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Investing in apartments in Indianapolis- Is the ROI good?
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.
@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?
@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
@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.
Quote from @Zulf H.:
Hi BP members, My portfolio is mainly in Chicago and I have been considering investing in Indianapolis as the prices in Chicago have been going up quite a bit. I spent my college years in Indianapolis and I think it would be a good place to invest in multi-apartment building. I would like to get some advice/feedback from investors based in Indianapolis on how the rental market is in terms of ( Apartment availability, rental units occupancy, quality of tenants, apartment price appreciation) Also if you can advise what areas in Indianapolis would be good to invest for apartments with good tenants. Looking for less headache as it will be managed remotely. Thank You!
How is it going? Did you enter Indy since posting to this forum? If so, please report how it went.
Quote from @Art Perkitny:
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.
Where did you find this map? Please post source. I would love to study it further. Please post any other info for doing market research on Indy.
Quote from @Ric Ernst:
@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?
Good point. Please discuss your experience in Indy. Want to enter this market. Let's collaborate. --TA.
Quote from @Art Perkitny:
@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
Please post source where map was published or tool used to generate this map. Where may I get a hi-res copy of map? I'll gladly pay for this info.
Quote from @Ric Ernst:
@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.
Which list of metrics do you use to select an area? Are the color-coded areas zip-coded or just distinct neighborhood names? Thanks. --TA.
@Art Perkitny
Looks like a great tool. Thanks for sharing!
@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!
@Art Perkitny - Can you please share the tool with me aswell?
@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.
Quote from @Mike D'Arrigo:
@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.
Thanks Mike. Shot you an email.
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.
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