Indianapolis Triplex- Fountain Square?

Question

Hi everyone, I have been looking at properties in Indianapolis and have been really deeply entrenched in getting to know areas from out of state- my plan is to go there soon- but work is tying me up at the moment.  I am working with a realtor there, who goes in with a project manager to look at properties etc.  I am mainly focusing on Fountain Square, Bates Hendricks, Irvington, other parts I do comparables for online etc.  I give her properties and she takes a look at them in time.  She has been pretty honest with me on scratching some that are in bad areas etc.  I have some money in my IRA I am planning to leverage with a non recourse loan and my own money too, but both in separate deals- which is why the MF focus.  I have been putting offers in the Irvington area for houses needing rehabbing- and would require no loan too- but am waiting to hear on those.  I am thinking of moving forward with a triplex or duplex and wanted some feedback from people on here to get feedback- Your feedback is appreciated- I am a newbie out of state investor, not a newbie here in California, but I know markets differ- your feedback is appreciated ahead of time.

1. Triplex- in supposed Fountain Square- not sure where FS cuts off is? Any insight would be helpful- but it is at the 2100 block of Prospect and my realtor says it is in the FS area- It is ready to go- Unit 1 is rented at $540 (been there for 4 years), Unit 2 at $580. Unit 3 is vacant for owner occupant possibility but my realtor says it is rent ready and would rent for $700. Asking price is 85K.  Dropped from 90K. Seller currently pays for utilities - electric, gas, trash etc.  For future utilitites could be payed by tenant- since individually metered, except water.  My numbers (using BP calcs) say no more than 75K, but please provide feedback.

2.  Duplex- 1500 block Tuxedo- not sure of the neighborhood- but my realtor says it is in a good neighborhood- near a nice park and a school of excellence. Tenants pay $595/mo and have been there 3 years.  Asking price is 70K- dropped from 80K- tenants pay all utilities.

Thank you!

Matthew Schroeder · Answer

@Lisette S.  You ask very good questions & it is clear that you are trying to do your due diligence thoroughly, and I commend you for that.

The term "Fountain Square", the neighborhood & its boundaries, are often used quite loosely, sometimes because of lack of knowledge (and with no bad intent), and sometimes, for other reasons (enhanced marketing of properties).

Below is a link to Downtown Indy, a very good resource & professional website.  If you scroll down, you will see a map which outlines the borders of Fountain Square (proper).  Most people who are very familiar with the neighborhood will agree that is the "core" of Fountain Square.

You will notice that this map conforms very closely to what @Erin Donlan has mentioned in her post (State Street being the east boundary).  We all have seen that some people argue that neighborhood boundaries are wider (usually to the east & south), but recognize that if you are outside this "core area", you are are generally getting to more marginal areas (although there may be exceptions).

To the best of my knowledge, this is the 1st time ever that a map to Fountain Square has been posted on BP, so consider yourself lucky! :)  I hope it is useful to you & other BPers.

Fountain Square (Map) - Downtown Indy

Best,

Matthew

Erin Donlan · Answer

I've had a lot of investors look over the FS triplex. I can tell you it it not IN Fountain Square, but just to the east. Anything east of State Street is technically not FS. However, there are more and more investors rehabbing properties there (something that wasn't happening even a year ago), and I would say the area will continue to improve. However, how quickly is anyone's guess. I can tell you a story about looking at a property there, but I'll refrain. :)

I also think $700 is high for the vacant unit - I've been telling my investors plan more like $600. Rents aren't rising as fast as the properties are selling for in the area. Also, forgot to mention that the two rented units are studio apartments, the vacant one is a 1/1, hense the higher rent.

For the Tuxedo duplex, I'm not a fan of the area, personally, but I know more and more properties are being rehabbed there. Again, area could improve but hard to say when or how quickly.

Hope that helps!

Ryan Mullin · Answer

Yeah 2100 Block of prospect is 4 blocks east of the state st boundary.  And the fact that its on prospect is not good at all for finding a qualified tenant.

My wife and I own a triplex just east of state on Fletcher.  Just east of state...  like one house east of state (In the area that is heavily being developed).  It has a 3 bed unit a small 2 bed unit and an efficiency.  We do 650 bucks for the 3 bedroom, 500 for the 2 bedroom and 450 for the studio.  And thats with all utilities included.  - just to give you an idea of what it takes to get tenants with good credit scores over there.

I would be really really careful about tenant placement in a MF in these areas.  If ones side has a trashy tenant the other side will either sit vacant or fetch yet another trashy tenant.  Then you get in the cycle of tenant turnover and high turn costs.  If you search BP threads for multi family in Indy you will find plenty of warnings about this.  - It can be done right, but usually its not.  In my opinion it typically starts off with someone estimating rents way to high...  then you get a bad tenant, etc..

Brookside park (1500 tuxedo) is a great place to invest in a buy and hold, IMO.  But...  again with the MF.  Its much harder to make it work than a SFR.  I would love to own a duplex in Brookside but I wouldn't sell one to an out of state client.  Its just to unpredictable.  Property management on that is going to be tough.

Lots of good info from @Erin Donlan and @Matthew Schroeder too!

Lisette S. · Answer

Thank you @Ryan Mullin- this helps so much! I appreciate your help!

Ryan Mullin · Answer

@Lisette S.   35k all in doesn't get you into any neighborhoods that would be considered "appreciating"   but...   you could definitely find something in an area that has the potential to see appreciation.  For example you can't get anything in Fountain Square or Irvington for that price anymore but you could find a little 2 bedroom on the south end of bates hendricks or just south of fountain square.  One of my favorite areas recently is the Old South Side near the Sacred Heart Church.  Also, the west end of Little Flower has some super cheap houses that could start to see appreciation spilling over from Irvington and the east half of little flower.  Just a few ideas.  Hope that helps!

Lisette S. · Answer

@Ryan Mullin- Thanks for the insight- it does give me a better idea of the difference in rents and property management concerns I had with getting good tenants.  Someone sent me a crime index of the area and it does not look too great either?  I rather have low rents and good tenants than high rents with not so good tenants- but getting good tenants in a reddish color area crime wise may be a challenge.  I keep getting that multi families in Indy are not so great...I will continue to look- Do you think purchasing a fixer (with not so much extensive work needed- maybe 5-7K) in a appreciating area with good future outlook and rents- good tenants is possible for a SFR for under 30K? I am trying to figure if using all cash to purchase and fix for under 35K is possible or leveraging that money is best- but minimum loan amounts is a challenge. This is why I was looking at MF's and possible loan leverage.

Lisette S. · Answer

Thank you @Matthew Schroeder! This is what I was looking for. I understand your explanation and it helps for me to understand better what is happening. That site also has lots of helpful information. Appreciate it.

Erin Donlan · Answer

@Lisette S. Hard to say but excellent question. I haven't seen the property first hand, but I've seen other "rehabs" in the same area that I know if I were to purchase the property I'd have to re-rehab just to keep up with the area. Pictures look good, but obviously pictures don't tell the whole story. I don't know if it's worth it to come out to take a look, but I'd at least ask your agent to take some video, if she can. That might give you a little bit better idea.

Lisette S. · Answer

@Harry Zhou- I have not worked with this realtor prior-She came through a recommendation and honestly have no idea - except from that one recommendation. She appears to get me what I am requesting and communicates and responds to my questions etc well.  The brokering agency has an affiliated property management company and she gives me rents based on what they have leased etc. I guess that is why I am asking on here, to see if her recommendations are legit or not.

@Erin Donlan- Thanks for your insight.  That is what I figured, from research etc- in  terms of State Street etc. I am estimating $600 in my figures for that 3rd unit, as opposed to the $700 due to it being 1/1.  Would you say that they are rehabbed for investors, but are really not worth what is asking, and playing on a nebulous appreciation of the area?

Anyone else care to chime in?

Harry Zhou · Answer

The key question is if this realtor is trustworthy. Have you worked with him o r her before?

Indianapolis Triplex- Fountain Square?

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