Buying 2 properties and maybe paying cash for one in Indiana

San Francisco, California
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Buying 2 properties and maybe paying cash for one in Indiana

Becca F.
Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes

I'm planning to make an offer on a SFH in Indianapolis, possibly 2 SFHs in Class C areas. Both are move in ready. The first one is $119,000. It's 2 bedroom/1 bath on a quiet street in an area with growth. Great house with built-ins. Potential rent is $1000, could ask $1100. My estimated mortgage payment is $824 (PITI). I asked my realtor about making a cash offer of $118,000 or doing financing at list price and asking for seller's concession of 2%. It's been on the market for 5 days. One lender said if I paid cash I could do a delayed financing 6 months after and cash out about 80% of the appraised value.

The second one is $120,000, main house has 4 bedrooms, 1 bath and ADU/carriage house in the converted garage has 2 bedrooms/1 bath. Potential rent is $900-$1000 for main house and $575-$750 for the ADU. My estimated mortgage is $827 month. My hesitation is it's on a busy street and the dining room in the main house has a sloping floor. It's been on the market for 46 days. The seller's agent said the sloping floor has been the reason that it's been on the market for so long. Their inspection don't reveal any foundation issues but they said I'm free to do my own inspection but property is being sold as is. My realtor did a video tour of both properties and she couldn't see why the floor was sloping. She said a contractor could fix the sloping floor for around $15,000 to $20,000. It was built in 1910.

To add to my choices the investor for property #2 owns a 2 bedroom/1 bath house next door, listed for $100,000. He said he'd give me a deal if I bought both properties for $210,000 so $5000 off each one. Realtor hasn't looked at this one. The investor mentioned this property after my realtor viewed the other one. This would be convenient for my property manager since both properties are right next door. 

My other properties (California and one Indianapolis suburban) are Class A but prices are much higher with Class A and my rent ratio wouldn't be as good if I try to buy Class A in Indy. I'm not sure if I should try to pay cash for the first one and if Property #2 I should consider with sloping floor. It has good income potential with 2 rents. Or try to finance 2 properties? With property #2 and #3 I don't think there's a rush to make an offer since it's been on the market for a while. If you DM me, I can send the listings. Thanks for any advice. 

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Tyler LingleBusiness Member
Real Estate Consultant · Indianapolis, IN · Member since 2021 · 440 posts · 292 votes
3y

It depends on where they are at. 


Class C in Indianapolis can mean a lot of things: declining neighborhood, stable yet not growing, or revitalizing. I advise people to invest based on the five year projection of that property. 

If in five years the rent & price have appreciated 10% then that's a great deal, and there are a ton of Class C neighborhoods like Englewood, Bean Creek, etc where that is doable. 

That's my take! Best of luck!

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  • Tyler LingleBusiness Member
    Real Estate Consultant · Indianapolis, IN · Member since 2021 · 440 posts · 292 votes
    3y

    It depends on where they are at. 


    Class C in Indianapolis can mean a lot of things: declining neighborhood, stable yet not growing, or revitalizing. I advise people to invest based on the five year projection of that property. 

    If in five years the rent & price have appreciated 10% then that's a great deal, and there are a ton of Class C neighborhoods like Englewood, Bean Creek, etc where that is doable. 

    That's my take! Best of luck!

    [email protected]
    Roots Realty Co. 563 Reviews
    WebsiteView Page
    1Reply
  • John Clevenger
    Real Estate Broker · Indianapolis, IN · Member since 2020 · 73 posts · 39 votes
    3y

    Becca,

    Seems like you have some great opportunities ahead of you. 

    In my opinion, one of the key advantages of offering cash is the opportunity to get a significant discount on price, especially if you plan to finance the property after closing as you will still need to pay all of the lending fees that would be there at closing. Personally, I think if you make a cash offer on either property, you should be able to knock off more than 1k. I'd shoot for at least a 5k discount, see how they respond on price after your first offer, and instead of budging on price, negotiate terms. This should secure you a better deal with a cash offer however, it depends on area and pricing as Tyler noted. If it is truly priced correctly then they may not budge. 

    In regards to making a decision on both I would base it heavily on location. If the location isn't great for either, I would do analysis based on no increase in rent or property value. If you're comfortable with the numbers then proceed accordingly. 

    Hope all of this helps and good luck!!!

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  • Melissa Nash
    Rental Property Investor · Orange County, CA · Member since 2016 · 740 posts · 529 votes
    3y

    Leverage the higher priced one.... use the bank's money for that one. Cash for the cheaper one and do a loan on it when rates drop. 

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  • Becca F.
    OP
    Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes
    3y

    Thanks for the advice. I asked my property manager for his opinion. He thinks the property's potential rents are overinflated, the $900-$1000 for the main house and $575-$750 for the ADU and that buying in areas with high crime areas will invite lower quality tenants. Higher quality tenants won't want to live in areas with problems. He manages my SFH rental in Hamilton County, great tenants but I bought that house almost 10 years ago. Spending $300,000 or more wasn't in my plan. After doing a crime data search with zip codes (46218, 46201 so far) that pretty much eliminates most of the East side. Isn't it street by street on the East Side as far crime? With Class C properties, thoughts about tenants? Are those landlords having problems vs. landlords of Class A/B properties?

    So now I'm widening my search to Lawrence, Washington, Pike and Wayne Townships. I'm seeing several of these homes go pending quickly. If I'm looking at $150,000 to $200,000 is my rent ratio going to be at least 0.7%? This is frustrating.

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