All Forum Posts by: Ross Denman

@Nathan Bellinger welcome aboard. What kind of investing are you thinking about? Rehabbing homes for retail? Starting a rental portfolio? Lending money? Brokering deals?

There are great opportunities in Indianapolis. It all depends on your network and other resources. Other than personal experience, this is the best resource to learn about anything real estate related. The books, podcasts, and webinar modules are an awesome place to start.

Reach out if you have any questions or need anything.

@Lee Smith is spot on regarding the Indianapolis market. I just had a very similar discussion with one of my clients over the weekend regarding small multi's in Indianapolis. In more populated cities, it is common that people live in multi's. Various parts of New York City is a prime example. As Indianapolis continues to grow in jobs and population, that will likely change. We are seeing more luxury apartments going into areas that used to be low-income areas, but until living in multi-family housing becomes the norm, most people simply prefer SFR's for their rentals. On occasion you will get a pretty good tenant who will live in a multi for several years, but this is usually a retiree who poorly planned their retirement and money tends to be tight for them. Most of the time you have people living in multi-families in Indianapolis, it is because they can't afford something else and are in some form of transition. This means more liabilities and higher frequency of turn-overs.

With that being said, we do have some great performing multi-family homes. I believe that trick is to find homes in good school systems, considerable size, and adequate amenities.

@Abdul Azeez is right. Having a good PM is a core part of your team if you are investing out of state. We also have local investors who use our services as well. Being a landlord can be cumbersome and overwhelming and if done poorly can cost you a considerable amount of money. Most of the landlords that I run across on BP run their properties in a similar fashion to a professionally managed property, but I deal with landlords all of the time that are constantly dealing with headaches and liabilities that could have been avoided if they had the proper systems in place.

As far as dependency on a PM... I believe that savvy investors can use a variety of checks and balances. Many of my clients shy away from the one-stop shop turn-key companies for a few reasons. By having a team that is not part of the same company, you can get perspectives from a variety of views. Having a different PM, realtor, GC, etc. will help you evaluate who is telling you the whole story. If your realtor, GC, and PM are all under the same umbrella, you are likely going to get one opinion and perspective on things.

@Abdul Azeez as I work for a PM company as well as invest on the side, our PM company makes no money on vacant units. We actually have costs for every unit that we manage and no money coming in, operationally, it's a loss for us. I do know that some PM's have minimums or fees while a home sits vacant, but I would personally shy away from them. To ensure that your PM has the same interests as you, their bread and butter needs to be closely aligned to the success of your investment. If there's no rental income, there's no income for us either.

Thirty days on the market isn't very unusual this time of year, but things are picking up and most of our homes are off the market within 2-4 weeks. We have just had 2 homes this week that were on the market for less than 10 days.

In general, there are only 2 reasons that a home doesn't rent (if it's being marketed and managed properly.) There's either a problem with the condition or a problem with the price. Other reasons may simply be that the PM isn't marketing the property very well or the leasing agent isn't answering the phone, promptly calling back, schedule showings adequately, etc.

Do a google search for the address. Ensure that your PM has it listed on Zillow, Trulia, Realtor, Rentals, HotPads, Zumper, Apartment Guide, etc. Also, visit your PM's listing site and ensure that it is listed there. Do they have a Social Media Campaign? Are they listing it on Craigslist (Eww... I am not a fan of Craigslist rentals.)

Next, I would call the phone number for the leasing agent, see if they answer. If they don't leave them a voicemail and see if they call you back. If you do talk to them, tell them that you are relocating to Memphis for work and looking to see rentals when you come in town. Tell them that you will be visiting next weekend and that you would like to see the property. Try to schedule a tour at an inconvenient time... say 7:30 PM on a Friday evening. See how available and eager to show the property. Are they encouraging you to start the application process before then?

In our office, if a home is vacant for more than 30 days, we start diving in to find out why and ensure that we are doing what we can to properly service our investors. Sometimes it's just the area. Ask your PM if they have put out directional signs and if the sign in the yard is still there. Apply a little pressure to ensure that they are giving your property the attention that you expect out of them. Some PM's are very good at what they do, but many of them need to be questioned, pushed, and potentially even managed.

@Mike D'Arrigois very right. We manage lots of $40-60k rental properties in Indianapolis and many of them are riddled with headaches. Usually the locations of such properties limit your tenant demographic which can bring everything from late rents, damages, lease compliance issues, to evictions and higher vacancy times (sometimes all of the above.) Because these are usually older homes, maintenance costs are usually higher. Even with "complete" rehabs, there are constantly things the creep up, especially if you are putting a tenant in a property that someone hasn't lived in for years.

I can't vouch for other markets outside of Indianapolis, but I typically advise my clients to target homes that rent in a range of $900-1,200/mo, which is about 15%-50% higher than the median rental in Indianapolis. It is hard to find those types of homes for less than $85k, although I have seen it.

There are tons of people here in the midwest markets, and we have more CA clients than any other area. Our second biggest set of owners are actually out of Israel. The midwest can be a fairly lucrative and moderately safe place to invest your money, but you still have to protect yourself by purchasing the right kinds of properties in the right types of areas. There are tons of experienced investors here who can help you along the way. Feel free to reach out if you want some greater insight in to the Indy market place. Myself, Jay Hinrichs, Mike D'Arrigo, Clay Manship, Shawn Holsapple, and many more are very familiar with the local marketplace. Mike and Jay are heavily invested in other markets as well and are valuable resources. Best of luck and invest wisely and safely.

My opinion is a lack of business organization. While I don't believe that you need a full blown business plan, strict operational budget, timeline, scrum board, etc... Just buying a home, rehabbing it, and selling it isn't as straightforward as it seems. There are several hurdles during the process:

• Find the deal - Unless you are marketing or plugged into a community where there are opportunities, it isn't always easy to find the right deals
• Evaluate the deal - Without professional guidance and research tools, it is difficult for a newbie investor to evaluate and ARV/FMV or create an adequate rehab budget
• Secondary exit strategies - If things don't go as planned are their other opportunities to exit profitably. Sell before completion, sell retail, sell owner finance, refi and rent, etc. If you go over budget or bit off more than you are equipped to handle what do you do
• Managing the timeline - So you've purchased a home that seems like a valid investment opportunity. Who's doing the work? Can you get the work done in a timely manner? If you have high holding costs (financing, taxes, insurance, utilities, etc.) the longer you are holding the less money that you are making
• Selling profitably - How long will it take to sell? At what costs? Will it appraise according to your numbers? Will there be more issues come about at an inspection? Did you figure in realtor commissions?

I think that many people are not equipped to handle all of these steps. That's why it is important to educate yourself and find a mentor. A good mentor will help you evaluate things and identify potential hurdles before they come into play.

People fail because they think it's easy without understanding what the difficulties can be. Once you are familiar properly evaluating a deal and identifying most of the potential obstacles, it becomes fairly straightforward and your profit margins go up considerably. Investing does need to be approached more like a business than just a simple stock trade. It is not usually a passive investment, even when owning rental properties.

Typically, the neighborhoods get better north of 56th St anywhere across town. 52nd St isn't too bad though. The worst places in Lawrence are going to be around 38th St and 42nd St. I would look that the crime map for that specific area. I use Trulia for this. I would also ensure that the rent will be $750/mo+ and even better if it is $800/mo. That will put you on the higher end for the area.

We manage several portfolios for IRA's managed by Equity Trust. I can't say that they are the best (as I don't know) but they are established and credible. I would give them a call and have them answer some questions.

It's just a rule of thumb. It helps you screen deals early on. At the end of the day, it's about your goals and how the numbers will work out.

It will also depend on your portfolio lender. Most portfolio lending programs that I have run across will only refi 65-75% of FMV as determined by an appraisal. If you are all in at 80% of ARV / FMV you will not get all of your money back when you refi. Normally, I wouldn't want to do that. If your are in a heavy cash flow situation... I guess it would work. Paying $5000-10,000 out of pocket after refi for a $400 positive cash flow situation on a financed property seems reasonable, but I think that may be a tough situation to find.

I believe that you can have up to 10 mortgages. You will get the best rates on your personal residence and can even FHA a multi of up to 4 units. I don't know that you will typically be in a cash flow position on renting one unit of a duplex unless you get a killer deal but more units mean more cost and more money down.

After your first mortgage expect to put around 20% down for future financing.

If you need more than 10 units financed, there are other options such as portfolio loans that may be offered by some credit unions, smaller/local banks, or non-traditional lending services (private/hard money type services.)