Looking for C+ to B neighborhoods

17 Replies | Indianapolis, Indiana

Out of town investor doing research in the Indianapolis Market. 

Looking for C+ to B neighborhoods with fixer upper properties ranging between 40 to 80k. Do those exist in these types of neighborhoods? I'm looking to BRRRR a property.

What resources can I use to further my research? I've been using areavibes as a starting point.

I really like Sterling White's Indy neighborhood map. Good place to start. 

Getting good rehab at competitive, not cheapest, and not expensive is not easy in Indy. Labor shortage and definitely an OOS markup if you're not careful. 

Definitely findable, but there's a ton of competition.  We occasionally get some stuff that we pass on.  You can PM me... I can share more.

I think those types of properties exist in several "pockets" in Indy, near or just outside the I-465 loop, from North to West to South.  The East side is pretty rough, C- to D properties are plentiful.  But, as Jeff mentioned, there is a lot of competition on the ground in Indy for the very properties you describe.  I look for those out-of-the-way neighborhoods built in the 1950's and 1960's, and use a dig lead app to capture addresses for automatically generated mailers that go out quarterly.  Good old fashioned driving for dollars works well in a competitive market.  It gives me a chance to meet the neighbors and talk with them in person.  It's amazing how many deals you can trip over this way.

To answer your question more specifically, they are out there. I currently am holding 3 units in the rehab phase and am all but certain they will all BRRRR to allow me to capture at least what I am all in at, including rehab. But it is getting tighter and tighter.

I don't think that you're going to find C+ to B properties in that price range though... I guess it depends on how you classify them, but to me, you're probably talking about homes that demand $900-$1,200/mo in rent which I don't seen in the $40-$80k range. I do see $1,000 rentals in the $90k market throughout the year though. Typically, you can't refinance all of your money out on these though, but they out perform almost all other investments that I've seen. They just stay occupied and have less maintenance. They also appreciate much better than homes in areas where most properties are rental properties.

As @Andy Rumple mentioned, Eagledale is a very solid investment area in your price range. While I consider it to be a C Class area because it's in the IPS school district, I prefer this area to other areas in town with similar homes and rents. The tenant demographic tends to be a little better. You can find BRRRR's (or close) in this area, but you need to be "all-in" for around $60k as most of these homes are appraising between the high $70k's to the low $90k's and renting for about $795-$900/mo. You won't get the appreciation that you would get in the "township" areas, but the cash flow is going to be a little better.

I am a bigger fan of the township schools (non-IPS schools) as these tend to be more family oriented homes that draw in better tenants who usually stay longer because they are getting their kids through school. Understanding the costs of tenant turn-over will become a larger part of the decision making process once you go through a couple of vacancies and see that it may wipe an entire year of income out in lost rents, renovation costs, holding costs, and tenant placement fee (average of $4,000-$6,500.) Our best tenant retention statistics come from homes in good schools, with at least 3 bedrooms, 1.5+ bathrooms, 1000 sq ft+, and garage (preferably attached.) These are homes that your tenants are less likely to outgrow. Tenants outgrow bathroom space before anything else, so we can see a definite impact on tenant retention between our 1 bathroom rentals and larger rentals.

Our best investors are targeting township homes newer than 1980 and rent for no more than 85 X 1 gross month's rent. While the initial cap rate may not look great, by leveraging your money with the bank at 4-5 times the standard 2.5%-3.5% appreciation we see in markets like these actually produce a 10%-17.5% ROI in equity build. If the home likewise cash flows at 8%-12% and you purchased with decent discount from the beginning, you will find yourself doubling your investment in 5-6 years, if not sooner. I've had several investor who purchase these homes on a 5-10 year investment strategy and I have actually seen some investors triple their investments over 5 years... not necessarily the norm, but not bad for somewhat passive income and a lot less headaches than the lower end properties.

I'm working on a wholesale deal right now of $70k acquisition, $11.5k in rehab, $1,050/mo rental, $105k ARV. This deal is going to tie up about $10k of capital long term, but he will probably triple that investment in 5 years.

@Ross Denman thanks for your reply. A lot of details to unravel. I'll definitely look into the Eagledale area.

The deal you listed for 70k is exactly the type of property I'm searching for. I definitely have an appreciation for buying in a better area and benefiting from the high appreciation, better tenants and probably less drama issues vs ONLY seeking the higher cash flow. But I'm sure there is a middle ground. 

I definitely plan on account for vacancy, holding costs, maintenance and capital expenditure costs any turnover costs between residents. 

Do you have any good agent contacts in the area that could prove beneficial for me?

The app I use for dig leads is proprietary to our company.  There are similar apps available, but they tend to be very expensive.  You might check out DealMachine.  These types of apps poll public tax records when you enter an address.  You can typically  customize the mail piece, then you are billed both monthly for the service, a fee for each address, and a fee for the mail piece.

@Gabriel A. That's a nice price point to get into, if you can find it in a hassle free rent point and location. I hold a mix of different rent/location grade properties and it affects your cash flow accordingly. As Ross mentioned, getting into the nicer areas and higher rent points will work best because of the out of state situation. You also have to work on putting a team together that has your best interest in mind.