Newbie Investor Question about Specific Indianapolis Property

[Nicholas Hindes]

Ok, So I am just starting my RE journey and I found this "potential" deal but I'm sure there are some things I'm missing. Perhaps just by posting this someone will snatch this property up but I wanted to see what y'all thought. I'm attracted to this particular property in Indy but don't know much about the neighborhood and it looks like the roof has a tarp on it, BUT property is a quadplex that the current owner has said he rents out at 650 per month per unit. I've asked my agent to contact the listing agent regarding getting some more photos before making the drive down there. It's about 75 minutes away. I would make a really low offer close to 50-55 percent discount of the list price. The seller seems highly motivated to move on the property. What do you guys think?

https://www.zillow.com/homes/3...

[Darren Haworth]

@Nicholas Hindes

Hey Nicholas,

Right out of the gate, I’ll tell you I graduated from IWU. Some great memories made in Marion!

Anyway, I live in Columbus, OH and have owned two properties in Indy, just sold one last month. So, I’m about 160 miles away. As you know, this would be a pretty easy drive down to this property for you. This place needs work. A new roof, it looks like a couple windows are broken, and I’m guessing there is a lot more on the inside. One pro, these windows are not original. They appear to be vinyl replacements which means that’s a future expense you don’t need to worry about, other than the aforementioned broken ones.

I’d be curious about utilities as this is a 4-plex with one electric meter. I can’t see the gas meter but I’m assuming there is only one of those, also. There’s also the question of water being submetered, the hvac, separate water heaters, etc. I have a feeling this place is set up in a weird way, which I’ve learned is a pain to deal with. Also, how is lawn care taken care of?

Assuming Zillow is correct, the owner only paid $28k a year ago, so there is probably some room for negotiation. But that also throws up a potential red flag. If I have a property that’s producing $2600/mo and I’m in it for $28k, why would I sell it? I mean in one year you have all of your money back and it’s just pure profit... well I’m sure there is some headache too. This is a rough area. But if you can buy it for $10 or 15k per door, that’s an amazing return. And given the area, maybe you factor having a higher vacancy rate. So, you factor in a high vacancy, maintenance, lawn care, etc, and this is still an amazing return.

I’d say it’s worth pursuing. But do your due diligence, ask for leases, get an inspection if you aren’t familiar enough with what to look for when walking through the place.

Just as an FYI in case you aren’t aware, with that roof and the broken windows, and the price point, you probably aren’t going to be able to use conventional lending. So, you’ll need cash or a hard money loan. Also, given the location, this may be in flood zone, I know some of those areas off the river there require flood insurance as I was looking to purchase a place just north of there a couple years ago. Once I added flood insurance costs, the numbers didn’t work.

Just know going into it, you’re probably going to have come out of pocket $25k+ right out of the gate to get this place back to par.

Hopefully that gives you some things to consider.

Good luck!