Investing in apartments in Indianapolis- Is the ROI good?

Question

Ric Ernst · Answer

@Art Perkitny what metrics were used to develop this map? I invest in Indianapolis and, while I think it is terrific that this tool exists, I am not sure I agree with the assessments...at least not in some areas that I own property. Perhaps there is criteria here that I am missing?

Art Perkitny · Answer

Hey @Zulf H. I can help with suggesting areas to avoid/investigate.

If you are looking for higher quality tenant profile i would suggest sticking to B or higher areas.

Returns will be lower, but so will the hassle factor.

The map below shows the rankings for area within Indy on an A to F scale. The lower the score, the higher the risk and lower quality the tenants will be.

Ric Ernst · Answer

@Art Perkitny that's an interesting approach and I suppose one way to rate areas. However, besides vacancy rates, I would contend that the education level and economic status of the populous isn't necessarily a gauge on what makes an area a good investment. Rather, I would suggest that crime stats should weigh heavily into the formula and, if there is a way to quantify it, the physical shape of the neighborhoods. There are many areas with small inexpensive homes that generate modest rents which are good investments.

In my view, A and B neighborhoods are pretty obvious. C neighborhoods are solid working class neighborhoods with a fairly stable population of mostly renters. The houses are typically older and no where near as valuable as the B properties. The renters are not high earners and many are not college educated and some may even be receiving assistance but, if the crime and vacancy rates aren't super high, I would not grade them any lower than C. D neighborhoods would be places where crime and vacancy rates are more of a problem and you may start seeing vandalism and occasional signs of blight. F should be reserved for the all out war zones which do indeed exist in Indianapolis.

As an example, one of my properties is in an area called Drexel Gardens which you rate as an F neighborhood. I feel perfectly safe in this area and have a stable tenant. It happens to feed into a desirable set of schools which is  big attraction for working class families that cannot afford to live in Greenwood or some other A or B area.

You mentioned your metrics include median home value and median rent. Are you using that data as low is bad and high is good? Or are you possibly working out a ratio between the two? I ask because the returns (as in rent:purchase cost) on what I consider a C neighborhood is really good....much better than the A or B neighborhoods. The advantage of the A's and B's might be lower vacancy rates and potential appreciation, of course. But that might be an interesting stat if you don't have it worked out already.

Anyhow...I don't mean to disparage your map and give you props for creating it (assuming it is yours). I just think there are other metrics that should weigh in for potential investors using your tool.

Gopichand N. · Answer

@Art Perkitny - Can you please share the tool with me aswell?

Raquel Yu · Answer

@Art Perkitny This looks like a great tool, would you mind sharing the link so I can zoom in to the streets/neighborhoods? I'm looking into investing in Indianapolis as well. Thank you in advance!

Mike D'Arrigo · Answer

@Timur Abdullin I've been active in Indianapolis for over 10 years. I'd be happy to share my insights and help if I can. Feel free to reach out.

Dominic Buhlmann · Answer

@Art Perkitny

Looks like a great tool. Thanks for sharing!

Art Perkitny · Answer

@Ric Ernst the metrics used include the following:

- Median Home Value

- Median Rent

- Percent of Population with College Degree

- Percent of Population on Food Stamps

- Poverty Rate

- Vacancy Rate

- Rent to Income Ratio

- Median Household Income

Which area do you no agree with exactly?

The rankings are accurate about 95% of the time and identifying locations with incorrect scores helps us fine tune the algorithm to perform better

Brittny Kenaley · Answer

@Nick Giulioni

Hi Nick, Congrats on 100 doors! We are based in California and just started our out of state investing journey earlier this year (Ohio).

We are in the process of identifying our properties in a 1031 exchange and very curious to learn more about Indianapolis. Any info you care to share would be super helpful!! Thanks so much- Jeff and Brittny

Nick Giulioni · Answer

Hi Zulf, I'm from California but I have started my real estate journey here in Indianapolis. Now, I have more than a hundred doors. I would love to help/share my experience and chat with you more if you're interested.

Investing in apartments in Indianapolis- Is the ROI good?

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