Indianapolis SFH Turnkey Analysis

36 Replies

Hey @Jason Leong I'm in much the same boat as you shopping for buy and holds in Indy. I'd advise you to corroborate all figures in the pro forma with other independent sources. I'm also talking to turnkey operators but I'm adding to the mix wholesalers and agents working off the good old MLS as well as market research on my own. If everything sounds consistent then your odds of getting into a solid property are that much higher.

As for how to factor in the cost of turnovers, ask a PM as others have suggested what the typical length of stay and cost of turnover is. After you've figured out the costs tied to that, add an additional contingency on top to cover any unexpected items.

In general, I think it pays to take your time, be as thorough as possible, and mull over your financial model for a while. Talk to a bunch of people on the forums and only move when you are totally comfortable with the picture you've painted.

Hope that helps.

@Ben G.  Brings up a good point that I was thinking about while reading this thread.  If they are going to do s complete rehab anyway why wouldn't they just do that and sell it if the neighborhood is good?

Maybe partnering with them on a flip is a better option?

This is a great neighborhood for investing in general...   We would definitely manage in this area but like @Mike D'Arrigo  said I think the rent would be better at 900/month.    1000 is definitely possible if the house is really nice, but I like to be on the lower end of rental ranges and shoot for the best possible tenants.  Maybe it rents for 1000 in year one since it has a brand new rehab, but I would plug in something a little lower for the long term.  good news..  There are comparable houses selling for over 100k in the area, even as high as 115k...   so...  in the long run I think making an 8% return on this is pretty reasonable.   Cash flow won't be great but as long as you can get this back to mint condition for an exit at some point you should be good.  It really boils down to property management and how well they can turn the house over in between tenants and for an exit sale...   

@Jason Leong   ^^I know you said you would hold forever but having an exit strategy is pretty crucial imo..   just in case..     

@Jason L. 

Did the turnkey company give you the projected ARV? @87K, thats above retail for that neighborhood. In my opinion. Here are a couple recent examples.

http://www.realtor.com/realestateandhomes-detail/5...

http://www.zillow.com/homedetails/5535-Winship-Ct-...

http://www.zillow.com/homedetails/5502-Furnas-Ct-I...

Base on those I'd say you are paying way to much. A turnkey property should leave you with some decent equity incase you have to sell in the future.

Also are you negotiating the purchase price before the rehab has been done? That doesn't seem very wise in my opinion.

Thank you all for your helpful responses so many months ago as well as those who chimed in more recently. I'm back with some updates!

A few weeks after initiating this thread, I visited Indy, the property under rehab, and met with the seller and PM. I was performing my "due diligence" but, looking back, my heart was set on pushing through with the purchase. I know, classic beginner's mistake, getting emotionally attached to a property.

With the help of an independent inspector we touched up several details of the rehab work that were initially unsatisfactory. When it came time to close, I had spoken with him as well as with the contractor on several occasions and I was comfortable moving forward.

@Mike D'Arrigo  and @Anish Tolia yes, the projected ARV was $87K. The rehabbed home ultimately appraised for $87K, for whatever that's worth. I realize I didn't get the best possible deal out there... I think I'll be more selective moving forward.

@Jason Leong  hard to hit a homer at your first ever at bat, but I think you'll be just fine.  Sounds like you did some great due diligence and that you're always looking to improve. 

better $87K first lesson than $500k first lesson :--)

thread was a good read and good luck to you! 

Hi @Jason Leong  

I know that area well so I thought the original rent was high. I hope the numbers are still ok for you at $900.

@Jason Leong how has the property been performing to date? Any surprise issues come up? Are you happy with your purchase? 

@Jason Leong

Does the property have an HOA? Didn't see that on your expenses. My experience is when you have under $200 per month cash flow that can be wiped away quickly. Estimating your costs beforehand is like trying to figure out your monthly checkbook to the cent.

Being into the property for 87k fully rehabbed sounds like a good deal. My suggestion is to put your cash flow back into your property and pay it off over a shorter period of time.

Feel free to send me the address if you're looking for another opinion on the property numbers.

My other question is who's performing the rehab? Is the rehab going to be complete that you can have inspected before you close?

Does the rehab include new pex plumbing? This is a must for me on all of my properties in Indy! 

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