I have a contract for my third property, this is lower end than I am use to. It's in zip code 46224. Indianapolis. Not the greatest area, but not a war zone, seemed like a quiet neighborhood with multiple types of people.
3 bedroom 1 bath, 1100 sq ft. HVAC new in 2012, new roof, newer water heater, updated windows, vinyl exterior. House could possibly use some new flooring, but really doesn't even need that, virtually move in ready.
Purchase price $42k
Estimated rent- 730-750 a month.
Taxes - 1200 a year.
Insurance- 500 a year.
Expect 400+ in gross cash flow, expect expenses to run pretty light, considering all big items are nearly new.
Tips on lower end rentals?
Sounds good. Was it a rental before or a family house?
Good question. I really dont know what the situation was.
It certaintly doesnt have tenants in there now.
its in good shape, except for some odd flooring.
If you haven't already, my advice would be to go visit some of the other apartments / houses in 46224 that have tenants. This will give you a better idea of the tenants you will attract and if the numbers your projecting are going to be worth it.
Where I invest there are a few lower end neighborhoods that I was considering because I could get almost double the cashflow I could get in some of the nicer neighborhoods. When I walked through some rented units in the lower end neighborhoods I saw the tenants currently living there and I knew that was likely the type of tenant I was going to be able to attract. I quickly realized that with that type of tenant, I would do well just to break even, so I ended up passing on their areas.
Hope that helps!
If you have it under contract you can tell us the address. There are some nice streets and some not streets in that zip. I live about 15 mins from there and would definitely invest there depending on the street.
The numbers look decent if the property is in a B class area.
Our group has just moved to Ohio and were located in Kansas City previously.
There are some solid properties to be had around that price range in B class areas.
Thanks for reading and have a great day.
What's your ongoing maintenance budget? Vacancy rate? Is this an all cash deal?
All cash,may do a cash out refinance or heloc,to use the money for another one.
Vacancy rate i used was 8 percent.
If i get a mortgage, net cash flow is 240 for 40 percent expenses, and around 160 for the usual 50percent rule.
It also almost gets to the 2 percent rule.
@Clinton Holmes thats a great idea , very simple and yet genius all at once definitely worth doing.
@Gabe G. that's in Eagledale and a good strong working class area. I assume it's a post war built ranch? Garage?
I have a few in that area. I get $750 for a 3/1 w/o a garage & $800+ w/garage.
I've found that buying with cash and then doing a refi is much better than using a loan to buy with. The bank will only give you 75% of purchase OR of appraised value. So, if you are buying low enough, it should appriase for about $55k and you will all/most of you money back to make it a no money down deal!
Yes. post war,1961 ranch, with 1 car garage.
The problem I am finding is, after I pay cash,if i want to free it up for other properties,the company i use to do lines of credits on my investment properties wont be 1st on non-owner occupied properties.
Shawn, Do you have any ideas on how I can free that money up either with a HELOC or cash out refi?
Thank you for the info on the subdivision.
It does sound like a good deal considering how much work the previous owner put in. It has to be a rental before with the property tax being so high.
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