All Forum Posts by: Marcel Couch

Hi @marcel couch

Good discussion, I am enjoying reading the comments on the classes of neighborhoods.  I have been working with OOS investors and investing myself in Indianapolis for 6 years now.  My C class neighborhoods are cash flowing the best for me and surprisingly are appreciating much more than I anticipated.  (Mostly because of what someone above said that the B class people are getting priced out and moving to the C neighborhoods and improving them).  As far as areas of Indianapolis, near north side is doing great and you would be able to get appreciation as well as cash flow.  Near East side is very street by street  -- one street has houses selling for over $400K+ and two streets over, there are houses that need a lot of rehab on the market for $100K.  Check the crime maps for the differences as well.  But there is a LOT of potential on the near east side.

I am a little unique with some local investor groups because I like the West side as well.

In response to your other questions -- PMs run about 10% here, your maintenance of $1000 per year may be a little low especially if you are buying an older home, unless you completely rehab up front.  Appreciation has bee 13%-20% over the last 2 years in the areas you are looking, but a typical year has been historically 5-7%

Would be happy to have a discussion with you if you are interested.

@Marcel Couch Classes for commercial properties are different than residential 1-4 family properties.

Also, you'll find the concept of classes for 1-4 family vary greatly as there's no standard and everyone has different opinions.

Our LOGICAL opinion is that it all revolves around the tenant pool for a property.

Here's our definitions of Class A-D, with the understanding that we are playing statistics and probabilities (there are always exceptions):

Class A: 680+ FICO, white-collar to high-blue collar, very stable career/income, usually some savings, takes very good care of rental property

Class B: 600-680 FICO, low white-collar to mid blue-collar, stable employment/income, often some savings, takes good care of rental property

Class C: 550-600 FICO, mid blue-collar to no-collar, decent stable employment/income, lives paycheck-to-paycheck, 50/50 on taking decent care of rental property or being hard on it.

Class D: <550 FICO, no-collar, unstable employment/income, often only SSI and/or Secion 8, often doesn't deal with banks, usually hard on a rental property.

The tenant class will eventually affect the property, which eventually affects the neighborhood class, which affects the contractor & PMC class willing to work there.

An abundance of housing will typically lead to a lowering of the overall class in that area.

A shortage of housing will lead to gentrification and improvement of overall class in that area. This is what many areas of the country are seeing currently. 

Class A area values/rents are increasing, pricing out many and pushing them into Class B areas, which raises values/prices in those Class B areas, turing them eventually into Class A areas, but pushing people into Class C areas and so on.

@Marcel Couch may I ask what is your risk level of investing? What do you consider a 'good deal'? What is your 'buy box' for a property? These questions can help you determine where you want to invest. Know your area to determine which neighborhood class is in your buy box. Also determine your end state with the properties. The more you know your ideal property to purchase and how you want to invest in it, the area will be far easier to see in our investing market. 

You mentioned cash-flow. How much? Cash on cash return on investment?