Out of State Investor Due Diligence & The Indianapolis Market

4 Replies

Over the last few weeks I have noticed a number of out of state investors reaching out for assistance in conducting due diligence on properties that are either close to being under contract, or already in contract. Whether it be an off market wholesale deal or a turnkey property, out of state investors should have a well rounded perspective as to what they are getting themselves into. 

While I would advise visiting your target market prior to making a purchase, I believe it can be advantageous for an investor to find someone that is either local to the market, or who has bought property there before. If investors are able to have connections as such it allows them the opportunity to verify the validity of contractors, wholesalers, realtors, property managers, etc in the market.   

Multiple property managers within my network have expressed concern around eager out of state investors pulling the trigger on properties far above market value  to later realize that they had overpaid. Consequently, investors become unhappy when the property does not perform. Keep in mind that realtors, wholesalers, and turn-key providers are typically not the individuals involved with the asset 2, 4, or even 10 years down the road. 

This is why it is crucial to align with a team that has your best interest in mind (longevity of the asset & relationship) and can assist you in making decisions from hundreds or even thousands of miles away. Trust but verify! 

Cheers,

Zach 

Originally posted by @Zach Hoereth :

Over the last few weeks I have noticed a number of out of state investors reaching out for assistance in conducting due diligence on properties that are either close to being under contract, or already in contract. Whether it be an off market wholesale deal or a turnkey property, out of state investors should have a well rounded perspective as to what they are getting themselves into. 

While I would advise visiting your target market prior to making a purchase, I believe it can be advantageous for an investor to find someone that is either local to the market, or who has bought property there before. If investors are able to have connections as such it allows them the opportunity to verify the validity of contractors, wholesalers, realtors, property managers, etc in the market.   

Multiple property managers within my network have expressed concern around eager out of state investors pulling the trigger on properties far above market value  to later realize that they had overpaid. Consequently, investors become unhappy when the property does not perform. Keep in mind that realtors, wholesalers, and turn-key providers are typically not the individuals involved with the asset 2, 4, or even 10 years down the road. 

This is why it is crucial to align with a team that has your best interest in mind (longevity of the asset & relationship) and can assist you in making decisions from hundreds or even thousands of miles away. Trust but verify! 

Cheers,

Zach 

 absolute best way to do what your describing 10 years down the road is to only buy at or close to the median price point .. Not way below it.. logic dictates that way below the median is going to get you in rougher areas that probably wont appreciate the toughest tenants,  its not the house its the tenants and PMs while they do the best they can they are not magicians and cant make low end life long tenants change their spots..  Median I believe in indy is about 130k  so that means homeowners are buying those to.. that's what an out of state person should focus on.

but OOS investors get on a site like this, hear locals talk about super high returns on rentals and think they are a failure if they don't get the same so they create this totally unrealistic criteria of what they think they need in the way of returns.. which on paper look great but as you state 5 to 10 years down the track they wonder why they did that..  

but that's what it is, everyone is beaten to death on the cash flow is everything and appreciation is gambling.. so they really do it to themselves.. and have no one to blame but themselves..  

buy a nice 130k house in Indy you know that's a given that's a strong B market with rents at or well above 1k per month get the top slice of the renter pool instead of the bottom.. etc.. that's the issue.. buyers doing it to themselves thinking they can do as well as local landlords who are professional landlords and can make C and D work since it their day job.

Originally posted by @Jay Hinrichs :

only buy at or close to the median price point .. Not way below it..

 I haven't heard this before but it makes a ton of sense. Good rule to follow. Unfortunately, in today's market houses in rougher neighborhoods (look at Lawrence for the Indy example) are being listed at that median so there needs to be more due diligence. 

Not sure if the inverse applies at the other end of the cycle or not.

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Great observation and perspective to provide!

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