Seeking advice for Buy and Hold rentals in Indiana

17 Replies

Hello,

This is my first post on BiggerPockets. I have listened to probably over 100 podcasts by now and have finally realized that it's time I seek out help and advice here on the forums. I have an interest in Indiana and would like to ask for advice on which areas are profitable to invest in there. I would like to purchase at least 2 rental units this year and am looking to spend anywhere from 30 to 50 thousand dollars each including rehab costs. I plan to employ the BRRRR method and therefore would love to find properties around 20-25% or lower below FMV. A few areas I would appreciate your help with:

1. Potential areas to invest in.

2. Reputable Property Management Companies to work with.

3. Reputable Contractors 

4. The average home prices, what I can expect in rent, tips on property type, etc.

Any other advice you could lend me would be much appreciated. Being a "newbie" I don't have a great deal of expertise to provide but I am committed to contribute to the BP community where I can. 

Thanks! 

Single family homes in North West Indiana (NWI) is a good place to invest. I know a lot of people invest in Indianapolis also, but I don't have experience there. I would suggest to look for those members who resides in NWI and get connected with them. 

Kaydn,
You will be hard pressed to find deals in that price range in the Indy area. There are a decent of properties in the $20-50k price range, however they are in the least desirable areas of the city, and will require a larger scale rehab costing $50-75k.
Also the rents you will get even after rehab will still be very low because of the area, and you then have to deal with that category of tenant.
All in all, likely your costs will be high and cash flow will be low, that’s before any turnover, tenant damage, tenant issues, etc

Thanks guys for your advice, I'm not particularly hard pressed to buy in that price range, I simply just want to maximize ROI while of course maintaining reliable tenants in the properties. More than anything I'd like to be able to pay cash and do a cash out refi to get out the majority of my money so I can scale. If there's any areas anyone considers solid B class that fit that idea I'd love to know, thanks again!

You just can’t get B area for 50k all in. Not in Indianapolis anyway. 80 would be the floor but closer to 100k+. That range you can find C area properties where people actually have jobs and you can make money. I own some of those and we manage lots of them. But not nice areas where people want to live and homes appraise well.

Kaydn-

I'm at a similar stage as well and have started to connect with some folks in Indy. I would recommend finding an agent to help you navigate the area. A good agent should be able to answer all of those questions for you and will help you find deals. Look for agents who have experience with investors or are investors themselves. The difference is they will present "good deals" to you, which they will know how to assess, as opposed to just setting up a search that will give you 1000+ properties to look at...not helpful at all for an out of state investor.

There are a handful of companies I've come across that perform all the services an our of state investor needs (agents, GC, PM). It's probably worth looking at them and weighing that against trying to build a team remotely. @Josh C. ' s company does this - I haven't done any deals with them yet, but I've been working with their agent (Cory) who has been very helpful in understanding the Indy landscape.

In terms of getting a sense of prices and rent, you should be able to leverage Zillow or Realtor.com to get a general sense of those numbers. 

@Josh Sohar @Josh C. what areas/zip codes in Indianapolis would you recommend as B+ to A areas? Would these areas be houses with ARV's of around 130-150 and rents around 1200 plus?

@Kaydn Jensen if you modify your strategy and try to BRRRR in a better area I'll bet you could leverage your money with an HML and be able to pull it off and have a really nice rehabbed property in a good area. Everything I've read is that for out of state guys like you and me the better thing to do is focus on properties close to the median home value for the MSA as this will work out better over the long term. Your proforma might look better with the lower priced homes but that extra "return" will be eaten up by high turnover, evictions, damage etc. I think the local investors have a much better ability to maleness money in the lower price range.

I'd LOVE to be able to BRRRR a couple houses with ARVs of around 150 and have 20% equity after pulling out all or most of my money. Even if they rent for 1300 I'd probably be pretty happy with that as long as they were truly in very good areas.

Ryan E.,
Any A/B+ areas are going to be in the suburbs, or in the trendy areas.
Good suburbs include, Greenwood, Brownsburg, Avon, Plainfield, Zionsville, Noblesville, Fishers, Carmel.
Trendy areas inside the city include Fountain Square, Bates-Hendricks, Herron Morton, etc.

@Josh Sohar thanks for the reply! I appreciate the clarification on suburbs vs city itself. I should have been clearer in asking about the Indy MSA in general, including suburbs, not just the city itself. Your response is very helpful, thank you! 

Ryan E.
Send me a colleague request and we can chat more about the area if you wish!
Always like to chat with like minded people!

@Josh Sohar @Ryan E. @Matt S.
Thanks guys for pitching in here and thanks Matt S. for the tip about getting an experienced realtor. Ryan E. I’m like you where I’m happy with spending more to get reliable tenants, my biggest priority is simply leaving room at the end for a solid cash out refi so I can snowball the whole thing over the next few years. Josh Sohar if you don’t mind I’d love to connect with as well to hear a little bit more about what you’re doing in Indy. I’ve heard on the podcast and from reading that cash flow is obviously very important but that appreciation is where true wealth is built. That being said, what’s your opinion on the appreciation potential of the suburbs you mentioned ?

@Ryan E.
Sounds like we are considering the same route right now and both from the Western US.I’d love to connect with you as well and talk more about your strategies. Send me a request if you’d like.

@Kaydn Jensen

I've been active in Indianapolis since 2010 so I can speak to Indianapolis but I'm not familiar with other parts of Indiana. If you're talking about being all in for $30K-$50K, that will be properties with an ARV of $40K to mid $60K. The high end of this range is going to be a low C class neighborhood. The low end is going to be in very rough areas. If you're looking for B class properties, you'll need to move up to the $80K-$100K ARV range.

@Mike D'Arrigo
Thanks for the tip, do you find that the increase in rents from the low C to B areas compensate the ROI? Do you have any areas near Indianapolis you would recommend or any that you would recommend avoiding? I appreciate your help!

@Kaydn Jensen Contrary to conventional thinking, the COC ROI on a B class is often better on a B class property than a low C class. Low end properties are notorious for high vacancies and turn over costs. You can often find a sweet spot in C+/B- properties, which in Indianapolis is going to be in the low $70K to $80K range. Indianapolis can vary neighborhood to neighborhood. Rather than recommending good areas or telling you what areas to avoid, I would say to stay away from cheap areas with low rents. Anything under $60K with rents of less than $700/mth is probably going to have a lot of problems and not perform.

Jaydn,
Send me a colleague request

From all my research, the $30-50k property opportunities have ended in Indy. I think you'll have to pay closer to $100k and expect lower ROIs.

I have been investing in SFH 3/2/2 in Indy on the west side and typically have $110-130k in to a property and get the 1% rule. I am finding pockets that lease a lot faster than others. I would call these B neighborhoods.

If you start looking at any of the northern suburbs you will need 2x that to get in to the SFH market.

Let me know if I can be of any help or make any specific introductions for you.  

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