Cashflow in -A- neighborhoods? Indianapolis area-Fishers,Carmel

[Samm Mero]

Hi Everyone,

Sorry if the question's been asked before, but I am a newcomer.

I am evaluating if I should invest in -A- neighborhoods around northern Indianapolis (Mainly Fishers/Carmel). Based on the info I've found most of the areas are occupied by homeowners (around 85%), in this case, is it still advisable to own rental properties or people mostly buy rather than renting?

Thank you in advance.

Sam

[Ross Denman]

@Samm Mero I live in Carmel and just moved from Fishers. It's very tough to find cash flowing rentals in these areas if you plan to hold a mortgage. You can cash flow, but your COC ROI isn't going to be as high as most investors like. Equity, well that's another story. Carmel is one of the best equity growth areas in central Indiana.

As you can see in this link

https://www.nerdwallet.com/blog/finance/high-roller-cities-wealth-credit-highest/

Carmel and Fishers are 2 out of the top 5 wealthiest cities in the midwest. 

I have a client, who is a local doctor, who purchases high-end condo's in Zionsville and Carmel with 50% down as rentals. This is more exactly opposite of how I was taught to invest, but it is an interesting model.

Personally, I'm not a fan of condo's. HOA's tend to raise faster than rents here, creating less cash flow over time, but this model is more about passive equity building. Basically, the HOA cares for most of the capital expenses over time and allows for a low-maintenance living experience for residents. Because these are more affluent areas, the tenants are stellar and even when we have a vacancy, it is very short... days usually. The residents usually take great care for the home and the areas are very desirable over all... but I wouldn't expect a ton of cash flow. He's probably putting $150k down for $4k-$6k annual cash flow, but they are never vacant, rarely have headaches, and he's building up incredible equity each year from a 2:1 leveraged position. If you are fine with 3-4% COC ROI, it's a fine model as the IRR will still top 10% annually when levered equity growth is figured in, but it's not a cash flow model.