All Forum Posts by: Ross Denman

This may not apply to your market, but Indianapolis, rents do not rise much over several years in most areas. I tend to dissuade my clients from considering condos as the HOA fees rise more rapidly than rents which means an annual reduction in cash flow. I would do some research on how much the HOA fees rise annually and compare that to whether or not you can adjust the rents accordingly.

You might consider buying it and owner financing a sale and make the residents responsible for the HOA fees. There are various ways to create an owner finance deal (lease w/ option to buy, seller carryback, full land contract, etc.) Just things to take into account.

It depends on the age of the home. We have seen a lot of the clay tile drainage systems failing in the 1970's homes for a few years now. It is less in the older homes as many of them were previously updated.

Something that I like to do when researching Indianapolis (Marion County) homes is to do a permit history search for both the home in question and the homes in the immediate area. You can start your search here.

https://permitsandcases.indy.gov/CitizenAccess/

Permits are frequently pulled when sewer lines are updated (not always though.) This can help give you and idea of work that may be lingering in the background. Our PM company can usually get a sewer line changed for around $2k-4k depending on the situation. That covers permits, excavation, replacement, etc.

Many rehabbers are upgrading to pex as it is not that expensive. If our homes have not been updated to pex yet, it is not a big deal to go ahead and have it done. Plumbing related issues are the most common issues that I see. My recommendation is always properly fix/replace a plumbing issue. A bandaid will not cut it. Having to deal with the same issue over and over is going to be more expensive than fixing it properly or replacing it the first time around.

If you have access to MIBoR (Realist) you can do a tax search for Indiana residents who own non-owner occupied properties. If you are looking for cash buyers in general, you can do a 3-month search for cash-sold properties and get their mailing addresses from the tax database. Send them a letter and try to get them to respond.

Network at various RE groups. You can find people at MIBoR meetings, but you will likely have more luck with CIREIA or INREIA. You might also find some groups on meetup.com. Talk to GC's who are doing larger rehabs. Bigger Pockets is full of investors as well. I've also built some pretty good social networks on Facebook and LinkedIn where I am networked with investor across the world.

Nurture those relationships. Stay in contact via social media, email, phone calls, coffee dates, etc. Be on the forefront of their minds when they are looking for that next deal or when they have the next deal that will meet your needs.

We rent a lot of pre-78 homes in Indianapolis. The historic districts are going to extensive revitalization as well. I understand your concerns about asbestos and lead, but usually they are not that concerning. For instance, lead based paint is most dangerous when it's ingested. If you have a good property manager, they will recognize any potential issues with chipping paint and so on and recommend getting it addressed, but I believe that actual lead poisoning is fairly rare. I would be that about half of the homes in Indianapolis are pre-1978 and I don't believe that we have a huge problem with lead related health problems.

I am not as familiar with asbestos, but I believe that you need fairly direct exposure to asbestos for it to be a problem. I know that we have one home in our portfolio that had a small amount of asbestos that we removed, but it is the only one that we have come across. I am not sure how common it is in residential housing in this area.

What we have done and is working out for us so far is as follows.

We pulled/raised/borrowed money to do our first rehab. We don't touch the profits at all. Once we built $300k in cash (the amount needed will depend on your market and goals) we kept a rehab as a rental. We continued to rehab properties and every time that we have over $300k in liquid cash, we keep a home for a rental. The point of the matter is as follows.

Rehabbing is faster money, but you cannot rehab forever. Eventually, I want to retire.

Rentals are slower money. I have to park the money that I have and set aside reserves before I consider cash flow. If your rentals yield 9-15%, you need about $1M in rental properties to make a 6-figure income. You have to build (or borrow as in BRRRR) capital to get there and rehabbing is a good opportunity for this.

Diversification is always something to consider as is short-term goals vs long-term goals. Rehabbing homes is not what I consider retirement, even when I am not doing any of the work. Retirement is travelling with friends and family or enjoying your hobbies. I don't care to babysit contractors and realtors until I die.

It may not be a bad idea to partner with someone experienced, but ensure that they are bringing some kind of equity to the table. Newbie investors get taken advantage of all of the time... some of it is a right of passage though. You are paying for someone else's expertise. Make sure that you are getting exactly what you paying for.

@Stephen Bagnani we see a lot of CA investors purchasing in Indianapolis. As I have said elsewhere, I frequently see my clients also investing in Memphis and Kansas City. I am also seeing a slow move toward Detroit. If you are looking in to rental properties, the midwest seems to be fairly stable and affordable. If you are looking for flips, as stated by others in this forum, FL, AZ, and TX seem to be hot ones. You don't have to necessarily relocate (although I do recommend the occasional visit) but you do have to build a team of experts that you trust. Leveraging other peoples time and expertise through outsourcing can be very powerful as long as you have the right teams.

I will have to create a list. There's quite a few:

• Too many newbie investors think that once a home is rehabbed/refurbished, there will never be any expenses. There is always something unexpected that comes up. With enough time everything will fail.
• They don't figure their expenses correctly. They think cash flow = rent - property management - mortgage. In a perfect world yes, but it never stays perfect for long. Vacancies, reconditioning, maintenance, inspections, legal costs, etc.
• They don't understand the importance of doing things correctly and providing a quality property. This allows them to rent a home at the top of the market and have better tenants to select from. By doing the bare minimum, you are asking for headaches.
• The most expensive part of rental investing is vacancy and getting a home back to market ready condition. This means that proactively doing things to retain tenants is vital. The ROI increase from having new tenants every 2 years to every 3 years is huge. Many times it's as simple as ensuring that there are as few inconveniences as possible. I can't tell you how many times we have recommended our clients to allow us to install a power outlet in a kitchen or bathroom when there isn't one. When a tenant who doesn't have a place to plug a microwave, toaster, curling iron, or electric razor will move as soon as they find somewhere less inconvenient.
• The importance of inspections. Our standard practice is to do them every quarter, but our clients are allowed to have us do them less if they want. I have investors who opt for one or no inspections at all and then they are screwed when they find out that the tenant has a 100lbs pitbull that nobody knew about or that they are growing marijuana in the basement.

@Account Closed I love this post. I have DIY landlords call all of the time because they are in over their heads. When things are going well, managing properties isn't that tough... but given enough time, something will go wrong. I just took on a client yesterday that attempted to previously evict their tenant and the judge wouldn't allow because they didn't give a pay or quit notice and accepted a partial payment. Then they told me that they believed Indiana was a very tenant oriented state (which is not true at all.) The tenant has also changed the locks and is denying them access to the home. They have no idea how to go about handling these situations and it appears that they have a tenant who knows exactly how to milk the situation. We won't have any problems straightening it out, but this entire expense is going to probably cost thousands in lost rents, legal fees, reconditioning the house, vacancy, etc. They chose to manage it themselves to save the $1,000-1,200/year cost of professional property management but they have lost considerably more than that and had to suffer many more headaches.

There are some really savvy DIY landlords here, but if that's the way that anyone decides to go, they have to ensure that they are educated and proactive.

@Ronn Johnstone browsing the court system is time consuming. I do it in my free time to create current direct mail campaigns targeting homeowners and investors who are having tenants evicted from their properties. I only do this for Marion County and the surrounding suburbs. Every county is a little different regarding which court handles evictions. There are a couple of different ways to do this, but I will give you a basic walkthrough. I keep all of this information in a spreadsheet as it makes it easier to reference. You have to understand the way that the docket numbers are created. Basically:

• the first 5 digits are the court location
• the next 4 numbers are the year and month (i.e. Jan 2017 = 1701)
• The next 2 letters are the case type

Use an * as a wildcard as well. So to search for all Small Claims court cases in Center Township in Jan 2017, search by case number using

49K01-1701-SC*

Here is a listing of the court identifiers that I use

49K01 Center Township
49K03 Lawrence Township
49K04 Perry Township
49K06 Warren Township
49K07 Washington Township
49K08 Wayne Township
49K09 Franklin Township

29D04 Hamilton County Superior Court 4
29D05 Hamilton County Superior Court 5
29D06 Hamilton County Superior Court 6

30D01 Hancock Superior 1

32D05 Hendricks Superior Court 5

41C01 Johnson County Circuit Court
41D01 Johnson County Superior Court 1
41D02 Johnson County Superior Court 2
41D03 Johnson County Superior Court 3
41D04 Johnson County Superior Court 4

Lastly, you can also search by party if you want to see how many properties that a PM is evicting. Just enter the property management name as the party. You will find some are in court ALOT more than others. I don't care to point out anybody, but it is public information.

@Andrew Cameron that is exactly how our office started out. The owner is actually a second generation investor and was managing his properties as well as his parents. I would recommend checking into the Real Property Management Franchise. The training and support is well worth the investment. In our local market I do not find very many other property managers who provide the same level of expertise or professionalism as our local office. Locally, we have grown to a team of 8 employees, 3 company vehicles, and successful clients who are reinvesting in our local market.

RPM is the nation's largest residential property management franchise with 30 years experience, over 270 offices nationwide, and one of the fastest growing and highest recommended franchises in the country. I am just an employee of a franchised office and get no incentives to recommend investors to the franchise... I am just impressed with what I've seen our office do and the education and support that we get from the brand.