Indianapolis, IN - trying real estate again

[Chris Friedl]

Hello. I come to real estate by a very tortured path.

I graduated from college with a BS in physics in 1980 (yea, I am that old). After not being able to find a job, I went running back to the safe haven of academia to learn the new up-and-coming skill of computer programming (this was before the Internet). I had been given a TRS-80 (Google it) during college and found that I had an aptitude for programming. Halfway through a second semester I was offered a job in the oil industry as a Field Engineer for Schlumberger Well Services. I withdrew from the computer classes and began a career in the oil fields.

I loved the job. I worked for two years and made lots of money which I stashed away so that I could go back to graduate school some day. Then oil was deregulated and the drillers started stacking their rigs. The slowdown in drilling activity dominoed into layoffs in many segments of the US oil industry. To hedge my bets I took a sabbatical to go back to graduate school and never went back.

While in graduate school I got back into computer programming (I had to write my own data analysis software). My experience doing this development work led me to become a computer consultant. During the work for my thesis, I picked up a full time consulting job programming and being a DBA. I worked for several companies an eventually managed my own software development team. (Although I never completed my thesis.)

Once again, the economy performed a nose dive with the simultaneous bursting of the Tech Bubble and 9/11. My team and I were caught in another layoff. After a very painful 12 months of unemployment I did catch another development manager job, at a much reduced pay rate working for a medical software company in Cincinnati, OH. One of my customers a hospital system in Indianapolis, that was in the process of opening two new facilities. They liked my project management style so two years after starting the job the hospital hired me as part of the the new facility project management activation team. OK, so this is where the real estate comes into play (I swear).

At this timeI owned a “gentleman’s farm” in Indiana near Cincinnati, but the new job was based in Indianapolis where my wife and I (mostly my wife), were raising our nine (9) kids. So, I took an apartment in Indy for the week and drove back home on the weekends. The wife and – at that time – five kids remained back at the farm.

Well, needless to say, this situation only lasted about 10 months before I decided to move back to the farm and just do the commute (about an hour and fifteen minutes each way – I'm an aggressive driver). Up at five back home at eight only lasted about a year. So, the solution to the problem was to buy a second house in Indy, which I did in 2007 at a near peak in the housing market. The family and I decided we would experiment with living in the city during the week and going back to the farm for the weekend. We did this because we are not really city people (yes, I was an idiot). But in my defense I had started a major renovation (ripped the roof off and put up a complete second floor) of the farm and I was doing a lot of the finish work, specifically all the tiling and painting. It was to be my "dream home" and where I was going to retire so I was outfitting this thing to the max. The family took to city life like a fish takes to land, so we started looking for another solution in 2008 (not a good time to sell a house). We moved back to the farm and started with trying to sell the city house with FSBO, but after four months and only one showing we decided to go "unconventional" and rent or lease option it. This worked well and a couple of months later I had moved a great family into it as a lease option. One problem down, one to go… I still had to find a reasonably priced place outside of the city the family to live that wouldn't have too long of a commute.

During that time, I received a bonus from my corporate day job that was big enough that I thought about investing in real estate as a retirement plan. My wife and I spent a lot of time drinking around the Indianapolis area looking for places to live and invest. An ad in a local classifieds magazine touted very cheap eight unit multi-family converted from an old school building in the small town of Rushville, IN.

We liked the town, but the building was a complete dump. The drive to Indy would only be about 50 min, so we thought this would be a good place to set up shop. We worked with a local agent and purchased an REO single family in Rushville and began renovating it. My kids and I did all of the renovation work. We installed a tenant and refinanced the property to fund the next rental. We repeated this again. Ultimately we wound up with three properties it still didn't have a place to live.

In town, there was an "historic" house on the corner of Main st. This house was started in 1842 and finished in1846 (that's 171 years old). This house had been renovated many times. It was converted into a duplex in 1917. In 2000 someone tried to convert it to a single family but during their renovation, they didn't complete the work and lost it to the bank. When we started looking for a house for us, this old "historic" house was an REO that had been left for years…YEARS. There were missing windows, holes in the roof, vines growing into the house, bats living inside along with the pigeons. Every time we drove past that house the running joke was that we feel sorry for the poor sap that buys that place.

With all the travel to Indy for work and to Rushville for renovation work I think that something snapped in my wife (in retrospect I wonder why it took so long). She decided to have a look inside the this house.

The the double front doors had to be secured with a padlock – from the outside because the wouldn't stay shut. The previous owner had sold the furnaces (yes, there were two – one for each of the previous units) before loosing it to the bank. The has painted latex over oil based paint without using a proper bonding primer. Ever inch of trim was peeling off in large sheets. It still had knob and tube electric. But on the plus side, we were told that someone had spent about fifteen thousand dollars tuck pointing the giant front porch. Well to make a much longer story less long, “we” put in an offer and, of course, they couldn't accept fast enough. We moved in just in time for winter. The winter was horrible. (It was the winter of my discontent.) In essence, we were living in an unheated giant brick tent. We are still reclaiming rooms from the elements one at a time (just two more to go).

In the midst of this new remodel job, I bought a quadplex. The neighborhood was not great and it needed way too much work for the price. I did a lot of nice remodeling, but could never get the tenant class above D. So after four years trying to make that work I dumped them and stopped investing. I will never again buy a multi family with the expectation that I can raise the tenant class.

Well, three years later, I've done more research, reading and joined the local REIA. Over the years, I learned a lot of things not to do. Now I want to begin again but more efficiently. Most of my kids have moved on to college and jobs so I don't have many around to help do the remodels so I'm going to have try to do flips using contractors. This will a new experience.

I'm on BP to network, find deals, get advice (I no longer have time to make my own mistakes) and hopefully grow my business.