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Single family investment properties

In March, I posted a story about duplexes suddenly becoming a viable, cash flowing, option for prospective investment real estate buyers. Four months later, I’m here to highlight the topic again. But this time, I’m not talking about two families. They are still an increasingly attractive buy, but the real surprise in the past few months has been how lucrative buying up single families has suddenly become in the St. Louis investment real estate market.

Many investors have always found these particular properties attractive. And while they can be good money makers, I have always been a bit reluctant to push clients into them. The resale value is typically better than a multifamily, but that comes at a cost. The cost of a safety net. Rather than putting money in your pocket each month, these properties traditionally have required out of pocket expenditures each month to cover the mortgage and expenses. You might might a good return at the sale, but keeping up on those payments can be a real drag on the bank account.

But now things are changing. Thanks to all the foreclosures on the market, single families in many areas are becoming cash flowing properties. The profits made each month can’t typically touch a good multifamily, but as in the past, the real money will be at the resale. You can now afford to buy, do some fix up, rent and hold indefinitely. Rather than selling at the wrong time because the mortgage and expenses are burning a hole in your pocket, you can hold until the time is right. And in real estate, timing is everything.

So the next time you dismiss purchasing a single family at first glance, step back and consider what you do. You just might be passing up some of the best returns on the market.

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Matt Kastner

Matt Kastner is an Investment Real Estate Consultant at St. Louis Real Estate Society in St. Louis, Missouri. He is also develops properties on the side through Threshold Properties. When he isn’t representing investors in the purchase or sale of multifamily properties, rehabs, foreclosures and other income producing properties, he is often taking on rehab projects himself. He lives in South St. Louis and has been in the real estate business since 2004.

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One thought on “Single family investment properties”

  • Dina

    July 24, 2008 at 1:48 pm

    Hi! I’ve been reading your blog off and on for a few months now ( we’ve gotten into purchasing single family homes in our area–just as you’ve described in this blog entry). But we’ve hit a snag and were wondering if you or any of your other readers have any suggestions.
    Our first rental purchase was done with our HELOC. After we did all of the necessary repairs to get it to pass occupancy inspections we went to the bank and applied to refinance to include the purchase price and the price of the necessary repairs(thus freeing up the HELOC). We attempted to go with a straight forward mortgage for our second property but we hit too many snags so we decided to use the HELOC process again. Apparently, while we were filling out the paperwork , the bank decided to change policy on us and now we have to own the rental property for 6 months before we can refinace. We called another bank and they will only let us refinance for a percentage of the purchase price! Luckily , this is not going to break us but it SERIOUSLY cuts into our monthly profits due to the fact that the HELOC payments are significantly higher than a mortgage payment. Any advice on a bank to go with???

    Reply

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