Rookie investor from Wy making a move in Indy

Rookie investor from Wy making a move in Indy

Member since 2019 · 3 posts · 0 votes

Hello everyone!

My name is Dan Huang and I am an Army Veteran turned tech entrepreneur turned Bigger Pockets podcast addict, who just made his first offer on a Near Eastside 1bd/1ba triplex in Indianapolis. Whoop whoop! Fingers crossed all this lurking around on the BP forums made me a smarter REI practitioner.

I've attached screenshots of deal analysis below for those of you who can provide feedback on what I did wrong - here to make mistakes, learn, and try again! If there's anything that I can take from my military experience it's to have thick rhino-like skin.

I'm focused multi-family units in Midwest cities situated along major interstates until I can trade up to apartments. I'm a sucker for older homes (modern homes lack the charm and craftsmanship) and absolutely love interior design (I've gotta thank my mom for that, she's got great taste). Transforming houses into a homes that's my game plan. 

Eventually, however, I'd like to get into commercial real estate, specifically restaurants. I come from a long line of restaurant operators and chefs (I chef around on a daily basis), and have been dreaming up restaurant concepts ever since I was a kid. 

I think that just about does it as an intro. If I sound like someone you'd like to get to know better, just drop a note and let's connect. The one advice I keep hearing and reading over and over is to network, even if we're not immediately in the same market now... who knows? The universe works in mysterious ways, doors close for others to open ;)

Looking forward to hearing from ya'll!

Cheers,
Dan Huang
Benchmark Ventures
 

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Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
6y

Dan:

Congrats on making an offer.  Here a few thoughts for you.  Since you said you had thick skin, I'll shoot straight.  I'm just going off the information you provided plus my knowledge of that market.

If the ARV of this property is $40K you are way over-paying for it. According to your figures you are all-in at $50,840 which means you just destroyed $10,840 of value. In this game you want to make money when you buy. You should be able to find a property where purchase + repairs is less than ARV.

East side of Indy has some pretty rough areas. Given the price point and ARV you provided, you are in one of those rough areas. That brings two other thoughts. Are you comfortable with your rent projections? At $650/mo for a 1BR, tenants will have the option to live in a nicer area. Also, if it is truly in a rough area, you may have a hard time with collections. I'd add a much higher factor for vacancy.

On the positive side, with such a low price it appears you are being very conservative on Operating Expenses.

Good luck.

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  • Greg ScottPro Member
    Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
    6y

    Dan:

    Congrats on making an offer.  Here a few thoughts for you.  Since you said you had thick skin, I'll shoot straight.  I'm just going off the information you provided plus my knowledge of that market.

    If the ARV of this property is $40K you are way over-paying for it. According to your figures you are all-in at $50,840 which means you just destroyed $10,840 of value. In this game you want to make money when you buy. You should be able to find a property where purchase + repairs is less than ARV.

    East side of Indy has some pretty rough areas. Given the price point and ARV you provided, you are in one of those rough areas. That brings two other thoughts. Are you comfortable with your rent projections? At $650/mo for a 1BR, tenants will have the option to live in a nicer area. Also, if it is truly in a rough area, you may have a hard time with collections. I'd add a much higher factor for vacancy.

    On the positive side, with such a low price it appears you are being very conservative on Operating Expenses.

    Good luck.

  • Member since 2019 · 3 posts · 0 votes
    6y

    Hey Greg, really appreciate the honest feedback here. I am definitely concerned about the ARV of this property being this low and wondering if it makes since to make a purchase of property in an area that's being revitalized. I understand this area is really rough, but have also read that money is being poured into the neighborhood. With its proximity to the Wholesale District and Fountain Square (lots of hip and new bars), I'm hoping in a few years, we'll start seeing single, straight outta-college kids who cannot afford to live downtown move to nearby areas like Near Eastside. Is there a potential for properties in rough areas to appreciate exponentially?

    In your experience, is this a risk worth taking or am I seeing things through rose-colored lenses?

  • Josh C.Pro Member
    Property Manager · Indianapolis, IN · Member since 2010 · 1k+ posts · 1k+ votes
    6y

    Mind sharing the address? Near Eastside can mean different things to to different folks. I personally love the near Eastside. But I consider West of state or a couple streets ober to be near east side. As you continue to head East it changes super quick. And from Brookside south to Michigan is nicer than Michigan to Washington. 50k triplex with $1900 rents seems amazing. If it’s really $650 for a one bed they better be is a decent area and be super nice. Possible, but it depends on how Far East you are and how close to 10th you are. Indianapolis is great though.

    Good luck and let me know if I can help.

  • Contractor · Seattle, WA · Member since 2019 · 339 posts · 325 votes
    6y

    @Daniel Huang I would be very weary about getting into the restaurant business these days. In Seattle, for example, we are seeing brick and mortar restaurants closing down on a more frequent basis then in the past. Many food concepts are going straight to a model that basically uses a shared commissary to produce meals for meal delivery

  • Member since 2019 · 3 posts · 0 votes
    6y

    Hey @Josh C. house is on Adams Street to the north of Brookside Park. I'm thinking we can reach $650/mo as the area improves, thinking that current rent would be closer to $580-600 starting off. Would be down to hop on a call to chat - I've never been to Indianapolis, I just know based on my research that Indy is undervalued and has huge potential for growth. I'd love to hear your thoughts on Indy, where it is currently and where it's headed next. What are your thoughts on Adam street/Brookside Park - whats the potential there?

    @Parker Eberhard I've heard of this concept, isn't Travis Kalanick staking out his next startup in this space? Do you see this trend sticking for the long-term? I hope sit-down restaurants won't disappear forever... Btw where are you based in Seattle, I moved back to Wy a few years ago, but was originally in West Seattle, right on Alki Beach!

  • Contractor · Seattle, WA · Member since 2019 · 339 posts · 325 votes
    6y

    @Daniel Huang with labor costs, food costs, and rent & construction, running a sit down restaurant can get very expensive with little room for profit.

    I’m on Mercer Island now; was in Greenlake and Queen Anne previously

  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    6y

    @Daniel Huang I would be extremely careful with this deal. You don't say where in Near Eastside the property is however, in general, the area is pretty crime ridden with a few decent pockets. Based on the price and rents, I can only assume that it is not a good area. Personally, I would never touch a triplex for only $50K. Actually, I wouldn't even touch a single family for $50K. Indy is a good cash flow market for single family but it is not a good multi family market. The vast majority if multi family units are in old, rough areas as I'm presuming this one is. The other problem I would have is the fact that the units are only 1 Br. That reduces your tenant pool a lot and can make hard to find good tenants. 

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