Indianapolis market

7 Replies

what is the realistic cap rate that i can expect to get in Indianapolis? What are some B-C+ rental areas in that market?

@Chris Zlotnik  

That really depends on how you go about buying the houses.

Buying B-C Turnkey in my opinion would be 8%-11%

If you buy prehab turnkey then you'd be more likely to find the 10%-12%

The problem in B neighborhoods here is that it's a sellers market right now in Metro Indianapolis which makes deals harder to find and makes your CAP go down.

The C neighborhoods are still popping ok. That's where I'd focus (and will be over the next several months).

JHP D4D Walk-Through

That will help you define what neighborhoods are B-C.

'My' view of C neighborhoods is any rent rate for a SFH $850-$1100/mo. You'll find places spread throughout that pull those rents.

B Neighborhoods would be $1100+/mo and you're probably looking at houses $150k+ (again in my opinion for those who debate)

I'd consider my house in a B neighborhood and houses here sell $160-$190k in Fishers.

I feel Lawrence is a great C area as well as spots in Irvington and Greenwood.

@Chris Zlotnik  Since this is in the multifamily forum, I will assume you are asking about apartments.  @Taylor Jennings  seems to have you covered on the smaller 4 plex size deals, which is not my area of knowledge.  I have been looking at this market for a couple of years now for complexes of 200 units or greater, and still can't lock one in to meet our required returns.  It is definitely a sellers market in Indy for apartments. For B products in B areas, cap rates are easily in the low 6 range, and usually the best and final rounds of bidding can see competition going into the sub 6 territory.  I will only look at C- or better properties if they are in C+ or better areas, and those cap rates are not much better. Easily go sub 7 for most of them.  I don't know what it is about Indy that has investors willing to pay so much, but I suppose the stable economy, favorable property tax laws and the fact that someone from Chicago can get there in a couple of hours is a big factor.  Hopefully one day I will find something.

As far as locations, I agree with all of Taylor's recommendations, except that if Irvington is the area I think, then that one scares me depending on which block you are on.  Definitely anything north of 56th street in that quadrant of the city is the path of progression, especially in the outer loop section between Carmel and Noblesville. South, in the Greenwood and Perry Township areas are solid as well.

@Mike B.  So that is what forum titles are for... lol Thanks for covering me on the multi family content =]

Sub 7 holy cow... You tell me what C neighborhoods you want properties and I'll sell them to you at 9% all day! I'm passing deals up because they aren't 12%+.

I agree with you on Irvington. It still has several questionable areas.

I've come across alot of affordable duplexes on the East side around the Raytheon Plant and Community East Hospital along 16th & 21st street areas. These would be Cash properties under $30K.  Is this a tough area to rent? This a C or D area?

There are also plenty of SFR in this corridor as well, but his is a MF forum so...

Originally posted by @Justin Owens:

I've come across alot of affordable duplexes on the East side around the Raytheon Plant and Community East Hospital along 16th & 21st street areas. These would be Cash properties under $30K.  Is this a tough area to rent? This a C or D area?

There are also plenty of SFR in this corridor as well, but his is a MF forum so...

 I've owned several of these types of properties in Indy and rejoiced the day I sold the last one a couple years ago!

If you're going to do multi-family in Indianapolis Metro, I would stick to 6+ units.  Duplexes just don't seem to work very well and are usually in the older areas and lower rents = lots of maintenance and bad tenants.

@Mike B.   @Taylor Jennings Irvington for SFR and smaller multi family is great. Never had a bad experience. For 20+ unit buildings on washington street... eh.. not the same thing. Washington street between emerson and arlington (Irvington) has lots of big apartment buildings and they are notoriously ghetto as most everything right ON washington st is. Back in the neighborhoods of Irvington (even a just half block from washington st.) is amazing. You can tell which pockets are rental pockets and which are home owner pockets but I love both. Great place to invest. Even doubles and quads work in Irvington if they are done right.

@Justin Owens    The neighborhood just north of the raytheon plant is historically (in my 10 years experience) the most vacant neighborhood in the city IMO.  Community east area is definitely a step up but its still not good for doubles.  That area is great for buying a little 2 bedroom house for 25k - 30k all in and rent for 550 - 595/month.  I would only buy a double over there to convert it to a single.  

@Shawn Holsapple  is right.  Duplexes in inner city Indianapolis are tough.  In areas like Irvington, broad ripple, woodruff place, or meridian kessler you can get some really good tenants and make them work.  Think of it like this:  They have to be in places where college kids will live. College kids are broke, but not ghetto.  If an area is even slightly questionable then doubles just don't perform.  Good tenants know that they can get a single family house so that is what they do.  People that rent doubles are looking to move into a single ASAP, making it nearly impossible to find a long term tenant.  

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