All Forum Posts by: Ross Denman

@Brittney Knies we've managed several hundred homes in Indianapolis and many of them are small multi's on one meter. I've never heard of Citizens mandating separate utilities... although the only corner multi with addresses on two streets has 2 water meters. Secondly, we have several buildings with the meters in the basement. Yes, I believe that if you were to add a meter, you would have to install a meter pit and update the line. In my experience, Citizens can be very inconsistent. I would give them a call and talk to another person if possible.

Insurance can be inconsistent too, but they should at least cover the water damage as Jeff mentioned above. I'm currently getting an estimate for exterior and roof damage from the last storm a couple of weeks ago and planning on pushing the insurance on that as well. We just spent a ton of money updating that unit last year. Insurance can be great, but difficult to work with some times.

I use several investor oriented realtors to help my clients build teams to expand your portfolios. PM me and I'll be happy to pass them on.

I don't have any recent experience in Anderson since it's too far from our office to manage properties up there, but I live in Fishers which is about 20 minutes from there.

• Anderson's population had been on a decline after the manufacturing jobs left during the recession. It is still difficult to find gainful employment and too far to drive to Indianapolis or Muncie for work. I don't have current data on population, but I have seen nothing that has told me otherwise.
• Many of the wholesale deals in Anderson are expired listings that the realtors were unable to sell. The prices are reduced because homes simply aren't selling. Nobody is buying because everyone is leaving. If the population continues to decline, eventually, there won't be enough renters to fill your properties.

Here's some actual data to consider.

There are currently 6 rentals available on Zillow in Anderson.

26 of these are less than 14 day old listings (which is ok for this time of year) but they are still not leased yet.

19 have been on the market for 60 or more days (about 1/3) which is atrocious for this time of year.

Of 221 properties for sale (raw land included,) I counted 66 homes for sale that have been on the market for over 90 days (this doesn't include raw land.) Taking out the raw land, about 1/3 of these homes have been on the market for a long time.

City-data shows a declining population from 2000-2014 dropped by 7% (that's a big drop for 14 years.) http://www.city-data.com/city/Anderson-Indiana.html

I don't have any current data in Anderson, but I haven't seen anything to make me believe that it's turning around yet. Anderson is not a bad area and used to be a somewhat thriving city, but until the employment base returns, it seems that many people are moving away for work.

I'm not expert, but there's the data I could dig up pretty quickly.

@Keith Shadle it's not uncommon for things to soften during an election year for both real estate and wall street as consumer confidence becomes more leery. The face is, we are about to see the Barnum and Bailey, Greatest Show on Earth, election year. Probably the biggest circus show of our life time. I don't see a lot of people looking to overpay for properties during this time. I could be wrong, but I'm expecting a soft market until at least the spring after the next presidential term. If the office changes to someone with highly different views on economics (heavy socialism) it's possible that the real estate market may take several years to stabilize under a new political climate and policy changes.

Regardless of your political leanings, everyone has to admit that this election cycle is going to be full of many surprising moments.

@Tom Makinen Fishers is very expensive to acquire properties. It's rare in today's market to find properties that meet the 1% rule. We have several in Fishers, but they are all homeowners that have relocated or investors who bought when the foreclosure inventory was so high. And we have dozens of homes over $1,500/mo, several over $2,000/mo, and 2 at $3,000+/mo. I'm astonished that people pay that for rent here, but the homes they live in are amazing. Dock deeds, in-ground pools, 5,000 sq ft homes, built-in cabinets, walk-in closets, granite/stainless/hardwood, etc. I've seen a few $10k rentals listed before, but not sure if they were ever actually rented.

Brownsburg, Avon, and Greenwood are probably the next three suburbs down from Fishers with ongoing development where you might find deals to meet the 1% rule. These are good areas with good schools as well.

I wish more people realized that you shouldn't pull "all of the cash" out of most deals when you refi. I actually determine my max mortgage amount (45% of rents) and set my mortgage there. Most of the time, I have 10-15% of my capital tied up in the project. Not really a whole lot better than conventional financing.

Also, if you are not cash flowing 100% (no leverage) you need to keep plenty of reserves liquid. Not having capital available for repairs, emergencies, disasters, evictions, vacancies, etc. will kill your cash flow.

Here are some oddball scenarios I've seen in the last year:

A tree fell over during wind storm and fell in to house. The owner turned it over to insurance, but it caused a roof leak. By the time the insurance gott involved it was causing water damage to the interior of the home and was starting to get discolored (we don't use the "M" word in our office.) Insurance took care of everything, but the owner still had to pay his deductible and lost a good tenant during the process. It probably wouldn't have made them so mad, but we had been trying to get him to cut the tree down for over a year and he simply didn't have the money.

Client purchased a tenanted duplex. The day of close, the tenant on one side was arrested and his 80 lbs of marijuana (illegal in Indiana) was confiscated. He was arrested, but the family was still staying there. We were able to get them out with cash for keys, but he had an unplanned vacancy from the very beginning.

Tenants were in a home for a year and everything seemed to be ok. We did several inspections and there were no problems at all. Owner decided that he wanted to sell the home this year with the strong market and did not allow us to renew the tenant's lease. The tenant was very upset about not being allowed to renew. When they moved out, the home was pretty trashed. While they were never known to have a dog, the interior of the floor was now full of dog crap. Now the owner has to pay to have it trashed out at a minimum.

Those are just the out of the normal occurrences. Point of the matter, always have reserves available. I highly recommend keeping at least 6 months of rents as reserves at the beginning. As your portfolio grows, you can reduce that amount/property, but you will always have to keep reserves.

@Sean Mcmahon, there are a couple of things to consider if your realtor is investor oriented.

The first question is liquidity. Most of us keep our money tied up in other investments and may not have capital readily available at any time. As soon as we refi, sell, or save enough cash flow for our next deal, the money is tied up again. Yes, they will try to find the best deals for themselves, but there are more deals than dollars usually.

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Secondly, here is the life of a typical realtor.

List a $xxx,xxx home for sale. Have 3-10 showings. Negotiate 1-3 offers. Close deals and get paid.

Represent a buyer looking for a $xxx,xxx home. View 3-10 homes. Negotiate offers on 1 or 2. Close deal and get paid.

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This is the life of working with investors

Look at 30 $xx,xxx homes. Run BPO's and rent rates for all of them. Schedule a visit to 5-10 of them to get pictures and video for the investor. Send out 5-10 lowball offers. Negotiate 1 or 2 (if you're luck) and get commissions on you $50,000-$80,000 deal.

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Most realtors do not like working with investors. They can make $3,500+/retail home they close with little work or they can make $2000/investment deal with a ton of work that needs done.

• Visits to the property for photography/video
• ARV and rent comps
• Schedule home inspection and/or contractor to build rehab budget
• Low ball offers and harsher negotiations
• Coordinate for long distance closing and turning over all items for the home to a property manager or project manager

Most investor oriented brokers are either investors or new brokers who are interested in investing. They are much more willing to work with investors as it educates them, grows their network, and creates future opportunities for their investments.

OMG... I think I finally disagree with Jay on something... and that's rare... he always has some of the greatest insight :)

Seriously, David Greene has put a great book together and it covers a lot of territory. Personally, I don't go out of my way to read every BiggerPockets publication out there. I wasn't going to read David's book, but a client was really impressing me with how he was building his team and managing his project... when I asked him how he was so efficient, he said that he was following David's plans from the book. I purchased the audible and listen to it twice now. For someone with little to no experience, it's really good material. It's a lot of the same things that us more seasoned investors know and share (like Jay or Caleb.) I would really be concerned about taking on a lot of risk in my first investment though. There are tons of ways to lose money in real estate and I recommend that you find a mentor or group and build an experienced team... It will help you bypass a lot of headaches.

I do disagree with David as he commented that it's not even necessary to visit your target cities. The most successful clients that I have know this town and visit 1-2 times each year. Indy can be very street by street and block by block and things are changing every quarter if you're in the gentrifying urban areas. While there is a lot of money to be made there... there's a lot of risk there as well. I usually start clients out in more established neighborhoods with consistent track records. Feel free to reach out if you would like some more information about investing in Indianapolis.

@Jonah Wilson I am an investor a the business developer for a property management company in Indianapolis. I help OOS clients build teams all the time. I'd be happy to put you in touch with professionals and providers my clients use most and answer any questions that you have. Most of my clients are using growth strategies like the BRRRR or conventional financing on homes that are pretty much rent ready. We also work with investors who are looking for cash flow strategies as well... which are usually selling owner finance or holding long term with no financing. I'll shoot you a PM and we can talk about what I'm seeing is working in Indy.

@Tom Makinen I'm an investor and the business developer for a property management company in Indianapolis. We have a lot of OOS investors in Indianapolis. My favorite niche for investors like you is to purchase 20 year old homes or newer, with conventional financing, and priced at the 1% rule or better. They are more difficult to find and they move very quickly, but we've closed several this year already. They are usually family homes with very little turnover (maybe 3 tenants in 10-15 years), in decent neighborhoods, and decent school systems. Usually middle class families getting their children through their education... this is probably the most stable tenant demographic that you can have. They are not cash flow heavy, but they crank out 3-4% ROI in equity every year and the rent rates increase about 2.5-3.5% annually. Leveraged 4 or 5 to 1 (20% or 25% down) the COC ROI on the equity growth is usually 12%-20% annually.

If you cash flow at much all, your IRR for the first 5-7 years usually comes to 20%+ annually... that's doubling your investment in 5 years and probably tripling it in 7 or 8 years. If you hold them through the 30 year period, they each should rent for $2,000+/mo and produce an NOI of over $1,000+/mo (50% rule.) The assets should also double in price... the means a 8x-10x return on equity over 30 years (2.5% compounded annually) from a leveraged position. This means a $20k investment being to a $200+k asset producing $12+k NOI annually in 30 years... 5 of these couple probably provide a small retirement for many of us. My goal is to own 10-20.

Most of my clients employing this strategy are only holding 5-10 years and transitioning to a cash flow  model instead of a growth model, but they are easy homes to own and manage with relatively low risk in comparison to other types of home.

In terms of stocks, you're using leverage to purchase an low volatility stock that produces low monthly dividends and is usually more valuable each year. Personally, I'm a fan of selling covered calls against dividend stocks. For smaller amounts of money, it produces a similar ROI (around 15-25%) as real estate, but I still prefer owning a Real asset. I think it's a great way to diversify that has less reliance on the economy and politics, but can still be heavily impacted by regulation (taxes, lending rates, local regulations, etc.) That's why so many people like the midwest... so many of the states with larger cities have regulations that are less business/contract friendly and more resident/tenant friendly, which can complicate the consistency in your cash flow. Having a bad tenant who takes 6 months to get out of the property is something I don't have to deal with in Indianapolis. Not being able to increase rents to match market rates are not a problem here either. It's a pretty easy state to be a landlord in as long as you follow the local rules.