Investment in Lawrence - Low Comps but good NOI

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Investment in Lawrence - Low Comps but good NOI

Jithin Yohannan
Baltimore, MD · Member since 2017 · 5 posts · 2 votes

Hi All,

I am in the process of buying my first property through a reputable online turnkey company in which does buisness in Indianapolis. 

It is a 4/1.5 bath located in the Lawrence neighborhood on 52nd street. Asking price is $75k (firm) and there is a tenant in place that is paying $900 a month on a lease through September 2018. From what I can tell the rents or accurate for the neighborhood which has a C crime rating and is in the Lawrence metropolitan school district (some schools getting 8 or 9 out of 10 scores). The inspection report was pretty positive, roof is in average condition and will need to be replaced in 3-5 years. HVAC is good with 10+ years of life. 4 windows need to be replaced at the next turn. 

The issue is the comps have come in between 32 and 60k. Though there are some individual properties on the comp sheet that have a value well into 70k.

My question is would I be safe buying the property based on the income stream alone. My strategy is to buy and hold for the long term. I will be financing with either 15 or 20% down and an interest rate a bit north of 5%.

Would love to know your thoughts!

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  • Phil DuChamp
    Investor · Indianapolis, IN · Member since 2014 · 61 posts · 28 votes
    9y

    So long as the numbers work for you, it sounds like a deal.  TK companies know that if they price them too high they will not be able to find a buyer who is financing because the appraisal will come in too low.  If that's the case, you can walk or the TK can come down in their price.

    Lawrence isn't a good area to invest in for big appreciation.  If the cash flow is there, I'd say you're in good shape.

    Is the TK going to manage the property as well?

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  • Jithin Yohannan
    OP
    Baltimore, MD · Member since 2017 · 5 posts · 2 votes
    9y

    Thanks @Phil DuChamp!

    The turnkey has recommended Brick Lane Property Management.  

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  • Rodney Kuhl
    Rental Property Investor · Fishers, IN · Member since 2013 · 381 posts · 69 votes
    9y

    @Jithin Yohannan You may be planning on buying and holding for the long-term, but I still don't think you want to overpay for a property. Your cash flow numbers may look good, but what if you have an emergency and have to sell in the next 5 years? If the comps are really $15k or more less than your purchase price, you'd take a big loss on the sale because you wouldn't have paid down much of the loan by that point. That may negate any cash flow you made during those years.

    1Reply
  • Jithin Yohannan
    OP
    Baltimore, MD · Member since 2017 · 5 posts · 2 votes
    9y

    @Rodney Kuhl

    Thanks  I appreciate your point. I certainly don't want to overpay if I don't have to. 

    @Phil DuChamp

    Mentioned there is a check in place with the lender evaluating the value as 

    well. I can re-negotiate if the property does not appraise.  

    Additionally, Many of the comps were 3/1.5 while this property is 4/1.5. Some comps were also  within the 70k price range. 

    @Phil DuChamp

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