Out-of-state Multifamily Investment in KC vs Indianapolis?

Question

Hi BP,

I'm an aspiring OOS Multifamily(2,3 units) investor based in the Bay Area, California. I have been looking into KS and Indy as possible options and have done some research on them and they seem pretty similar. Mainly I've looked at the Population Growth, Median Household Income, Vacancy Rate, Median Rent, Landlord friendliness.

I'd like to connect with some locals from both markets to get more insights on these markets and help me pick a market and start my journey.
I'm looking to start from a duplex with a positive cash flow and my main focus is good appreciation.

woULD

I'd like to get help on:

1. Which Submarkets I should look into that would have a better appreciation and safe? (I don't care much if one market produces more cash flow and one less in the beginning)

2. Are there any major natural disasters that I should be worried about before getting in these markets? (Indy seems to have Tornados, would this be worrisome?)

3. Do these markets have a strong and diverse economy (based on a Google search, seems they do but different sectors)?  what resources do you use to compare?

4. Which market is better for Multi Families in a long run? How I can measure this(would it be based on the inventory and building permits)?

5. Which one is better to be landlord at?

I have a few more questions, that I'd like to connect with the local agents, investors or OOS investors who have or still invest in these markets and hear your suggestions.

Looking forward to connecting with you.

Mike D'Arrigo · Answer

@Ali Mirabzadeh we have been heavily involved in both Indianapolis and Kansas City for about 10 years. I would say that you have done your due diligence on both markets. Both have strong economic and demographic trends and as you've noted, are very similar. As far as natural disasters, the Midwest in general is prone to tornado's however, they are pretty rare in the populated areas of Indianapolis and Kansas City. The last major tornado that cause any significant damage in Indy was over 30 years ago and about 20 years ago in KC. Hailstorms are fairly common so you'll want to be sure that your insurance policy covers hail damage. For small multi families, I strongly prefer Kansas City. Most of the multi families in Indy are in old, rough neighborhoods that perform well. I'd be happy to share more insights and experiences if you'd like to connect.

Mike D'Arrigo · Answer

@Ali Mirabzadeh we've been active in both markets for over 10 years for the reasons you mentioned. Both are comparable in terms of solid economic and demographic fundamentals such as population growth, job growth, income etc. If you're interested in multi-family, however, I would choose Kansas City. With few exceptions, most of the multi families in Indy are located in old, rough neighborhoods that don't perform well. I'd be happy to share my insights and experience if you'd like to connect.

Gloria N Gear · Answer

Hi Ali,

I am an investor and also help OOS investors in the Indianapolis market.  Here are my thoughts and opinions.

1.  Indianapolis has several submarkets -- as a general rule of thumb, outside of the 465 circle appreciates more, and inside the circle cash flows better.  (BUT, there are many exceptions to that rule -- you have to look at individual neighborhoods, not zip codes - it is very street by street).

2. I am almost 49 years old and have lived in Indiana my whole life, I have only been close to a tornado 2 or 3 times and never been affected by one.  Hail storms are much more common which is a good thing because you can do insurance claims to replace roofs.

3. Yes, Indianapolis have a very strong and diverse economy.  I personally think that is it's strongest asset for the investor market.  We not only have good professional jobs -- IT, Pharmeceutical, etc, but also a vast variety of blue collar workers in manufacturing and distribution.

4.  honesty here --- I personally don't always think multi-family is the strongest here.  Yes, there are good multis here, but it is much harder to find than other types of investments.  There is so much space, Indy seems to have spread out rather than up, and many multis are in the not desirable areas.  But if you search hard and do your research, there are good deals to be found.

5.  From my investors that work in several markets, I am told that Indy is one of the easiest to work with as far as being the most landlord friendly.

Would love to have a conversation, if you are more interested.

Maurice Blackledge · Answer

I went to college in Indiana and started investing there a few years ago. I live in Charlotte NC, but invest heavily in the IN market and have a great team /network of people that can help you get started. Feel free to connect and I would be happy to help you in any way I can!

Jayson Cain · Answer

Hey! @Ali Mirabzadeh I have started my out-of-state real estate journey in Indianapolis. Now, I have a portfolio of long-term rentals and STRs. I’ve also helped other investors with their DSCR loans and flip projects. Happy to share my experiences and chat with you more if you're interested.

Lee Ripma · Answer

@Ali Mirabzadeh

I have looked at both markets and invest in KC. KC actually has the highest density of small MF built after 1960 of any affordable market I have analyzed. In Indie if you want "newer" construction you'll need to buy SFH. See numbers pulled today for both markets. Note this is for the entire MSA.

Coming from CA you don't think about year of construction. In the midwest this really matters and one of the things I didn't realize when I started investing out of state. I prefer to buy built after 1980 but will buy after 1960. Prior to 1960s I avoid.

KC has some great B class submarkets that appreciate well on both rents and on natural market appreciation from what I've seen. See screenshots below taken from ZipFinder for where I would focus for appreciation. KC still won't appreciate like CA but you can't beat it for the tenant's rights and the price points. My favorite B class submarkets for appreciation - Overland Park (KS), and Blue Springs and Lee's Summit, MO. Also some areas of Independence and some areas of KCMO. Some good C class areas as well. It's really just a great market for rental investing.

Spencer Smith · Answer

Mike gave me this same advice a few months ago and I found it to be very true.  Very difficult to find a 2-4plex in Indy that isn't 80+ years old.  KC area has much better inventory, in much better neighborhoods. I was just in the area last month and saw a neighborhood of duplexes being built!  I ended up purchasing a duplex in the area.

Steven May · Answer

Happy to chat about options here in Kansas City as I work with several out of state investors who purchase here!

Navid A. · Answer

I am somewhat familiar with Kansas City metro and have some MF in the area. I made the move to buy in KC (in both CF and appreciation market) last year and happy about my choice.  Last year was much different though since interest rates were in the 3-4s. Last week there was a tornado in KC and costed me almost 1K to clear up a neighbors tree that fell on my property.

Michael Margarella · Answer

I invest in Indianapolis and I think it is a solid investment market.  In addition to some of the things mentioned above, the investor community is more tight-knit than in other markets.  Happy to connect to chat further!