Advice on a Indy property 46222

17 Replies

Hello everyone, I’m a new investor looking at an out of state property in zip 46222. This property is a 2bed 1 bath in N Moreland ave from a turnkey for 42k. Rent 650. Thanks for your help in advance. -Manoj

I grew up in 46250 on NE side

This is down in Speedway area

Like much of Indianapolis you have large swaths of good mixed with bad, and barring more of neighborhood setups, I've found that it's very hard to know the 'good' pockets from the 'bad'

Not sure what to make of those numbers.  Not sure what your regular options are.

For out of state though that really doesn't move the needle for me.  I'd pass.  Doesn't take much of anything to wipe out profit for the year when you're only netting a couple hundred a month.  The first furnace or roof and you're eating it for YEARS.  

I don't like the asset class that only brings in $500-700 / door though.  For the reason(s) above....

Jim, forgot to mention that this cost is post rehab. 21K worth of work is going into this. So other than the frame, everything else will be pretty much new.

I checked zillow and comps and the price range around that house seems close.

My concern is the neighborhood and the going rate as Zillow gives a ballpark not 100% reliable.

Thanks
Manoj

I'd say you really need to find someone (who isn't the seller) to help you with the areas/neighborhoods.  Looks like there might be too much meat off the bone on this one.  

Side note: your tenants will make a few bucks selling parking space in the yard during events at Indianapolis Motor Speedway.

@Ritch Bonisa Great side note about the potential for extra income during IMS events. 

Also, I'll echo your point about the need for having boots on the ground in the neighborhoods/areas you're interested in investing to ensure you don't get caught in a bad deal. Bildwise is a great example of a company who can handle the rehabs for out of state investors if you don't already have someone lined up. And a shameless plug for my company - we work with out of state investors looking for property management and leasing services. We offer a by the bedroom model that appeals to tenant groups who often pay 125-150% of market rent. However, this niche isn't always a fit with every property. 

Regardless of who you work with, having "boots on the ground" will allow you to pin point the neighborhoods that meet your goals. In areas like Speedway, this is vital since things can change drastically street to street. 

If it's in the Haughville neighborhood I would pass.  Our company doesn't like to manage properties in that neighborhood since there are too many problems.  As a general rule of thumb, you want something that will rent for at least $700/month, as usually sub $700 rentals are more problematic.  Plus, you will have fewer profits overall.  I've also learned that a lot of companies that tout "turnkey" rentals are not actually providing a fully rehabbed property.  They may put some work into it, but they are likely not redoing the entire electrical, entire plumbing, new HVAC, new water heater, new roof, etc.  They will probably redo what needs to be done, but if the rest is functioning they will often leave it as is.  Just my 2 cents.  

@Matt Speer @Samantha Soto    you should listen to the local PM's  or you may want to check out Morris houses and Oceanpointe threads.. this sure sounds like one of their deals.

I would want an INDEPENDANT inspector you hire to go out at each phase and sign off on a full gut job rehab.. Just like a bank does for new construction deals.. that is the only way you can be safe.

Also last thing I would do is buy any property in a major MSA that does not rent for at least 750 to 800 bucks... you are buying into long term drama and trouble most likely.  does not matter how great the house is.. its the tenants.. and a 2 and 1 is not that attractive as a rental generally speaking.

I will let the local experts chime in .. but that is my expeirnce in doing a few hundred loans in Indy.

@Samantha Soto @Matt Speer   also maybe the locals will concur on this little exercise.

45k purchase price  21k rehab.

leaves 24k... the turnkey company if they are using outside marketing like a Morris for example he will make 5k on the deal.. that leaves 19k to be split.. the turn key company wants to make 10 to 15k on the deal that leaves an asset that was bought for 4 to 9k as is.. where do you think that is .. how good a property or area can that be if the homes are selling for 10k or less..

what do you think your home will be worth when a tenant trashs it and you need to exit.???

I know again this is harsh.. but having funded this stuff since 2002 and started in Indy in 2003 and I work 15 markets I see this time and again and again and again..

CAUTION on low value assets in a major MSA from a QUote un Quote turn key company.. most turn key do not sell 45k homes.. most learned they are not sustainable and moved up in asset class.. simply because of the failure rates and hassles.

Most PMs like Sam above won't work this stuff either..   Oh Vey 

Hello @Manoj Narayanan

           Looks like you are seeking opportunities in Mid-west.  Have you thought about Cincinnati, just 90 mins south from Indy.? I am in PA, but do invest in  OH amongst other states. Let me know if you like to chat.  Usually before I invest, I visit the area and get familiar with neighborhood, network with locals etc. 

Thanks,  Naveen. 

@Manoj Narayanan I have been active in the Indianapolis market since 2010 and know it well. Trust me when I say that this is a terrible area. It's just slightly north of the Haughville area which was one of the first designated "weed and seed" which is a federal program targeting high crime areas. I can't tell you how many calls I get a week from people who have bought properties like these asking for advice. Unfortunately, all I can tell them is to try to unload them on some local investor. This particular property has several major things against. 1. It's in a bad area, 2. It's a 2 Br in a bad area, 3. The rent is only $650/mth. What kind of tenant do you think you can get for $650/mth when anything reasonable decent is a miniumum of $750 and that's still a very C class neighborhood. Even if by some miracle you happened to get a good tenant that wanted to live in a horrible neighborhood, the numbers won't work. No matter how well rehabbed a property is (and as @Jay Hinrichs has pointed out, there is not enough room to do a decent rehab at this price point), you will always have maintenance expenses. It costs the same to fix a leaky faucet, clean a clogged drain etc on a property renting for $650/mth as it does on one renting for $900/mth so your maintenance expenses are a much higher percent of your income. Imagine when you have CAP EXP expenses like a new furnace or roof. Unless you are local and very hands on, you can't make money with these cheap, low end properties. List to what Jay Hinrichs has been preaching and save yourself a lot of heartache and money.

@Mike D'Arrigo   you guys and gals can now refer to me as the  C class whisperer or preacher take your pick.. this morris stuff has simply put me over the top in frustration

@Manoj Narayanan I came here to break down the quality of a rehabbed prop you can buy for 42k...but of course @Jay Hinrichs beat me to it lol! I'd pass, in addition to the whole Morris debacle and the risk of getting suckered, the basically guaranteed higher turnover and maintenance costs, that neighborhood will be where appreciation goes to die. You can do better!

Wow!  Thanks everyone for such valuable inputs and making me think hard now.  I had planned so much  to start accumulating such properties but realizing after going thru this and other threads in the forum as how uninformed I'm.  Back to the drawing board but with right research now.  I'll reach out to you individually and seek more insight and path forward.  

Thank you!  Thank you!

@Willie Nelson I've bought 4 properties through Norada in Birmingham and Atlanta a few years back. Had a great overall experience - Marco (the president) is extremely knowledgable and a great resource if you're just starting out. He can help you pick the right market based on your goals and risk tolerance and connect you with local turnkey providers, lenders, inspectors, etc.

All of the properties I bought from them are still performing well today. PM me if you have any other specific questions.