Indianapolis Vs. Memphis: Rental Market Showdown

Rental Property Investor · Philadelphia, PA · Member since 2015 · 212 posts · 116 votes

Hello Everyone!

I'm a first-time investor looking to invest in a buy-and-hold SFH that has stable cash-flow in an A to B- neighborhood (any appreciation would be a plus, of course!). I'm looking for properties in the 60-80k range and narrowed down my markets to Memphis and Indianapolis. After some research, I found that both have stable and growing economies, a healthy list of available properties, and good job growth. Each market also has their fair share of "bad" neighborhoods and properties. So my question for you is: which market would you recommend for a first-time investor to jump into? Which zip codes would you recommend? What experiences have you had in these two markets?

Any feedback would be much appreciated. Thank you in advance!

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Haim Mamane Palman

Investor · San Francisco, CA · Member since 2013 · 147 posts · 97 votes

10y

interesting showdown. I invest in both of these markets and I love both. I don't think you can find A-B class properties at 60-80k in both markets and especially if you plan to buy from turnkey companies. But I may be wrong and will let the turnkey guys to weigh in. Since the numbers are very similar, My best advise to you is to focus your time on researching the property management company that will manage your property as this factor can make or break your return on investment. I purchased two properties from two different turnkey companies in Memphis. The property that I purchased at a higher priced and at a lower rent (76k at $800) performed better than the property I purchased at a lower price with a higher rent (62k at $925) why? Mainly because of the quality of the property management company that did a better job rehabbing the property, better job screening a tenant and overall better job managing the asset.

Good luck

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Haim Mamane Palman
Investor · San Francisco, CA · Member since 2013 · 147 posts · 97 votes
10y
interesting showdown. I invest in both of these markets and I love both. I don't think you can find A-B class properties at 60-80k in both markets and especially if you plan to buy from turnkey companies. But I may be wrong and will let the turnkey guys to weigh in. Since the numbers are very similar, My best advise to you is to focus your time on researching the property management company that will manage your property as this factor can make or break your return on investment. I purchased two properties from two different turnkey companies in Memphis. The property that I purchased at a higher priced and at a lower rent (76k at $800) performed better than the property I purchased at a lower price with a higher rent (62k at $925) why? Mainly because of the quality of the property management company that did a better job rehabbing the property, better job screening a tenant and overall better job managing the asset.
Good luck
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Charles McClure
Investor · Raleigh, NC · Member since 2016 · 37 posts · 7 votes
10y
@Haim Mamane Palman, care to share the names of those two companies?
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Haim Mamane Palman
Investor · San Francisco, CA · Member since 2013 · 147 posts · 97 votes
10y
The good one is Memphis Invest. The other company wasn't bad just completely in a different level. Don't feel it would be right to mention them here on the forum. My point was that the quality of the property management is as if not more important than the purchase price and the location. There is a company in Memphis that manages properties very successfully in 38127 which considered C- D Neighborhood and they have investors lined up ready to purchase more. They just know how to manage properties in this area that other turnkey companies would never buy in.
6 Reply
Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
10y
I like Indy over Memphis, but totally personal preference. I know of some great properties in Indy right now. The other market that is good for that price range is Kansas City. Have you looked there at all? I like Indy and KC's fundamentals much better than Memphis'.
3 Reply
Mike D'ArrigoPro Member
Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
10y
@Snehann Kapnadaka couple of things jump to mind. Your desired price range of $60K to 80K isn't in line with your desired property class of A to B-. If you want in the A-B class range, you'll need to move up in price to around $80K-$120K. I'm not sure that I would agree that both have growing economies either. Both are stable markets with very affordable home prices and good cash flow, but Memphis is a little on the anemic side when it comes to population and job growth compared to the national agrverage and other markets like Indianapolis. (See the comparative matrix below). I'm with @Ali Booneon Indianapolis and Kansas City. I think they are 2 of the best cash flow markets and both have good economic and demographic fundaments. I'd be happy to chat with you about either of these markets if you'd like.
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Mike D'ArrigoPro Member
Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
10y
Originally posted by @Haim Mamane Palman:

The property that I purchased at a higher priced and at a lower rent (76k at $800) performed better than the property I purchased at a lower price with a higher rent (62k at $925) why? Mainly because of the quality of the property management company that did a better job rehabbing the property, better job screening a tenant and overall better job managing the asset.
Good luck
This looks to me to be a case of putting an unqualified tenant in at over market rent because the tenant was desperate and willing to pay more than market rent. A $62K property in Indianapolis is not going to rent for $925 (unless that $62K was considerably below market value). Be suspicious of higher than market rents. There's a reason a tenant is willing to pay it.
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Haim Mamane Palman
Investor · San Francisco, CA · Member since 2013 · 147 posts · 97 votes
10y
agree, hence my point about about the importance of a good property manager. I didn't know what I didn't know when I purchased the property... Now I know. The best tenants look for the best deal because they want to make sure they can afford it and pay on time.
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Lance Robinson
Investor · Scottsdale, AZ · Member since 2015 · 130 posts · 102 votes
10y
Originally posted by @Snehann Kapnadak:

Hello Everyone!
I'm a first-time investor looking to invest in a buy-and-hold SFH that has stable cash-flow in an A to B- neighborhood (any appreciation would be a plus, of course!). I'm looking for properties in the 60-80k range and narrowed down my markets to Memphis and Indianapolis. After some research, I found that both have stable and growing economies, a healthy list of available properties, and good job growth. Each market also has their fair share of "bad" neighborhoods and properties. So my question for you is: which market would you recommend for a first-time investor to jump into? Which zip codes would you recommend? What experiences have you had in these two markets?
Any feedback would be much appreciated. Thank you in advance!
I've reviewed both of those markets, among others, and personally decided for buy-and-hold SFH that I liked KC more than Memphis. I think KC is a more dynamic market than Memphis. in Memphis, I think it will be pretty stable and linear, but I thought that KC had more room for appreciation when looking more long term. Other than that, I think you can't go wrong with either. Don't suffer from analysis paralysis : )
In KC, I like solid A's for SFH because of the most demand for renters and appreciation potential. the properties I've purchased there have been between $90 - $125K. I think overall, Independence is a good area (you may have to check which parts of Independence.) Good luck!
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Douglas SkipworthBusiness Member
Rental Property Investor · Memphis, TN · Member since 2014 · 1k+ posts · 1k+ votes
10y
@Snehann Kapnadak,
I'm partial to Memphis myself. I have been buying in the area for the past 10 years and plan to keep doing so. Over that time period the rents have increased slightly and the home prices have increased as well.
The name of the game is finding deals and managing them right. It's that simple...it's just not easy!
Best of luck to you.
Investor's Guide to Memphis Real Estate
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Alex CraigBusiness Member
Real Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes
10y
I know nothing about Indy, but you may want to look into if being located in a colder climate causes more maintenance. Snow on roofs, busted pipes, etc. I don't know, but always thought that it could.
I have heard good cash flow in Indy. Bottom line, pick a team you like with good management. That is more important then the market. Also making sure the homes is renovated retail ready for the areas is important too. You will cash flow better on a home 10k more expensive if it is rehabbed right and there are not any large capital expenses for the first 10 to 15 yrs of your investment.
901-848-9028
2 Reply
Steve Endress
Sheffield, IL · Member since 2012 · 85 posts · 27 votes
10y
I have properties in Indy and Memphis and would be glad to share my experiences on turnkey, management, and ROI. PM me if you want to dialogue some more.
2 Reply
Matt Long
Rental Property Investor · Northeast Missouri · Member since 2016 · 21 posts · 10 votes
10y
Great discussion here. I am originally from Missouri so am interested in building my portfolio in the mid-west. Currently stationed in San Diego but learning about and researching the KC and Memphis markets. Due to my career in the Navy I will definitely be going the turnkey route initially. I have seen good info on turnkey companies in the Memphis area but have not seen as much in KC. Anyone have good experience with reputable turnkey operations in KC?
2 Reply
Charles Moore
Investor · Lake Forest Park, WA · Member since 2015 · 108 posts · 35 votes
10y
I think in terms of greater simplicity, Memphis scores higher than Indy or KC. Unlike Indiana and Missouri, Tennessee has no state income tax on earned or rental income (only interest and dividends), so you don't need to file and pay for a separate state income tax return like you would in those other states. Also, it seems there are fewer bad weather concerns there to damage your properties. Indy gets more snow, and KC can get more tornadoes.
6 Reply
Cailyn AunePro Member
Tacoma, WA · Member since 2015 · 176 posts · 88 votes
10y
@Charles Moore- This is great information... this was on my list to tackle as I've been looking at out of state investing. So even though Tennesse, Indiana, and Missouri ALL have state income tax- it's different for real estate income...? Hmmm.. Good to note. I will have to go look up details... thanks for bringing that to my attention...! I do know that Tennessee has an Excise tax of 6.5% imposed on the net earnings of business done through an LLC, and if you hold properties in an LLC, they have an LLC renewal cost of $350 every year, on top of the excise tax. There is a possible exemption for it, but no guarantee you'll get it. I know a lot of people hold properties in their own name, and therefore this wouldn't apply.... but it's good to know the lay of the land, regardless. This was a big factor for us in comparing markets....
I have a document I downloaded earlier this fall... regarding LLC annual costs by state, that I have referenced multiple times. Now I need the equivalent one on the Income tax regulations. :o) I'm happy to share it with anyone... Not sure if you can attach a doc in the post.. it's quite a few pages long, so I didn't want it to just take up a ton of room on the thread. Message me if you want it. :o)
2 Reply
Ross Denman
Real Estate Consultant · Whitestown, IN · Member since 2014 · 547 posts · 933 votes
10y
I work for a Property Management company in Indianapolis. I have several clients in both markets. I even have investors who live in Memphis and own investment properties here. I agree with @Haim Mamane Palmanregarding finding a good Property Management company for your team. I am not a fan of the one-stop-shop turn-key rehabbers/property managers. I'm certain that there are some good ones, but they make considerably more money on the rehab side so their property management business seems to take second place. I do have clients who buy from turn-key companies but bring them over to us to manage the homes. If you need some numbers regarding any deals that you may be interested in Indianapolis, I can provide you with a rental and demographics analysis. Never take numbers from the seller as gospel. A good property manager only makes money by renting your property... taking on a bad property or pricing a property too high does not produce income, so you will usually get honest numbers from a good property management company.
As far as Memphis is concerned, I have never heard bad things about Memphis Invest but I don't have any direct dealings with them.
1 Reply
Todd Burton
Managing Broker / Investor · Indianapolis, IN · Member since 2015 · 350 posts · 362 votes
10y
Hello Snehann-
I know nothing about the Memphis market but I know the Indianapolis market very well from 16 years doing over 400 investment properties. I am also a licensed Real Estate Broker. I agree that the management is as important (if not more important) than the property. If you end up investing in Indiana, make sure your property management company holds a valid Indiana Real Estate license. This is required by law to manage for third parties.
I would be more than happy to assist you with any questions you have regarding the Indianapolis market. Feel free to contact me anytime.
Best of luck in your quest.
0 Reply
James Bitakis
Investor · Melrose Park, IL · Member since 2015 · 77 posts · 24 votes
10y
I live in Chicago but am strongly considering buying newer 0-20 yr old SFH for buy and hold cash flow, although I'd buy older homes if the area showed good cash flow. I figure Indy is only 3hrs away so even though I'd use a property manager, it's close enough so that I can get to it fairly easy. Property taxes are so much better too.
0 Reply
Anna Smith
Investor · Lakeland, TN · Member since 2016 · 41 posts · 14 votes
10y
@charlesmoore It sounds like we are in a similar situation. My husband is a Naval Officer. We want to buy and hold. After being stationed in Millington, we are looking at purchasing in the Memphis area. We currently also live in Chula Vista. Perhaps we should all meet up?
0 Reply
Anna Smith
Investor · Lakeland, TN · Member since 2016 · 41 posts · 14 votes
10y
Matt Long that last post was directed at you. I tagged the wrong person...
0 Reply
Snehann Kapnadak
OP
Rental Property Investor · Philadelphia, PA · Member since 2015 · 212 posts · 116 votes
10y
Thanks everyone for such great advice!
@Haim Mamane Palman, @Douglas Skipworth, @Ross Denman, and @Alex Craig thanks for your help. Yes the common theme seems to be that good management is key.
@Ali Boone I looked a little bit at KC but I think I like Indy more as an overall market. Will PM you for more details if you don't mind.
Hi @Mike D'Arrigo and thanks for your solid advice. Looks like I was mistaken with my statements about growing markets and clearly I have a lot more research to do haha. I definitely want to go along the cash flow route vs. the appreciation route. Will PM you as well.
@Lance Robinson Thanks for your input, I'll definitely keep KC in mind moving forward.
Hmm I never considered weather to be that big of a factor when purchasing property but that seems somewhat important in the long term.
1 Reply
Alex CraigBusiness Member
Real Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes
10y
The only thing I can find head to head on Indy and Memphis is the head to head match up for the Memphis Grizzlies vs the Indiana Pacer. Memphis Grizzlies own that 16 to 12. So there you have it. Memphis wins!
901-848-9028
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Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
10y
Yeah, definitely. Both are good markets, but the guys I work with in Indy I like better than the KC guys right now. Message anytime!
1 Reply
Account Closed
Indianapolis, IN · Member since 2013 · 210 posts · 149 votes
10y
@Ali Boone
What do you know about Indy?
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Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
10y
@Account Closed
As far as what? Market fundamentals? Properties?
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Account Closed
Registered Nurse (ICU) · San Jose, CA · Member since 2014 · 496 posts · 332 votes
10y
Snehann Kapnadak In my opinion you have narrowed your research down to 2 great markets. My advice would be to start looking for reputable turnkey providers In these markets now. See what each have to offer and then go from there. Don't let statistical information alone to steer you one way over the other. Statistics are only one piece of the puzzle as there are tons of other pros and cons that you will not find on a statistical chart. Talk to people that actually invest in these markets and get there take on things. I invest in Indianapolis and use a company called FS Houses. I do not invest in Memphis however I have heard great things about both Memphis Invest and Mid South Home Buyers. I would contact all 3 and explore your options.
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