
I have a Real Estate Investor friend who did a private loan with me on my first place, which I paid off early with Life Insurance funds from my mother’s passing. He wasn’t comfortable loaning against the new property since he didn’t know anything about that market, but he offer to do a lien against my paid off condo, which in essence was like a HELOC. This gave me the insane advantage of $0 down.
I didn’t really know what to expect furnishing a 3 bedroom home, so I asked for 80K on the 72K purchase price to have a little extra for furniture/repairs. We filed a promissory note and a deed of trust with the city and he wrote me two checks. I wired the money to get it to the title company in St. Louis.
Closing, Furnishing, & Management, Oh my!
I signed all the documents ahead of time with my local agent and jumped on a plane to go furnish.
I don't have an exact photo but something like this little number. #stylin
My friend who got married lent me their electric blue 4cly Ford Truck with limited AC for a sweaty July furnishing extravaganza. (nowadays, I rent an SUV, so they have something to drive and still rock that hipster truck).
In the weeks leading up to the close date, I had been thinking a lot about how I would manage the home from afar. I was concerned about finding dependable cleaners and someone dedicated to my little home. I decided that the best way to handle this was to have a live-in manager (who I would pay for cleans). I could still rent out the two rooms individually* and have the manager pay discounted rent. I interviewed a few candidates from Craigslist and landed with Alana. I also lucked out because she was open to selling me a bunch of furniture from her previous apartment for the new house.
*These days I recommend only renting homes an 1 entire unit, and yet, I was experimenting at the time.
In the days before my arrival, I pinged a bunch of people on craigslist to see what was available, who could deliver, etc. I find shopping that site can be time consuming, so I like to do it in advance, email items to myself and then organize them into folders in my email box. Another crucial thing I do once the home has passed inspection, is to get the Airbnb listing made. I use photos from the Redfin listing. Ideally they are staged as it grabs attention more than empty rooms, and yet either can work. I make notes in the account that say these are not the actual furnishing, will have it furnished and photos updated by X date.
When I arrived, my friend grabbed me from the airport and let me crash on their couch. Bright and early the next morning, I got the keys, walked through the home, and started hitting up garage sales. I usually plan closing to happen on a Thursday or Friday so I can garage sale Fri, Sat, Sun.
I gather all the little stuff myself and had Alana help be with the big furniture items on Sat/Sun when she was off of work (it is nearly impossible to furnish a whole place by yourself, get reinforcements!). I believe I was in St. Louis 5-7 days furnishing and the day I was done the rooms were rented... I haven’t looked back ever since.
And there you have it.
--
I know that was a lot of info, hopefully you are not overloaded. Feel free to post your questions in the comments.
TAKE ACTION:
Create your Airbnb listing today (We earn a referral bonus for up to 5 new listings per profile)
Track your Net Worth (get $sign up, it’s free!)”20 when you