All Forum Posts by: Jeff Kelly

@Linda Weygant sorry I mis-spelled both your first and last names above!

@Lynda Waygant I'll be at the Chicago conference in May. Hopefully I'll see ya there!

@Damian Robinson did you end up proceeding with this acquisition? Looking in similar areas of Indianapolis myself. Thanks.

@Milos N. Have you made any more progress on your potential Indianapolis investment decision?

@Ross Denman thanks a lot for all that info. It's quite helpful for those others of us who are also looking in Indianapolis!

Following because I'm planning to invest in Indianapolis very soon. Thanks for asking the question, @Paul Singer. Thanks for these responses too, everyone. I'll hopefully need to use some these names. 

@Louise Alexander, @Bijoy Shah, @Kevin Wyn, @Ross Denman, I'll be visiting Indianapolis on a weekend soon and would love a chance to network with some locals there. 

@Jade Richel Northern Illinois / Souther Wisconsin is my neck of the woods! Let's be in touch. Maybe we can help each other out some day.

@Joe Halter. I wanted to add that you could see this from a portfolio diversification standpoint, too. If you own your own residence in Denver, and you end up deciding to rent the farmhouse in Indiana, then you could consider yourself to be diversified between 2 different types of markets. 1 is a market where appreciation is ongoing (Denver) and expected to continue, and you already own a residence there (unless I'm wrong and you don't!). The other market is a cash-flow style market (Indiana farmhouse), where you might not be getting much appreciation, but you can expect regular cash flow, at least. To me, it's like having some money in stocks and some in bonds.

Yes, as @Nick B. explained, but put another way, just pretend you are buying the property with cash, and no loans. The price you pay for the property in cash is what you use to calculate the cap rate. That's actually what makes Cap Rates such a useful metric: they do not take into account one's financing sources, terms, or interest rates. This way, a cap rate of, say, 8% gives everyone instantly a decent idea of the property and it's cash flow potential. Cash buyers would actually experience those 8% returns. But any buyer who would borrow money to be able to afford the purchase will have to also pay to service that loan, that mortgage. So that person's realized returns will be less than the 8% the cap rate suggests. But still, the cap rate allows investors to communicate a lot about a property (on the surface) with each other. It's very useful in that general way. But again each individual investor will have his/her own sources of funding with different terms. So the cap rate allows us to compare properties without considering funding. It's still only surface info, though.

Most good investors buy deals where their numbers work for their specific goals even if no appreciation takes place. They consider any appreciation to be icing on the cake. With that approach, it helps them buy well and wisely. Seeing as how your need seems to be cash flow, and considering the insane appreciation Denver has experienced in recent years, you might want to focus on renting the farmhouse first. Then you will have some cash flow coming in, and you can take the time you need to then decide whether to sell the place, or get a Heloc on it to try to expand your portfolio, or make some other move. Not that Denver can't continue to appreciate, but to go through the process of selling a perfectly rentable farmhouse in a cash-flow friendly market only to move that money into a cash-flow tight market like Denver where there's lots of competition among buyers and prices rise as houses are sold very quickly after being put on the market, all when cash-flow is basically what you need anyway, would be something to think twice about. You can find a good property manager to run the farmhouse and not eat into your cash flow too much.