HELP! Indy SFRs Have Been Vacant for Months...

31 Replies

Hello Everyone...I have been struggling with finding tenants for my last two SFRs in Indy and would love to get some advice from people who are experienced in Indy rental market.  Any help is greatly appreciated.  I hope my experience may also help other investors who are interested in or have just started in Indy buy and hold market.

I am a newer out of state investor.  I started from Indianapolis buy and hold market and have closed 3 SFRs there since December, 2015 (the other 3 SFR transactions fell through for various reasons).  I was planning to purchase at least 7 more by end of 2016, but because of the challenges I have been facing to find tenants for my 2nd and 3rd SFR, I have decided to slow down my pace or change my strategy until all my properties have been rented out.

The 1st SFR was rented out easily because my property manager happened to have a tenant that wanted to move to a larger rental quick. The 2nd one was closed in the beginning of January, the 3rd one was closed at the end of April; both have been vacant till now.

The addresses for my 2nd and 3rd properties are: 

5405 E 21st St, 46218 (750 sf, 2 bed 1 bath with basement, central heat, no air-conditioning, built in 1953)

2401 N Sheridan Ave, 46219 (1173 sf, 4 bed 1 bath, no basement, central heat/air, built in 1949)

Both properties are in very good shape, all new paint and flooring, both have double-pane windows, 2nd property has brand new exterior paint as well.  2nd one is listed for $675/month, 3rd one is listed for $700/month.

I tried working with section 8 through my PM on my 2nd property since the beginning of March and have found tenants twice, but the inspection and paper work with section 8 are extremely slow, so both tenants went for different properties.  We are marketing for regular tenants now.  

I used a different PM for my 3rd property.  After rehabs were done at the beginning of June, I listed it for $750 and lowered to $700 at the beginning of July.  I asked my PM why there are still no qualified applicants for the 3rd property after rent was lowered, he said there are many rentals on market, but for a property with reasonable rent, good shape and 4 bedrooms, I can't think of why nobody wants to rent it other than 3 applicants that had eviction or criminal records (their applications were rejected).

I have a full time job in California; even though I can fly to Indy if needed (I am a remote employee), I feel quite helpless when things like this happen.  Please help.... 

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Howdy

I've had a lot of rentals in Indianapolis in the areas your talking about, with a lot of mixed experiences.

I'm curious who your property management company is, I've used four different companies their. One is great two are so so and one is a crook.

If you want to PM me who your using I can give you some feedback on them as we most likely are using the same companies and I can give you a referral and hopefully some tips.

@Annie Li ...since you said you are now listing for regular tenants, how are these rentals being marketed? Trulia and Zillow merely show the "public record" for your properties, and nothing about them being available for rent.  When my property manager lists rentals, we blanket as many avenues as possible to attract prospective tenants. 

Thanks to everyone's response.

@Ryan Poske I didn't ask my PMs this question because they were referred to me by other investors so I assume they all market their properties as much as they can.  Per my PMs, there are plenty of traffic but no qualified applicants.  

46218 is tough zip code and nobody is breaking their neck to go live there. By choice, anyway. Lots of inventory similar to yours.  In the future I'd suggest spending a little more in a better part of town.

@Mark Radford I get your point, but there are many hard-working and responsible people who can't afford renting in a better area.  I made sure the all-in price I paid for these properties would give me enough buffer for gaps between tenants or higher maintenance costs.  

The rental on 46218 is not on a very private road; there are apartments buildings right across the street and convenient stores right by it, so I feel pretty safe.  Thanks for your suggestion.  I will see how these 2 properties go and may move to better areas later.

Totally agree with you Annie. We owned/flipped a small commercial bldg in 46218 years ago and I have that zip as a saved search myself. I'm a native so it's easier for me to filter these properties but for an out of state investor it can be tricky.  Best thing is buy low low low over there like you're doing. We have a great town that's fairly stable and getting better every year. Good luck!

Just chiming in as a local who likes the 46218 zip as well. Yes, there are rougher areas (as there are any zip in Indy), but there are certainly areas that can be great. I don't think area is the issue here.

By thought about the properties in question - there are reasons why investors wants a 3/2 or 2/2. Privacy is a nice commodity if you can get it, and that's something that's appreciated by tenants. More bathrooms are always better, so i would suggest going with at least two baths with SFH. Duplexes are different, obviously.

Marketing is a big question here, as other posters have noted. If you're not seeing postings on Zillow, Craigslist, etc, I would be having a serious conversation with your PM and see what marketing they are doing. Hopefully at least you're not paying them while the properties go unrented. 

Best of luck resolving this!

@Annie Li  According to public records, 5405 E 21st sold for only $17,500 in January 2016.  Is that your purchase? It is not in a great part of town.  It is only 2 bedrooms.  No aircon.  You are asking $675/month - while that is not expensive in Indianapolis, that is also not cheap.  Do you see any disconnect here?  Although you may not want to hear it, you should happily lower the rent, attempt (make sure!!!) that you get very good tenants who pay a reasonable rent, as your financial numbers will still be very good!

2401 N Sheridan is a similar story.  Paid $24,000, right?  No matter what you hear to the contrary, that is not a very nice neighborhood.  Anyone can buy houses in the neighborhood all day long for $20,000 - $30,000, although a lot of investors/locals simply choose not to play in that sandbox.

For future purchases, you might want to try a different neighborhood, if nothing else, than to diversify your risk.

I second @Matthew Schroeder . Although there could be many factors, like time of year, condition of property, property type/size, etc, they can all be addressed by price adjustments. Given that you said they're in excellent condition and have been on the market for many months now (during decent times to rent), a price drop appears to be in order to strike up interest.

@Matthew Schroeder and @Alain Perez-Majul have said exactly what my thoughts would be as well. We have previously rented a property under what we think market rent should be. Think of it this way, $50 less per month than what you think you should be able to get is going to lower your returns, sure, but $625/mo rather than $675/mo is better than $0/mo.

Just a quick google check for vacancy rate on that 4 bedroom zip was 14.3%. Normally when I see vacancy rates in the teens in midwest cities this indicates the wheels have fallen off for the overall hood generally speaking. Block to block this stuff varies typically but that exact location on the 4 bedroom might be the issue. Too many better options for this tenant base locally could make a rough run long haul. I have seen this in pockets all over the midwest cities. Hopefully, this is just an exception for that one. Location really matters coast to coast. I remember one I sold and the tenant moved out same day, it took my buyer nine months to fill again. That was in Colorado but the exact location became the obstacle as hood was going down the tubes quick. The actual property was fine physically. The buyer was local and fully understood the future challenges so no hard feelings but phew that sucks. Good luck in Indy!

I have had no issues finding renters in Indy, especially in the summer. However, looking at the google street view I see a few problems. 1. Its on a very busy street. 2. Its across the street from a large apartment complex. 3. Its inside the loop in not the best area. My properties are in different zip codes but mostly outside the loop and seem to rent pretty quick. It could also be a function of the PM. I hear most people in that renter class drive by and call for rent signs. If no one picks up right away, they move on. 

Thanks to everyone's input and warm words.  

Surprisingly, my PM on 3rd property told me this afternoon that they have found a tenant (single mom with 3 kids, stable job, average credit, no eviction/criminal history) and the lease will be signed tomorrow. The rent is $700.  If there is no lease this week, I have decided to replace him because he is charging me $100/month even though the unit is vacant (higher than what he will charge me when unit is occupied), but he won't charge extra for tenant replacement, which is unusual among PMs.

@erin 

@Erin Donlan In regards to your comments on 2 baths properties, since I have been shooting for high cash flows, 2 baths properties are very hard to find, furthermore, more bathrooms mean more maintenance costs.  I just checked Zillow, Redfin and Trulia, neither of my properties are listed for rent there.  One of my PMs explained that he only targets prospects in thespecific area, so he uses signs, flyers, etc. instead of Internet.  He said if he posts on Internet, it would be too much hassle dealing with applicants from all over the places.  I'm not sure how to comment on this.

@Matthew Schroeder @Alain Perez-Majul  @Rodney Kuhl

The rent amount was determined by my PM, and I'm ready to lower it anytime when needed.  The purchasing prices are accurate on public record, but I spent a couple of thousands on rehabs for each.  Instead of buying more SFRs in better areas, I would prefer to start buying small apartments (<20 units).  

@Mayank S. I asked FS House when I just started in Indy and came to know they don't manage properties that were not purchased from them, furthermore, my area is not their service area. 

@Hersh M. I feel that 10 properties are not that many to consider diversifying yet.  If I start buying in a new area, I have to do a lot of research on the market, find local contacts, etc. It's very time-consuming and can be a little risky as well since I've not gained enough experience even on one market yet.

@Matt R. Can you please share how you google check for vacancy rate in a specific area?

For this one I just googled vacancy rate for the zip. There will be a variety of sources usually at that point. You can also check rentfaxpro .com for more formal insights, average vacancy durations etc...

You should consider listening to @Hersh and consider diversifying. It may take a little bit more time but I'm sure you'll sleep a lot better.

I'm glad I diversified when I first started or else I would have been hurting with a bunch of properties in Phoenix when the market turned.  

Rentfaxpro will also rate/measure the

averages for PMs. Whether this address is a challenge or how much of a challenge it is to manage based on historicals. They claim lenders use rentfaxpro. I believe it. 

I don't know your market, but not posting online seems like your PM is lazy. 

Zillow rental manager is FREE and posts to zillow, hotpads, trulia, and a couple others all at the same time. You download the app on your phone then if they contact you through one of those sites it saves it in the app and emails you. 

5 out of 20 are a waste of time, then I pre-screen the rest and set up a group showing (I am in a highly desirable rental area), even if you aren't it still seems like your PM is alienating a good portion of your market.  

Originally posted by @Garrick Oconnell :

I don't know your market, but not posting online seems like your PM is lazy. 

Zillow rental manager is FREE and posts to zillow, hotpads, trulia, and a couple others all at the same time. You download the app on your phone then if they contact you through one of those sites it saves it in the app and emails you. 

5 out of 20 are a waste of time, then I pre-screen the rest and set up a group showing (I am in a highly desirable rental area), even if you aren't it still seems like your PM is alienating a good portion of your market.  

 It is possible the PM is at fault...and or he knows that certain rental ads lead to complete strip of property. There are ways around it all either way...but it is possible most of this is merely a function of location. I have advertised homes long distance before....have them text pic of driver license and double check that with social media before revealing address. Be sure to mention, your handyman will be dropping by same time. 

@Annie Li You can try 3 strategies here.

1.) Retake the photos and make sure that they look professional.

2.) Offer free 1st month. This incentive will help you attract more renters.

3.) Lower the price and make tenant pay for all their utilities including water.

I hope this help. =)

@Annie Li  If your PM gets paid more money when the unit is vacant than when it is rented, this sounds like an issue.  Personally, I would want my PM to have a financial incentive to rent my properties ASAP.  I want to know that our interests are aligned and my PM is making more money when I am making money.  Instead, it sounds like you have the opposite situation.

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