Buy a home or rent? Indianapolis Folks!?

Question

I am going to keep this short and sweet. My dad is buying a warehouse in Westfield, Indiana and is asking if I would like to move there to manage the warehouse for 2 years. I understand the housing market is hot right now in the area, but my wife and I wanted your expert advice on whether or not we should buy a home in the area, live in it for a few years, then move away and find renters. Orrr just rent for the whole time we are there.

Need opinions on:

1. Is it smarter to rent for the 2 years? Or buy a home?

2. If we were to buy a home in the area is it easy to find good tenants?

3. Is it easy to manage these tenants from another state? How do you suggest we go about doing so?

The Indiana market is much cheaper than the Utah market right now (Utah is the fastest growing state) which is why it is so enticing to buy a home instead of rent. But I would like any and all opinions.

Thank you!

Gloria N Gear · Answer

@Dayton Wright -- I think there are some great opportunities in Westfield and the north side of Indy.  Yes, it is the most "expensive" side of town, but the equity build is also the greatest there as well.  So, if you don't decide to use it as a rental, you should be fine if you decide to sell in a few years.  There are also plenty of opportunities all around that area that are better cash flowing that are less than 30 minute commutes.  Would be glad to have a conversation with you and connect you with others in the area doing the exact same thing - ie house hacking, using first residence as future rental, etc.  @Nick Giulioni is one of those guys, make sure you talk with him.

Rohan D. · Answer

Hi Dayton, these are my thoughts1. If you plan to hold the property for long (7-10 years) and don't need liquid cash at the end of your 2 years stay in Indianapolis, I would recommend buy. Multiple benefits: lock in low interest rate (as a primary home [low%] vs investment [high%]), build equity, house hack a bit while you stay there (if that's your thing) for potential rent upside in the future.

2. I've heard good things about Westfield, experts on this forum can comment more. Avg rent ~$1750 and stays on the market for about 3 weeks before it gets rented out.

3. Property management in Indianapolis is an industry by itself. They make it really easy for out of state investors to manage rentals. I can recommend a few if and when you plan to take that route. Monthly PM fees are ~10% of the rent + some leasing fees. You should be able to easily cashflow on your home especially if you buy it as a primary residence at a low interest rate.

Hope this helps. Goodluck!

Jaron Walling · Answer

@Dayton Wright Have you started looking at properties? I don't know if you know much about the Indianapolis market but Westfield, Carmel, Broad Ripple, Noblesville, and most areas on the northside are pretty gentrified. The prices are sky high and homes sell quick. If you don't have boots on the ground I'd start immediately and be prepared to go over asking. I'd check out Whitestown and Noblesville. Those two are not quite as crazy.

My friend has been looking for a home in Westfield for about a year. They have been outbid numerous times. Cash buyers from Chicago are buying everything, maybe even buyers from Utah. HaHa. Future rental potential is low in all these areas unless cash-flow doesn't concern you.

Either way you'll love Indiana. The areas around Brown County and Bloomington are beautiful.

Joshua Jarrett · Answer

People are talking about house hacking... I live in the area and i rarely see multi-unit properties come up for sale in decent neighborhoods. When they do, they are gone quickly and for top dollar.

Marc Rice · Answer

@Dayton Wright

I think buying always make sense. On a single family home if you live in it 2/5 years you can sell it without paying any capital gains. Plus if you buy one that can rent out to close to 1% of what you bought it for, it should cash flow and also appreciate gradually over time.

The market is hot right now so that is the downside and you don’t necessarily know the local area well enough yet. But I think if you buy a modest home that can be rented out when you leave you should be ok.

Dayton Wright · Answer

@Dan Casilli I am starting to think the same thing. The buy and hold strategy, plus some house hacking, plus buying where it is not as competitive is a good idea. Thanks for commenting!

Matthew Brill · Answer

Getting started with a house hack is a great first acquisition and introduction to investing. You'll get to both live in it and get income to reduce your expenses. Then when you move out it's a performing asset. My biggest regret with house hacking is not doing it sooner and every time I moved!

Dayton Wright · Answer

@Jaron Walling Since your comment I have been looking in Whitestown and Noblesville, so thank you for that! The goal would be to cash flow once we leave Indiana, so I appreciate your advice

Matthew Brill · Answer

First off, I would look to house hack. I have tried to do this every time I have moved to a new area. Then you are decreasing your living expenses while you are there and setting up to have a cash flowing asset if/when you leave. This will de-risk you needing to sell at an inopportune time (like if you buy but the market doesn't appreciate enough by the time you need to leave/sell to recoup costs). Also, during your time there you will be learning about property management to assess if you want to be able to do it from a different state (it is possible). In your time there you will also have the ability to network with local investors/property managers should you want to get professional property management when you move.

Dan Casilli · Answer

Hi, Dayton.  I live on the South Side of Indy and like most places, the market is hot right now.  However, I do agree with what others have posted with the buy-and-hold strategy.  Combine that with the house hack mentioned and you would open up some property alternatives, as it would exclude many residents while creating some positive cash flow.

Good luck.

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