About to buy first turnkey duplex in Indy, need advice!

Rental Property Investor · Indianapolis, IN · Member since 2015 · 46 posts · 16 votes

I just walked a really good looking duplex here in Indy with a realtor. Has new furnaces, hot water heaters, cleaned up really nice. Neighborhood is probably a C with B potential. Seller is asking 118k and currently has a contract on it but feels like the contract is going to fall through. He's actively marketing it to be rented ($700 each side). It will need a fridge, stove, W&D on both sides. Currently empty on both sides, hasn't been on market long... Appraising around 120k. I plan to use my HELOC to buy it from another property I own out of state but concerned about having so much of my money tied up in one duplex. What should I offer?

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Matthew Schroeder

Investor · Carmel, IN · Member since 2014 · 332 posts · 245 votes

For a vacant duplex in Indianapolis, at that price, and for that "pro-forma" rent, it had better be in a quite a good location.

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Juan Reyes
Jericho, NY · Member since 2016 · 143 posts · 49 votes
9y
Will your HELOC cover the whole asking price ? If so you are technically paying cash, that might mean that you can try to make. a cash offer. All IMO not any advice or recommendation
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Travis Darden
OP
Rental Property Investor · Indianapolis, IN · Member since 2015 · 46 posts · 16 votes
9y
Yes it will cover it. Don't want to lowball too much but don't want to get stuck upside down later either...
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Matthew Schroeder
Investor · Carmel, IN · Member since 2014 · 332 posts · 245 votes
9y
For a vacant duplex in Indianapolis, at that price, and for that "pro-forma" rent, it had better be in a quite a good location.
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Erin Donlan
Real Estate Agent · Indianapolis, IN · Member since 2015 · 87 posts · 56 votes
9y
Did the realtor you're working with provide sold comps? Did they look to see if there might be a mortgage on the property? Do you have an idea what the other offer looks like? Why do you feel like that offer is going to fall through? Is the other offer cash or financing?
Sorry, lots of questions. :) That's all things I would be considering when putting together an offer.
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Travis Darden
OP
Rental Property Investor · Indianapolis, IN · Member since 2015 · 46 posts · 16 votes
9y
Matthew Schroeder the location is "okay" I think. Have a cop friend that said it's a good rental area. The 100k is hanging me up a little though. Feeling like I could get more bang for my buck in Indy too.
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Travis Darden
OP
Rental Property Investor · Indianapolis, IN · Member since 2015 · 46 posts · 16 votes
9y
Erin Donlan the other offer is depending on financing according to my realtor. The seller doesn't think it's going to happen. My realtor sold me my house; this really isn't her thing I think. Of course she'd never say that b/c she's an awesome person. Don't have comps right now. Rents in that area for 3 bedrooms are around $700. Best house on the block by far. How long will that last is my concern. A couple of houses on the street are being renovated. So there's hope. I'm thinking I should offer lower to try to gain some equity on the purchase.
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Travis Darden
OP
Rental Property Investor · Indianapolis, IN · Member since 2015 · 46 posts · 16 votes
9y
Erin Donlan and that's a great question about seeing if there's a mortgage on the property. Didn't think of that, thanks!
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Tyler Jahnke
Rental Property Investor · Oakland, CA · Member since 2016 · 341 posts · 643 votes
9y
@Travis Darden - Make sure you really dive into the numbers using the deal analysis tools on BiggerPockets or your own formulas/spreadsheets. Buying a duplex for $118K with $1400 in rent per month (pro-forma) doesn't seem like an amazing deal off the top of my head. I'm seconding @Matthew Schroeder 's comments.
But again, you've seen the place, know the neighborhood, and understand the specific property better than us all. BEST OF LUCK! And congrats on finding a place you want to pull the trigger on. That's one of the toughest steps!
-Tyler
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Leo B.
Investor · Hercules, CA · Member since 2015 · 208 posts · 47 votes
9y
What part of Indy is it located? There hasn't been much in terms of 2-4 units that I'm seeing good numbers on that are in areas I would want to invest in.
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Shawn Holsapple
Residential Real Estate Broker · Indianapolis, IN · Member since 2010 · 1k+ posts · 557 votes
9y
@Travis Darden - I would MUCH rather have a couple nice little 50's built SFH for $120 that rent for $750 each - rather than a double for the same price!
Anyone that knows me knows I'm NOT a fan of duplexes as a whole in Indy. Yes, I own some nice ones in Greenwood that were built in the late 80's - but other than that, I've had more than my fair share of doubles and the nightmares that go along with them.
IF I was going to buy the one you mentioned, I wouldn't go more than $75k rent ready...and even that's high. You'll find it very difficult to keep both side occupied at the same time. So - you basically have a $100k home that rents for $700...
In addition, you mentioned the area - we are so street by street here that it's hard to tell if it's good or not.
You should be relying on your property manager and not an inexperienced retail realtor for neighborhood advice - IMHO.
I'm sure there's much better opportunities out there and I'd be glad to point you in the right direction, if you need any assistance!
I hope that helps.
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Aaron B.
Investor · Indianapolis, IN · Member since 2015 · 80 posts · 82 votes
9y
@Travis Darden, i think you have gotten some great advice. The following is just food for thought. Regardless of the location the numbers are a bit tight, for me. That said, I am very conservative in my estimates but here is what I mean: 118K price; 20% down so your financing 94,400. Your rent is USD 700 per side (total USD 1,400). So your mortgage would be USD 506 on a 30 year term 5 percent interest rate (a guess). So next, minus 10% on Vacancy, CAPex, Maintenance/Repair, Property Management, plus Uncle Sam will want his cut USD 1,100 taxes (guess here also that your property was assessed at 55K), and finally 700 insurances - total guess. You would clear slightly less than USD 100 per side. I think you are also exposing yourself to additional risk using a HELOC. These numbers don't factor in any closing costs and hopefully you would have no rehab/repairs.
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Kathleen Bassett
Real Estate Broker · Cleveland, OH · Member since 2015 · 451 posts · 313 votes
9y
Hi Travis,
I echo a couple of our bigger pocket folks on how tight the deal is and you agreed. I guess a reduced accepted buy price could help much there. My bigger concern for you is what happens to the rate on your heloc over time unless you have a locked in rate and term for which to do your hard math here. Just some food for thought as at some point, the rate cycle will cycle back up. You have to sleep at night. Good luck!
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Travis Darden
OP
Rental Property Investor · Indianapolis, IN · Member since 2015 · 46 posts · 16 votes
9y
Wow! I'm blown away with the advice you all have given me! Thank you! I'm definitely reassessing at this point. The other contract is still on the hook right now so if and when that falls thru, the seller could be a bit more motivated. It is a tight deal. You all are awesome though. So impressive.
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Travis Darden
OP
Rental Property Investor · Indianapolis, IN · Member since 2015 · 46 posts · 16 votes
9y
Shawn Holsapple I never thought about the duplex theory. I appreciate that angle. My thoughts were to get as many doors as possible with my funds but you make a valid point. Thanks!
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Ryan Dossey
Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
9y
@Travis Darden
If you want an unbiased opinion on the property drop me a PM with the address and I can give you some solid thoughts on it. Realistically I think you can do much better from a cash flow/purchase price standpoint.
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Josh Harris
Investor · Derby, IN · Member since 2014 · 33 posts · 17 votes
9y
$70,000 minus cost of needed appliances. That would be my top offer. 50 X monthly rent is a good rule of thumb. And remember that a duplex is harder to resell than a single family residence.
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Jon Q.
Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
9y
Originally posted by @Travis Darden:

I just walked a really good looking duplex here in Indy with a realtor. Has new furnaces, hot water heaters, cleaned up really nice. Neighborhood is probably a C with B potential. Seller is asking 118k and currently has a contract on it but feels like the contract is going to fall through. He's actively marketing it to be rented ($700 each side). It will need a fridge, stove, W&D on both sides. Currently empty on both sides, hasn't been on market long... Appraising around 120k. I plan to use my HELOC to buy it from another property I own out of state but concerned about having so much of my money tied up in one duplex. What should I offer?
My advice: don't buy it. It likely will not rent for "$700 each side".
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Andy Rumple
Wholesaler and Real Estate Broker · Indianapolis, IN · Member since 2009 · 438 posts · 293 votes
9y
As a former owner of 10 duplexes I would be cautious. This is general advice.
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Lecia Montague
Residential Real Estate Broker · Raleigh, NC · Member since 2016 · 18 posts · 4 votes
9y
I would suggest asking the seller; how long has it been vacant ? how much did it rent for when it was rented ? What has been the vacancy rate during his term of ownership ? Why is he selling it ? Is there a good property management company that is willing to manage a property in that particular area ? You may also want to consider charging pet rent and charging rent for a washer/dryer to generate more income per month. If you are going to pay cash, I would also negotiate a lower offer than the 118k. The CASH and a quick closing will normally entice the seller to negotiate. Good luck !
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Kevin Harris
Indianapolis, IN · Member since 2016 · 21 posts · 9 votes
9y
I am a newbie here in Indianapolis, but I think you could buy 2 SFH that rent for $750 each for 100k
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Travis Darden
OP
Rental Property Investor · Indianapolis, IN · Member since 2015 · 46 posts · 16 votes
9y
Josh Harris great advice about the reselling of a duplex. You guys have really given me an education on this one. Thanks!
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
My clients that have bought sub 100k duplexs in Indy have just been literally wiped out.. these tend to be in the worst areas with teh worse tenants..
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Travis Darden
OP
Rental Property Investor · Indianapolis, IN · Member since 2015 · 46 posts · 16 votes
9y
Lecia Montague so there's a sign in the yard about calling if interested in renting it from the prop mgmt company. I call them for the price of the rent, she places me on hold and tells me she's gonna get back to me about the price as it wasn't in her system yet due to the newness. I still haven't gotten a call back (more than 24 hours at this point). Def won't be using them for help!
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Lecia Montague
Residential Real Estate Broker · Raleigh, NC · Member since 2016 · 18 posts · 4 votes
9y
That's exactly the problem in C neighborhoods. They are on the bottom of the totem pole for most Management companies. Geez ! How unprofessional
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Travis Darden
OP
Rental Property Investor · Indianapolis, IN · Member since 2015 · 46 posts · 16 votes
9y
Andy Rumple I haven't cut the deal off 100% yet, but the more I look at it, the more I'm thinking I better stay with the SFH strategy for rentals...
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