Any advice for REI in Indianpolis while living in California?

Question

Greetings BP Forum. I was at a BP networking event here in the Bay Area last week and the subject was investing out of state while living in the San Francisco Bay Area. The area of focus was on Texas, but there were a couple of people there that seemed to think that Indianapolis was a great area to look at.

I've been told Cap Rates of around 13% to 14% can be found there, especially around the Fountain Square Area.

Thoughts?

I've been told Cap Rates of around 13% to 14% can be found there, especially around the Fountain Square Area.

Thoughts?

Ryan Mullin · Answer

Not any more.  Fountain Square and Bates Hendricks are pretty much tapped out as far as buy and holds go.  Its extremely tough to get an 8 or 9 cap these days. There are areas near fountain square that will get above 10% but you have to know where to look... and yeah there are rough pockets..

As an out of state investor right now I would not focus on trying to be near fountain square, its too narrow of a search.   2 Years ago I was saying the opposite. I encouraged a lot of people to buy in FS and BH and surrounding areas.  And now prices have pretty much doubled.  Both on the acquisition side and the retail sale side.  Not because of the influx of out of state buyers or any thing like that..   but more so the community at large here on the south east side of Indy over the course of 20 or 30 years + the economy is good and people are loaning, investing, building and rehabbing.

There are more opportunities out there!  Dont worry.  :)   Tons of good Indy neighborhood threads on here.

Lee Smith · Answer

I not only own investments here in Indy(low income, and bread and butter neighborhoods), I also have my own brokerage where we specialize in working with out of state and international investors. Is indy a good market? Yes... Is it risky? Well, if you are out of state and don't do your own research, then yes it really is VERY risky.... As others have said, you need to make sure you have a good crew here on the ground. You need to make sure you are double and triple checking everything anyone is telling you.. A lot of the big names on here have an aversion to inflating ARV(after repaired values) and Rent rates, so do your own research... Even if you work with me, I tell you to double check my numbers. Is 14%+ on a SFR doable? Well, it depends on your risk tolerance.. Most likely a SFR with that kind of cap rate(including vacancy rates, repairs, etc) is going to be in a lower income area where you get a good tenant. My company works in these types of areas, and while we have a pretty good success rate with finding these renters, the occasional one slips through... You are more likely to see this or more on duplexes to quads. Again you are dealing with lower income renters though and that provides it's own challenges..Bread and butter neighborhoods in Indianapolis are providing 8-10% cap rates. Those are on houses in the 80-125k ARV range.Your best money is in buying houses that need a ton of work. You buy it, rehab it, and rent it...

2nd best money is in buying turnkeys. You buy it fixed up, maybe with renters in it(although I would prefer you place your own tenant unless you REALLY know the property manager who placed the tenant)...I would be happy to help you out with purchase, rehab, property management, and sales.. We can help you with any part or piece of that puzzle, or just if you want a second set of eyes on a deal you are looking at with someone else, give me a call!  If you just want a CMA(Comparative Market Analysis), for $5 I will give you active, pending, solds over the last year, and leased properties over the past 2 years within quarter mile radius or the neighborhood the subject property is in.  I also offer a service where if you want a third party to create a video of your property we will do 1080p/60fps video for you for $100.. Give me a call and I can go into more details or just let you pick my brain for a bit.. haha

David Faulkner · Answer

My advice for REI in Indianapolis while living in California is simple: Don't do it!

I agree with Bob that investing in CA is less risky, but probably for a different reason than him. I have nothing against REI in Indy and sure it is possible to make a fine return there, if you live in Indy. If you do not live in Indy, are not familiar with the market, are new to REI, don't know anybody in Indy, and are thousands of miles away if there is a problem you need to address, then it seems fairly darn risky to me. No amount of arguing that you'd have a PM, would do some research on the internet, and fly out for a couple of days, and passing that off as sufficient due diligence is going to make it much less risky IMO.

On the other hand, there are plenty of ways to make great money in REI in CA, and here you can become a local expert in the market, take your time & put in the effort to actually buy yourself a great deal rather than paying market value (or higher than market price with a turnkey out of state), you can supervise or DIY the rehab to cut costs and ensure it is a quality job, you can PM it yourself again to cut costs and ensure the job is done right. You can make good money in CA REI, and no you don't need to speculate to do it. In the process you will learn a ton too and become a real, local, hands on investor.

Buying out of state won't make you a RE investor any more than I would become a sophisticated stock investor by buying a Vanguard S&P500 index fund, but I would probably get better returns than you over the long haul in that case.

Kathy Henley · Answer

@Brian Garlington  Cap rates are only one tiny clue to finding possible areas to invest. One can learn a lot from the web (crime rates, schools, walk-ability, proximity to a pool of tenants.)

I live in the Bay Area and invest in St. Louis because I used to live there and have family there.  My search for putting together a team on the ground, was easier than being a stranger to the area.  Cities are big, neighborhoods have cycles of being worthy of investment dollars.  Call property managers in your area of interest and ask about vacancy rates, turn-overs and what kind of listings they wished that they had more of.  Then go hunting for such buildings.

Philip Sriployrung · Answer

@Ryan Mullin  Even though its harder to find those higher cap rates in FS and BH, what do you think about appreciation in these neighborhoods compared to other Indianapolis areas? As a self-identified buy and hold investor (without actually having made any deals yet) would it be wise to trade-off cap rate for appreciation; or should the goal be for both?

Jeff Rightmyer · Answer

Does anyone in here actually have investment property in Indy? Is it performing well? Do you find a lot of competition in both the turnkey world and for a solid property manager? We usually handle the Sunbelt, cities like Charlotte, Birmingham, Houston, Orlando etc. with pretty solid returns and happy clients. I am just curious as to who has boots on the ground in Indy

Mike D'Arrigo · Answer

@Brian Garlington Dallas has a booming economy with great job and population growth but because of some of the highest property taxes and insurance rates in the nation, the returns are very low in comparison to Midwest markets like Indianapolis and Kansas City. 13-14% return are not realistic however when you take in to account vacancies and maintenance which a lot of people neglect to include. Still, the returns in Indy are quite good. The key is being in the right area and having good property management. We sell turn key properties in both Indianapolis and Kansas City and know the markets well. Feel free to PM me or call me if you're like more insight.

Robert Musallam · Answer

Hey @Brian Garlington. Welcome to BP!

@Mike D'Arrigo does work in Indianapolis. He's a good person to connect with on that front. Best of luck on your out of state investing!

Brian Garlington · Answer

Thanks Daniel, Thanks Jamaal! No relatives in Indy but I have some in Ohio and N.Carolina............thanks for the advice everyone

Any advice for REI in Indianpolis while living in California?

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