Indianapolis & All Opportunities in Bad School Districts?

Question

Hi there guys,I just relocated to Indy and noticed that the majority of multifamily and other investment opportunities appear to be in areas with shockingly bad schools - ratings from 1- 4 out of 10.When I look at all the turnkey properties, I am yet to find houses or multifamily units in great school districts, 7+ for assigned elementary middle and high schools. It appears that many TK properties have an average school rating of 3 out of ten.I am wondering why one would invest in areas with below or even average schools if you have a buy and hold strategy?Any areas with good schools and decent returns you could recommend? Thanks for reading and I look forward to hearing your thoughts.

Account Closed · Answer

@Shawn Holsapple I am indeed very concerned about the maintenance issues of these older properties you referenced. I think you have just saved me a from doing something I would have regretted. Thanks a million.

Shawn Holsapple · Answer

Phil F. I've owned rentals in all areas of the city and the areas with really bad schools where still easy to rent.Now, with that said, I no longer own rough properties like this for various reasons [all bad].I know only own my self, and suggest to investors, SFH that are built after 1945 and rent for $700 - up per month. No more duplexes that rent for $450-$650 per side or SFH home built in 1920 that rents for $550!By using these two simple rules one will automatically be out of the really bad school systems [for the most part].Don't get sucked into the pipe dream of 30% returns on that $600 per month SFH home that you can buy for "only" $20k! Yes, they look sooo sexy on paper...but then after it's been vandalized a few times, the tenant does a midnight move - while leaving the place in a total wreck- two months after moving in - you will realized that massive ROI was just bad hallucination. [ask me how I know].I hope that helps.

Scott DeMichele · Answer

Schools matter if your prospective tenants are parents. However, we have a growing cohort of empty-nesters who wish to downsize and live close to city amenities. These kinds of tennants tend to be higher quality and are likely to stay longer. Kids are hard on a house.

Shawn Holsapple · Answer

[Most] duplexes are built around 1920 [read: lots of maintenance] AND are located in low rental areas [vandalism, midnight moves, etc]I've tried several times [I had 11 of them at one point] and finally sold the last one a couple years ago [that was a happy day!]The "good" ones are built in the 60's and located in places like Greenwood, Broadripple, Avon, etc but cost $125k+ and only rent for $700 per side.Vacancy is always much higher with doubles as well.IMHO - I'd rather have 2 SFH that rent for $750 each and cost $60k than the one double.That's the short answer. I hope that helps.

Anthony G · Answer

Phil,I know what you mean about the schools, but maybe this means you should be looking in areas that cater to young adults who aren't focused on schools yet. Indy has a couple trendy up-and-coming neighborhoods that may be good buys. Try looking at Fountain Square, Irvington, Holy Cross, Fletcher Place, etc..

Account Closed · Answer

Account Closed Thanks so much for taking the time to respond, as someone who was a teacher for 10-years, I will concede that there is much more to a school with a 1/10 rating as you correctly pointed out. However, my experience also tells me that a school typically has a poor rating for a reason and changing the perception is no easy task. On a personal level, I am concerned about acquiring a property in an area where the assigned schools have a rating of 3 or below as it appears that there is a strong correlation between low school ratings and high crime areas in Indy. High crime and low school ratings are certainly red flags in my book. Again, I will concede that many investors have made fortunes investing in such areas, but there has also been a few casualties along the way :)

Account Closed · Answer

@Scott DeMichele I definitely hear you regarding the empty-nesters and it is certainly true that kids can be hard on a house. Is there is particular neighborhood you could recommend? Thanks so much for your comments, I really appreciate it.

Account Closed · Answer

@Shawn Holsapple I really appreciate your guidance. As a new investor, I am alarmed by how money investors were promised Heaven only to receive Iraq. It seems like you focus predominantly on SFH - Just curious why you are staying well clear of multifamily units? I definitely have my eye on properties that rent for $ 700 plus.Thanks again for your thoughtful response, much appreciated.

Account Closed · Answer

@Anthony G You, sir, raise an excellent point. I guess as a soon to be dad to, I am probably overthinking the whole school thing :)Thanks so much for your response as it is broadening my horizons :)

Scott DeMichele · Answer

Crime heatmaps and low-rents help me find places to avoid, but Indy is full of pockets of decent neighborhoods in IPS districts. As Shawn pointed out, many of these houses are old and may be higher maint in the long run, the upside being that they are close to the city and boomers are increasingly willing to pay a premium for an "active" lifestyle in a smaller home close to the action rather than a larger home in the burbs. The monon trail is a great place to start.