Indianapolis, IN - Starting out BRRRR

[Nathan Baird]

Hello,

I'm a new investor and am currently in the Indianapolis area. I would like to use the BRRRR method. However, I currently am self-employed since June 2021 and before that made decent money. I am finding it hard to figure out what the best way to start for me is. I have about 75k cash, and about 30k equity in my primary residence. So, I would need a loan of some sort for this market. With my current income and expenses it would be difficult to qualify for a traditional mortgage. Mostly because I don't have solid steady proof of income yet from my business.

There are a few depressed areas (Anderson/Muncie) around Indy that I've looked into and they're super cheap (10-20k max but needs moderate rehab). With the depressed areas though I'm worried about not being able to rent the property and the quality of tenants. Anderson's population has dropped about 2k within the last 10 years. Muncie's has grown by about 5k.

So to sum it all up, my main questions are:

How do you recommend getting additional cash for the purchase/rehab?

How do you estimate the cost of a rehab? I am somewhat handy and can do the cabinets/drywall/paint/flooring/etc. 

Does anyone have experience renting in depressed areas? Good, bad or indifferent?

This is something I really want to get into and I flipped my previous primary residence (bought for 30k, rehab about 20k, sold for 100k) so I do have some experience. 

[Zachary Inman]

Hi Nathan, another Indianapolis-based investor here!

Muncie has a significantly larger renter pool because it's a college town, but the PM side is going to be more difficult because most of the tenets will be short-term (and there's a lot of competition). 

To answer your questions:

The best way to get cash is OPM. Syndicate capital from passive investors and you put some skin in the game while putting in a majority of the sweat equity. If that's not your thing, you can always go for a land loan, which is when the seller acts as the lender.

Get an estimate from multiple GCs on the property. A few good GC relationships are worth their weight in gold.

Low barrier to entry, high risk, more returns if successful. Buying in a more expensive area will typically yield safer but lower returns. What you want to do is isolate to a specific area, become an expert on this area (aka know each street, know the neighbors, know who owns the real estate, etc), and then it will greatly increase your chance of finding a good deal. Going too broad leads to analysis paralysis and lessens your ability to turn over rocks for off-market assets. I've done this on the near west side of Indy, which as you know isn't exactly Carmel or Zionsville, to great success.