Cons of investing in Indianapolis that I might not know

[Danny R.]

I’m considering investing in the Indianapolis market within the next 4-6 months. I’m looking to purchase 5 properties of up to 150K each with cash. But there are some cons I’m probably unaware of. I’ve been doing constant research on that market but here is something I’m now concerned about and would like to hear from you guys.

Winter in Indianapolis. I know it gets cold and icy there but as someone from Southern California I never experienced what it’s like to live somewhere where it snows. I don’t know what it’s like to have to deal with snow on a daily basis and all the dangers that come with it.

So, I have some questions for those who have more experience living in snowy areas.

1) Do I have to pay someone to clean the walkways to the properties every time it snows? What about the sidewalk?

2) If a tenant slips and falls because of ice on the property, am I liable for their injuries?

3) What happens to pipes? Do they freeze and break? Is having pipes replaced a constant expense? And when it warms up do they leak due to damage caused by the ice?

4) How often do furnaces and AC units break due to the cold weather?

These are just some of the questions I can think of right now. I’m sure there’s a lot more that I don’t even know to ask.

Thank you

[Mike D'Arrigo]

@Danny R. These are all good questions. Indianapolis is a great cash flow market but there are some things you need to be aware of. I'll respond to your questions in their order.

1. Your tenant lease should specify that the tenant is responsible for all yard maintenance and shoveling of snow. Of course Indianapolis get snow but not as severe as many Midwest markets like Chicago and other cities further north. Indy has an average of 24 snow days and gets an average of 26 inches of snow a year. They might have snow on the ground for up to a couple of weeks at a time but unlike some markets, don't have snow call winter. 

2. People can sue for any reason. It doesn't mean that they will win. I would recommend carrying a $1M umbrella insurance policy to protect yourself.

3. Pipes will only freeze if the house is vacant and the heat isn't being run. If you have a vacancy, you'll want to winterize the property and drain the pipes. Replacing pipes can be very expensive.

4. Furnaces and AC's don't normally just break because of weather but they may have a shorter useful life due to being run more. This would be more the case with furnaces. You can extend the life by doing regular annual maintenance and changing filters. Ask your property manager if they can provide this service. At the very least, provide your tenant with a supply of filters and tell them to replace them. 

5. Although you didn't ask about it. Indy can be subject to hail storms. Hail damage is generally covered by insurance.

I would not consider Indianapolis's climate severe but it isn't California. There are other markets with much more severe weather conditions.