Is BRRRR a good strategy for Indianapolis?

Question

Hey everyone one BiggerPockets! I am a new investor looking to invest in the Indianapolis area. Has anyone had any luck with BRRRR investing in this area. I had two different PMs tell me that BRRRR is not a good idea in their city...

Nick Giulioni · Answer

Sounds like you chatted with a couple of PMs who were tired of people looking for free houses. Hit me up if you want to chat!

Jónas Tryggvi Stefánsson · Answer

BRRRR is always a good idea if it aligns with your ideal real estate investment strategy, the market doesn't matter.

That being said, not every market makes it easy to perform a BRRRR investment. That doesn't mean it can't be done.

Nick Giulioni · Answer

It's a great idea. Expecting to get all your money back out probably isn't going to happen in today's market though.

Account Closed · Answer

@John Glazier

The challenge with trying to BRRRR in C neighborhoods is the appraisal. These areas have a lot of fixers being bought by investors for sub 50K. Even if the property would sell for 100K to a retail buyer, it won’t necessarily appraise for that. The houses being bought cash by investors can lower the average. During your 6 month seasoning period a number of cheap houses sold in your area can be used as comps.

John Glazier · Answer

@Christopher Dente I am in the exact same boat as you! It'd be great to connect on this. I've been in touch with different investors, realtors, PMs, and most have said they do a lot of BRRRs. However, one warned me that doing a BRRR in the cheaper neighborhoods is not a good idea due to sketchy areas that a lot of PMs refuse to manage. I don't know what areas that would include, but I said I'll have around 75k all-in and he said I could do it, but it'd be in one of those areas. I'm looking more in to doing it towards the end of the year and am still in discovery mode with Indy.

Mike D'Arrigo · Answer

@Christopher Dente I'm not sure why a PM would tell you that unless it's because of low inventory.

Ric Ernst · Answer

Account Closed that is spot on and has been my experience. I have several C class properties. They perform well but appraisers don't tend to value them nearly what the market says they should be.

Kent Ritter · Answer

@Ric Ernst. You hit on the major disadvantage of residential <5 units, vs. commercial multifamily >=5 units.  They only appraise on market, so you can't force appreciation.  You can create tremendous value in multifamily by increasing NOI and appraising it on income.

Kent Ritter · Answer

@Christopher Dente. I can tell you from experience that they are wrong!  Indy is a great town for BRRRR. I've been doing it with both SFR and multifamily for years.  I'd find a different PM.  Let me know if you need contacts to get started looking for properties.

Is BRRRR a good strategy for Indianapolis?

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