Where to go next?

[Ken Scarbrough]

Hello All! My name is Kenneth Scarbrough. I am a long time reader/listener of bigger pockets but this will be my first post. I have lived in Indianapolis (primarily 46250 / 46226) for almost 20 years now, and about 3 years ago I decided I was tired of working for someone else. I hatched a plan to earn myself financial freedom and after some reading decided that real estate is more my kind of thing. So I took the plunge in 2014 and bought my first duplex in Castleton, Indiana, and cash was instantly flowing! I was excited for the money but learned a tough lesson when I realized how tough the tenants I inherited could be to deal with. Shortly after there leases ended, and after a month or so I had both units filled again (Indy has a pretty solid rental market, especially in the summer). After performing some renovations on duplex 1 I purchased another duplex on the same street, and based on some much need renovations to one side I decided to house hack and live in that side so as to renovate it while renting out the other. I inherited a tenant on that side as well, but she is awesome! Pays rent on time, takes care of the property, doesn't bother me unless it's something important. The 3 golden rules :) As 2015 rolls around it seems that the good deals are getting harder to find. After months of fruitless searching I managed to talk the owner of another duplex on my street into selling it to me. That was November 2015 and the home was empty upon purchase, so it took some time to get 2 stable, well-vetted tenants. Now I am back at it again looking for a good multi family property to invest in, but they seem overpriced now and still hard to find. So my question is, where do I go now? I know there are many ways to purchase a home, and there are many ways to find a good deal, but I feel like I'm hitting dead ends. I thought bigger pockets could assist me. So I am wondering if anyone can help by sharing a best practice or tactic they use to find good rental properties in a market that shows very little on the MLS?? Any help you can provide is greatly appreciated. I love providing people with quality homes, finding good tenants, and I am dedicated to improving the area in which I live and purchase homes. Kenneth Scarbrough

[Michael Lee]

Hello and welcome to BP!  You did not say if you are interested in short term or longer term investments and what seems to be doing better there.  The market(s) determine where you go.  You might want to consider Fix and Flip because you have some experience.  The inventory on most real estate improvements are pretty low now and that has driven up prices and has been better for cash buyers because they can typically close quicker.  To make a living in this economy you have to work harder.  Just go in the hottest market for sales and you have a better chance of being a competitor.  "Driving for dollars" and direct mail handwritten is working for finding more leads.  Do not try to do everything yourself.  Find/Get local and experienced Team members that will help you and pay them well.  They are usually worth every penny.  Talk to the Chamber of Commerce to find a good area.  Just do what is working there.

I am 59 years old and I found BP about 7 months ago and I am still trying to decide what to do.  I went to college back then, not that it is mandatory, and I got a business degree that emphasized real estate.  Since I was in Texas and I planned on staying there I got a broker livcense since I was allready qualified to get it without having to take anything extra.  Regardless of what I had I felt more comfortable in the construction business.  I have been in the construction business since I was 17.  My father has been in real estate for about 40 years and he has taught me a little bit.  If you think that I can help you please contact me through BP at any time.  Good luck!

[Account Closed]

Welcome Ken! The deals are getting harder to find for everybody but they are still out there. This site has lots of good information on direct mail campaigns, that may be something that could work for you. There's also several Indianapolis wholesalers on here that can help you out. Best of luck!

[Chris Davis]

@Ken Scarbrough I would suggest that you move your search away from the MLS and reach out to any of the 100 of local wholesalers we have here in Indy. You could also cruise the monthly sheriff sale and the county surplus sale.

I'm not sure what area of town you are searching for your next property, but I think the Castelton and surrounding area might be tapped out. Any home that comes to market in 46250 and 46256 tend to go really quick. 

If you are really dedicated to improving the area you invest, you might want to look around downtown; that's where I spend my money. 

[Ben Leybovich]

@Ken Scarbrough - all of the above are good advice. However, I might point out that all of the above advice focuses on trying to out-smart the market. In other words, people are saying - the market is tough, you be tougher...

While this is not necessarily wrong in that you should be tough, you should also be smarter! The river flows - don't swim against the flow. You, as is evident from you original post, are sensitive to the direction of the flow. So - relax for a minute and let the flow carry your thought-process.  Where is it taking you?

Ken - when everyone zigs, you've got to zag. The reason market feels like it's pushing hard in a particular direction is because everyone is running in that direction. You don't want to be within that mass of humanity all chasing round holes with square pegs. 

Ken - in this marketplace, what would be the definition of a round peg which would fit the round whole?

[Greg Bieberich]

Hello Ken,

Congratulations on owning rentals in the Castleton area. That is a strong area to be in and you should have no problems finding good tenants if screened properly. You are correct, the Indianapolis market has tightened significantly over the last several years. I started buying here at the bottom of the market when everything was in foreclosure and pre-foreclosure. Great deals are harder to find in this market, especially in stronger areas. I would say that you lucked out with your neighbor if you bought that property right.

You can look at local wholesalers, but will probably not find their inventory in better areas like where you are invested now, and conventional financing will probably not be an option, depending on condition. In that case, you will be managing properties in areas with higher turnover and more tenant issues.

You can get with a local realtor who knows the investment climate in the area and set up an email notification for any new MLS listings hitting the market that meet your specific criteria. You will have to be prepared to act fast after analyzing the property and determining that it is a good deal, or pay current retail for the property in areas of likely appreciation. You can also look at properties that are about to expire off the MLS to find motivated sellers. PM me if you want to talk further about this.

You can "drive for dollars" and send out mailers to property owners, but that is time consuming, and may involve a cash offer to get the deal done.  Networking with other investors at local investors associations such as CIREIA can also be helpful.  There are a lot of people out there trying to do similar things!

Good Luck.

[Jynell Berkshire]

Ken,

Congratulations as well on your success on the Northside of Indianapolis. This can be a tough area for investments but you have done it successfully.

I agree with Chris that you may want to look at wholesalers for inventory that are off market. I have clients that do this successfully and are always looking for other investors. You also may want to extend your targeted area, as you have found. Widen the net, so they say.

I will inquire with my current clients to see if anyone has inventory as to what you are looking for. If so, I will PM you.

Best of luck and keep up the awesome work. Well Done!

[Account Closed]

@Ken Scarbrough

Ken, in my opinion, you should really think about what @Ben Leybovich wrote. It's sound advice. 

[Ken Scarbrough]

Thank you all for taking the time to respond!!

@Michael Lee I love real estate because I want to work for myself and improve my community while simultaneously finding financial freedom for myself, so I guess it would be a long term goal.  What do you mean when you say, "go to the chamber of commerce to find a good area"?

@Account Closed I asked Ben to embellish, I think I get the general idea but would love to hear more!

[Michael Lee]

Hello!  I am so sorry just now getting back to you but i just found this option is available. The Chamer of Commerce people are supposed to know where the City is moving and other economical things.  I hope to be able to help you down the way.  Best wishes!

[Ben Leybovich]

@Ken Scarbrough - I am assuming you meant to ask me to elaborate :)

Doing things the way you used to doesn't work anymore - this is your assertion. Why - because there are too many people doing the same things the same way. So, you have several options:

1. Get to those deals before anyone else, or

2. Find a competitive advantage angle which would allow you to underwrite a higher purchase price without sacrificing your returns, or

3. Do something else entirely. Recognize that RE moves in cycles, and now may not be the best time for you to be a buyer.

Either way, you need to zig while everyone is zaging. 

[Ken Scarbrough]

@Ben Leybovich I appreciate your advice and will consider it strongly.  I will try and start to think more "outside of the box". I only have three properties though, so if it is not the time for me to be a buyer and I don't have anything to sell where does that leave me?

Thanks again for taking the time 

[Ben Leybovich]

Originally posted by @Ken Scarbrough:

@Ben Leybovich I appreciate your advice and will consider it strongly.  I will try and start to think more "outside of the box". I only have three properties though, so if it is not the time for me to be a buyer and I don't have anything to sell where does that leave me?

Thanks again for taking the time 

 Ken - all I am saying is that your post indicated that you are feeling the market working against you. I agreed with you. 

Now, you are asking how to move forward in-spite of the market.  To that, the only thing I can tell you is: listen to what the market is saying, and if you can - adapt your approach, strategy, and technique. And if you cannot, or are not interested in doing so, then go into a different marketplace which offers you more of a competitive advantage. 

I simply cannot tell you to push through - competing against the market without a clear competitive advantage is seriously bad idea...

[William Jenkins]

I have to say that I agree with Ben. Don't try to make things work that won't.

There is an obvious rush towards real estate again and I personally think we are at the later stages of the up cycle.
I am seeing the same silly things that I did in 2006-2007 and it won't end well for many.

If a good deal comes along I am ready to pull the trigger, otherwise I am in hibernation until the market becomes more favorable on the buy side. You make your money buying by the way.