All Forum Posts by: Daniel Mendez

I went through literally all of this last year on my first two out of state properties.  I thought seriously about cutting my losses and giving up at one point. I'm glad I didn't because every purchase since then has been better with fewer headaches, and I've learned a lot along the way. Next month will be a milestone for me; It'll be the first month I'll have all of my Cleveland units occupied with positive cash flow.  It's really not that much work, if any, once the units are filled. 

Daniel, we focus on SFR in C+ and better neighborhoods in the suburbs.

@Daniel Mendez at the moment the MLS is very competitive, but there are deals out there. We've only had 2 MLS closings this month with clients, whereas most months are 4-6. We have a network of Realtors who call us with pocket listings for certain types of properties, which gives us an edge, but it's still pretty lean out there.

I'm not a fan of most wholesale deals I see nowadays as most are way overpriced and pretty distressed.

As far a SFR's VS MFH's it really depends on your goals. The way I have most of my clients invest, they usually yield about 100% ROI in 5-6 years, but cash flow is only a fraction of that, the payday comes at refinance or sale.

As a whole, I prefer SFR's because they're simply more predictable... But that's not any SFR, but ones that meet certain criteria. There are plenty of people who like investing in small MFH's as well though. There are benefits either way.

If you're investing out of state, I recommend properties that allow you to be as passive as possible. Don't believe the hype, rental property investing is not altogether passive.

@Daniel Mendez Indy isn't a "bad" place for MF investing, but most of the older MFR's in town are in lower income or more distressed areas. In general, MF housing is more similar to apartment investing which typically means more turnover or higher vacancy rate. It makes the cash flow inconsistent. This is especially true of many duplexes but is much more sustainable with 4+ units. Duplexes can be cash cows until your tenants move out and if both units are turning tenants every year or two, it never feels like you're getting ahead.

Also, in Indy, single family homes are usually a more desired lifestyle so most MFR residents are younger, in some sort of transition, or have more limited means. With that being said, about 15%-20% of our multi's do have older, long-term residents which plan to live in the home until they need more of an assisted living lifestyle.

The areas in Indianapolis where you can do well with multi's are typically going to be more expensive to get in. The areas we see the most consistency and demand are probably Irvington, Emerson Heights, Mapleton-Fall Creek, Herron Morton, and Broad Ripple. Also, any 3 bedroom duplexes or larger outside of Indianapolis Public School district do pretty well. Decent duplexes in these areas usually start at $90k+ though.

Duplexes can also be slower to appreciate if you don't purchase them in the right areas. They are usually in areas with a higher concentration of investment properties and investors tend to suppress the pricing market (go figure... everyone wants them cheap.) They can be difficult to appraise well which will impact your ability to refinance the majority of your capital out. I've seen it go both ways though. I've seen appraisers look at the income and appraise a duplex higher than I expected and I've seen them get very poor appraisals because there is less inventory to compare them to and they are usually purchased at lower price points. I imagine that a lot of markets are going to be like this unless you have a high population density making MF lifestyle more of a common place (NYC, DC, etc.)

In order to successfully pull off a BRRRR you have to have a decent appraisal which isn't always easy. MFR's are just a different product. Not good or bad, just different metrics that impact the cash flow and equity differently.

@Daniel Mendez with a few exceptions, most of the MF in Indianapolis are old early 1900's converted single families in rougher parts of the city. We haven't found them to perform well at all.

@Daniel Mendez To answer some of your questions, yes, Indianapolis is still a good cash flow market but you're not going to get any bargains on the MLS. It's also not a good market for multi families if that's what you were asking. The majority of small multi families are early 1900's single families converting to MF, in the rougher neighborhoods. The Indy market is also very competitive and inventory is very tight. I think you'll have a tough time doing the BRRRR strategy without having well connected boots on the ground.

Hi Daniel,

Yes Indianapolis is still a great place to invest in. I just started investing out there in June 2018 and have already bought 2 properties. The first property I bought in Lawrence for $77,000 with a 20% down payment and it cash flows almost $400 after all expenses are paid each month and the second property cash flows around $494 a month after all expenses are paid. 

The second property I bought in speedway Indianapolis for $65,000 with a 20% down payment and put $28,000 into rehabbing it because I wanted to try the BRRRR method out myself. I didn't have the money for the rehab after I paid the 20% down payment and closing cost. So I opened up a line of credit and used that to find the entire rehab. The mortgage is $518 a month and it rents for $1,100 a month. I'm going to refinance the property in June because it's worth around 115K-120K now after the rehab because I turned it from a 3 bed/1.5 bath into a 4 bed/2 bath with and everything is new in the property at this point. I should be able to pull out about $38K-43K when I refinance the property. So to answer your other question about using the BRRRR stratagy. Yes it is possible to use it out there and I found both properties on the MLS and made offers lower then the asking price for both properties and they both excepted the offers without a problem. I live in California and rent a tiny studio because it's so expensive out here, but because of @David Greene podcast on investing out of state. I used the strategies from that podcast a book to invest with  success of the state. 

I hope this helps Daniel and have a great day. 

-Luis Moreno