Indianapolis Class A, B or C Single Family Properties
Indianapolis Class A, B or C Single Family Properties
I want to get into the investment game, but what is the best property for me?and how do I decide if it is an A Class Property or B class?How do I decide?Is it different by Market or by Neighborhood or by School?It seems like the choices are endless or maybe even confusing.I don’t want to make a mistake. Which way do I turn? As a 20 year veteran investor in the Indianapolis market, these are questions that are often asked by new and experienced investors that are considering the Indy market.What I have found is that all these concerns really boil down to 1 question … How much am I going to make?
Let’s take a look at Indianapolis and talk about property classes. First, in order to understand a residential property classification you need to understand your particular market.For example, if you are in San Diego the price range for an A class property will be different than an A class property in Indianapolis. According to the National Association of Realtors (NAR) A median price for a 3 bed, 2 bath single family home in Indianapolis is $159,200. If you move that same home to San Diego, the median home value jumps to $607,000.{So, anything at or above $159,200 in Indianapolis would be considered an A class property, anything below that would be considered a B Class property. Same thing if you’re in San Diego. An A Class property would be anything above $607,000 and anything below the $607,000 mark would be considered a B Class property.}
So, what property Class is better?Of course, Class “A” properties are better.We were taught that in elementary school and we tell our kids the same thing.An “A” is always better than a “B”.But is it better for me?Let’s dig a little deeper.
There are certainly other “Things” to consider. Market, http://www.greatschools.org/is a rating tool that is provided by Zillow.I ran a search of homes and located XXXX Cole Wood Ct, Indianapolis, IN 46239. It is a very nice 4 bed 2.5 bath 3 car garage home built in 2002. 2494 Sq. Ft. priced at $ 169,900. It is in Warren Township Schools. This would definitely be a Class A property by most grading systems. But if you look at the schools for this property then you would be less than impressed. Here is the grading system for that address.
As you can see the Middle School and High School rank is very low according to Greatschools Rating system. Try to tell that to an alumnus of that school system who has children attending that school.They will swear by that school.
I ran a quick check of another school system in our market for comparison purposes.This is another school that has a loyal alumnus and passionate parents. The school system is called Hamilton Southeastern:As shown below the schools have a much better overall rating according to Greatschools.
I ran one other comparison. I ran a comparable sales analysis to see how fast homes are selling in Warren Schools vs. Hamilton Southeastern Schools.
Results:Homes in Warren School District sold on average in 50 days.
Home in Hamilton Southeastern sold on average in 36 days.
The message for me is that people want to live in both school systems and are moving there on a regular basis.I believe that tenants are going to move to the Location that best fits their lifestyle.
ROI
Roi is a good term to use when making a purchase decision and I think it's important to consider, but any ROI analysis is ONLY an ROI analysis on paper. Where the rubber meets the road is the actual performance of your investment property over the long term.You can look at all the spreadsheets and I think they are valuable. I think it is even more valuable to review them on a regular basis to see if the performance is meeting up to expectations. When you look at an ROI analysis there are certain variables that you can count on.Your property taxes and insurance costs are fairly predictable.If you are borrowing money to make your purchase then your Principal and interest payments are predictable.The only item that is Not predictable is the vacancy and maintenance on your investment property.I believe that the age and condition of the home and tenant selection will help determine how long you will enjoy the cash flow from your rental property.
It is easy to say that the lower the purchase price and the lower the rent, the higher the Risk.
Which means the higher the purchase price and the higher the rent the lower your Risk.
So here is a property Class Illustration for the Indianapolis market.
So, what’s the best property for you to purchase for your rental portfolio. You should talk to someone who has been IN the game and can provide some assistance. Anyone can send you a list of properties. Not everyone can guide you to ones that will fit your long game investment objectives.Rental Real Estate is an Excellent way to build long term wealth, but it helps to have a seasoned investor mentoring you.
Indianapolis Class A Property Search
Indianapolis Class B Property Search