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Striking Foreclosure Gold in the Gateway City

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In the February issue of the Foreclosure News Report, we take our readers on a tour of the Gateway City. We wanted to see what’s going on in the St. Louis real estate market and we interviewed some investors and local REO brokers to see what’s going on. Here’s an excerpt  of what we found.

If the St. Louis real estate market was a human being it would be diagnosed as bi-polar.

To some, the city under the arch is an affordable Midwestern metro with Southern charm, affordable housing, livable neighborhoods, appealing 19th century architecture and a business friendly climate. For others, St. Louis is a sprawling dysfunctional Rust Belt metropolis with failing schools, a crumbling urban core and a housing market  plagued by decades of racial segregation, redlining, blockbusting and white  flight.

However, for real estate investor  Matt Krause St. Louis is a modern-day gold mine. Krause and his partner Andrew Goldstein buy foreclosed St. Louis homes, fix them up and rent them out to Section 8 tenants. The partners are usually on the lookout for good deals, and there's no shortage of cheap foreclosure bargains to choose from.

Foreclosures in St. Louis are so economical Krause can buy them with his credit card.

“We buy foreclosures in North County,” said Krause, a real investor for 24 years who owns four foreclosures in Spanish Lake and Dellwood. “They cost about $25,000 to $30,000 each, and they're all cash flowing”

Krause, who is a part-time investor, said the competition is increasing and prices are creeping up. He is looking for more properties to buy, but he ran out of cash. He's currently seeking financing to buy his fifth investment property.

“In St.Louis city, buyers are searching for properties by neighborhoods and zip codes,” said Bryan Young, broker/owner of Young Realty Group. “In St. Louis County, on the other hand, buyers are looking at school districts and certain communities.”

Young, the president of the St. Louis Investment Property Association, and a veteran landlord with 25 years of experience, said government-owned foreclosures offer the best deals, followed closely by bank-owned REOs and then private sales.

“We're one of the Top 10 investment markets in the country,” claimed Young. “The price points are so low in huge parts of the metro area that investors are buying properties for as low as $10,000, $15,000 or $20,000. Then, they put $20,000 in repairs and rent it out to Section 8 renters for $850 to $950 a month. Here in St. Louis County, the median price for a government-owned foreclosure is $34,500. The median price for a bank-owned foreclosure is $41,175. By comparison, private sales go for a median sales price of $159,000.”

To read the full article, subscribe to the Foreclosure News Report and receive the January issue free if you subscribe before Feb. 15.

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