Indianapolis Real Estate Blog and Real Estate Investments Resource

Something I have been working on the past 4-5 days, and something that I feel would be a great investment for the capital rich real estate investor.  Note, you will need between $40k-$50k down for this, but the payoff will be generous over the next 3-5 years.  At time of this post, you will need 10% down for non-owner occupied for well qualified investors.  Note again, this is for VERY QUALIFIED INVESTORS!

Details on property one:

Watkins - Stratton Model by M/I Homes. Available for lease back to M/I homes. 

Watkins / Stratton Model is available for $479,990 - lease term is $4,389 per month for (1) 6 month lease, with (15) 3 month extensions. 2% earnest money required at time of contract. $1,550 in buyer/seller closing cost plus 1% with the use of M/I Financial only. Located in Lawrence Community opened in July 2007 75 total home sites estimate of 3 years until close out at a pace of 2 homes per month

Photos of home are available online here

Now Look at the numbers:

Purchase price:  $479,990

Down Payment:  $47,999

Monthly payments at 7% for 30 year note:  $2,874.  Taxes:  $700/month.  Insurance: $100/month

Cash flow of $600/month plus depreciation expense of $5,900/year(based on 27.5 year amortization in 33% tax bracket).  = $600+ $489/month in tax savings = 1,089/month in cash flow before interest savings.   

Property goes up in value at a conservative 4%/year.  4% after first year is $19,200 increase in value.   Principal pay down is $300/month.   Add on the $1,089/month listed above. 

CASH ON CASH RETURN comes out to be $35,868/$47,999 =

75% cash on cash return.  WOW

I’m not even including your savings from interest deductions.

UPDATE:  THIS HOME WAS SOLD BEFORE I WAS ABLE TO GET THIS LISTED AND SENT OUT TO MY OTHER INVESTORS. 

An investor or ours found the photos I had placed under "specials", called me up, and locked in this deal already.

Details on property two(STILL AVAILABLE)

Carmel - Broderick Model MI Homes

Broderick model is available for $376,000 - lease term is $3,011 per month for (1) 6 month lease, with (15) 3 month extensions. 2% earnest money required at time of contract. $1,550 in buyer/seller closing cost plus 1% with the use of M/I Financial only. Model is located at Heather Knoll - located just West of Towne Rd on 141st st. Community entrance is on the north side of 141st St. Community is about 3 years old, will have a total of 151 homes when complete. Completion is estimated to be in 3 years…or more. We have 42 moved in homeowners. Of the 151 total, we have 50 home sites to be developed late fall 2008 / early spring 2009.

Photos of home are available here:

Now Look at the numbers:

Purchase price:  $376,000

Down Payment:  $37,600

Monthly payments at 7% for 30 year note:  $2,251.  Taxes:  $600/month.  Insurance: $80/month

Cash flow of $80/month plus depreciation expense of $4,512/year(based on 27.5 year amortization in 33% tax bracket).  = $80+ $376/month in tax savings = 456/month in cash flow before interest savings.   

Property goes up in value at a conservative 4%/year.  4% after first year is $15,040 increase in value.   Principal pay down is $260/month.   Add on the $456/month listed above. 

CASH ON CASH RETURN comes out to be $23,632/$37,600 =

63% cash on cash return.  WOW

I’m not even including your savings from interest deductions.

ALSO, we throw in one year of management for FREE when you purchase a new home through us.  When we mean one year FREE here, we mean one year FREE AFTER the lease back expires, not during the lease back, as there is really no management to be done while this is under a lease back scenario.

Contact Craig at 317-490-5074 or Derek at 317-796-9825 for additional information.  Also via email at info@MyIndianapolisHome.com or at our office at 317-839-8786

I have ran across  people that have been advertising purchasing propeties with negative cash flow, mainly because they will appreciate in value, you are paying down the mortgage, raising rents, etc. 

It’s one thing to own 2-3 properties that are negative $200-$300/month, but when you end up with 20-25 properties negative each month, it’s not a good thing!  I have seen this happen to many investors.  In fact, I recently met someone that purchased a “package” deal of properties from another investor.  Not in great areas, and not much cash flow at all.  In fact, no cash flow when you include vacancy allowance and repair allowance.    They have tried to sell properties, but found out that they purcased the properties for 25% markup to what they were really worth.

I learned earlier in my career to make sure you have cash flow.    I originally purchased my properties on 15 year notes.  I thought it made sense to pay off everything as quickly as I could. That is great, but no cash flow.  And lenders like cash flow more then they like the logic of paying things off quickly.  My philosophy now is to pay as little as I can and spread it out for as long as I can.  This allows you the cash flow to proceed with future investments.

Looking to purchase a home in the Indianapolis area?   We help buyers and sellers with Indianapolis real estate, Plainfield real estate, Zionsville real estate, and Carmel real estate.
Hundreds of free buyer and seller reports  online at  Indianapolis Homes for Sale
Looking to invest in Indianapolis real estate?  Take a look at my Indianapolis Real Estate Blog at http://Blog.IndianapolisHomePricing.com
The brand new blog about Zionsville Real Estate, Anson Real Estate, and the Anson homes in Zionsville is here:  Zionsville Real Estate Blog

Well, first, here is some before and after photos side by side to view

And here is the video. Warning, this is a 10 meg video, so it may take some time to download.

The thought of quitting a job and living off of rental income properties is merely a dream for many people. But it’s exactly the lifestyle that Matthew Martinez has achieved.

He’s basically just like many. He worked hard for a good salary but dreamed of being his own boss. &#9

“There is a way that you can substitute your income from your day job with rental income,” says Martinez. &#9

Now, he’s finally working for himself and investing in real estate as a means to support his lifestyle. &#9

In his new book, “2 Years to a Million in Real Estate,” due out June 1, Martinez tells readers how he fast-tracked his way to become a real estate investor. Here are a few tips to get you started.

Keep Working Your Day Job &#9

Martinez says the best way to build your security and investments is to continue to work your nine-to-five job and invest in rental properties in your off-hours until there is a stable enough income to quit.

“It took me two years to do this. It might take less time for other individuals who can ramp up more quickly, it might take longer [for others],” says Martinez.

He recommends this for obvious reasons such as maintaining lifestyle, paying bills, and supporting family. But Martinez says keeping a steady income from a job also helps with securing loans.

“When you obtain financing for your properties you need to show that you’ve got income, right? And also, when you leave your day job you need to show that you’ve been investing in real estate for probably about two years. Banks will be hesitant to loan to you if you haven’t been in the rental business for at least two years.” says Martinez.

Martinez spent most evenings working on his investments. He attended landlord groups, read real estate investing books, took courses, met with real estate brokers, did his due diligence on rental properties, and sought investment mentors to help him quickly understand how to successfully turn rentals into a replacement salary for his day job.

Buy Only Rental Properties with Positive Cash Flow &#9

You may have heard that it’s okay to feed a rental property. In other words, some say that you should purchase rental property even if you have to pay a little to subsidize the mortgage. Martinez says that’s not the way to do it.

“You can’t buy properties that lose money every month. If you do that you won’t survive in this business. The name of the game is to find those right properties that actually make you money, not the properties that lose money,” he said.

He points out that as the real estate market changes investors might not be able to count on the appreciation being as high as it has been in the past, “So you really have to count on the cash flow.” Martinez says that way you’ll be able to buy more properties sooner.

“If you need to pull money out of your wallet or your purse to float that property, it’ll eventually strangle you and you won’t be able to move forward,” says Martinez.

Create a Support Team that Helps You &#9

“You can’t do this alone. You can’t be successful if you do this in a vacuum. You need people to help you and you need the right people,” says Martinez.

He recommends putting together a team consisting of: an attorney specializing in real estate law or tenant law, a real estate agent, tax accountant, mentors from real estate clubs, colleagues who are growing along with you, mortgage brokers, other industry vendors, and property managers.

“The difference between a landlord and an investor is the following: if you buy a property and you manage that property day-to-day and you’re receiving phones calls at three in the morning about clogged toilets, then I call that a landlord. If you buy a property, you put up the financing, you organize the property, you close on the property, and you put a property manager in place and you manage a property manager, I call that an investor,” says Martinez.

He says becoming a real estate investor should be the goal for everyone who eventually wants to replace their day job salary with rental income salary. Being a landlord takes up too much of your time and is a distraction from “buying and looking for the next big deal,” says Martinez.

As you get more properties, Martinez says the best time to quit your day job is once all of your rentals are stable and securely producing a stream of income revenue.

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Written by Phoebe Chongchua
May 22, 2006 

Here is further proof of real estate investing in Indianapolis.

Advice to Investors: Look to Affordable “Linear” Real Estate Markets

A new statistical study on real estate cycles suggests that smart investors in 2006 should consider markets that were bypassed by the housing price boom of 2000-2005, and that have affordable home costs but are experiencing solid employment growth.

The study, conducted by Dr. Christopher Cagan, research and analytics director for First American Real Estate Solutions, an affiliate of giant First American Corp., classifies metropolitan housing markets into several types:

* “Linear” markets, where prices over time tend to move up slowly — a few percentage points a year — and have slow, steady economic growth. Examples include Atlanta, Nashville, Wichita, St. Louis and Indianapolis.

* “Cyclic” markets that run through boom and correction cycles of 10 to 15 year durations, where prices rise rapidly, and then cool or even retreat. Most of these are located along the coasts and have little land available for new construction. Examples include San Francisco Bay, southern California in general, Miami, Houston and New York City.

* “Hybrid” markets that sometimes behave in a slow-but-steady growth “linear” pattern, but occasionally go into faster growth cyclical behavior. Cagan considers Chicago, Seattle and Dallas to be in this category.

* “Catch on” markets that traditionally behaved in a slow-growth linear manner, but that more recently have “experienced a strong move in prices up or down, in a departure from their long-term character.” Cagan includes Las Vegas, Phoenix and Detroit in this category.

The study used publicly-available housing price data from 1988 to 2005, and applied proprietary analytical modeling techniques to classify metropolitan areas. The study offers no specific investment advice, but in an executive summary, Cagan comments that “markets in areas where prices have not yet risen rapidly,” and where “affordability and job availability are high and economic conditions are strong may offer the best opportunities for investment during 2006.”

By implication, “cyclic” markets that have peaked out may offer few opportunities — at least for the short term. Those markets are easy to spot, even from daily headlines: Most of the coastal California areas, along with Washington D.C., Florida, New York and New England are in slowdown mode at the moment. And according to Dr. Cagan’s analysis, are poised for further slowdowns.

Cagan focuses on Texas metro areas — Amarillo, Austin, Beaumont, Corpus Christi, Dallas, El Paso, Houston and San Antonio — as “linear” markets that may well be poised for growth in real estate values. Texas is benefiting economically from high energy costs, and with its moderate house prices and generally attractive business climate, could well attract investors who see their opportunities restricted in some of the high-cost, highly-cyclical East and West coast markets.

Cagan lists “linear” markets beyond Texas and notes that they have not yet “tested their affordability limits” — that is, home prices still have plenty of room to grow if local economies expand — and are “not likely to be vulnerable to a downturn of magnitude.”

Besides the major moderate-cost, moderate-risk areas mentioned above, Cagan also lists following among linear markets where investors might take a look this year: Denver, Davenport, DesMoines, Baton Rouge, Kansas City, Charlotte, Cincinnati, Oklahoma City, Pittsburgh, Memphis and Milwaukee.

(You can access the full report here)

Related Articles: # Bond Market Jump Signals Higher Mortgage Rates Ahead # New NAR Study: Tax Law Changes, Demographics Fueling Second Home Boom

Written by Kenneth R. Harney May 22, 2006

Wondering What Your Home Is Worth? Want Free Home Listings Via Email? — Let me show you.

Increased interest rates have created an interesting dilemma for the potential real estate investor — especially in the area of apartment investments. Is now the time to buy, or not?

On one hand as interest rates go up it makes it more difficult for investors to make deals pencil. On the other hand, most investors know that in some key states populations are growing resulting short-term shortage of housing. (see my article #183, “What Makes Investing In Real Estate a Valuable Proposition” for additional information on this.)

In markets with this housing shortage, rents will be forced up as the shortage looms ahead. The increased demand for rental housing will come from three major places: 1.) the increase in students graduating from colleges (the echo-boom or baby boomers kids), 2.) the increase in immigration and the growth of immigrants families, and 3.) as interest rates increase a few people will lose their homes to foreclosure. These foreclosures most likely would result from having purchased homes with no money down, and/or made interest-only payments, and not having the ability to pay increased mortgage rates.

This press release from RealtyTrac illustrates this point.

In addition, the cost of construction is soaring in many markets. Land close to economic (city) cores has become very expensive. In Portland, the Urban Growth Boundary has created an artificial shortage of land and made it more attractive to build condominiums. This has generated a condominium boom. This new construction boom has also encouraged developers to buy apartment buildings and convert them into condominiums.

These key items could encourage buyers to make risky purchases of apartment investments by gambling that significant increases in rent (due to apartment supply shortages) will offset increases in interest rates and any negative cash flow concerns. The pressure on interest rates will force employees to look for higher paying jobs, or push for significant pay increases to keep up with rent increases.

What does the future bring?

If there is overbuilding of condominiums, the overage will be converted to apartments/rentals, albeit at high rental prices, until the market turns. There will also be a demand for apartments at median income levels, and an increase in foreclosures of homes and condominiums that will start as a trickle and increase in flow if interest increases exceed one percentage point in 2006.

Again the dilemma is to buy or not to buy. I say buy — but very carefully and do not over-leverage. If you have it, put more money down. Rents will increase. New apartments built with unsubsidized money will be more expensive to rent than renovated apartments built 30 years ago.

On a recent trip to Israel, we were trapped on a road at the Dead Sea in a flash flood. There I meet an Israeli real estate investor who reminded me to look at the big picture. He suggested that the current birth rate drives future apartment development, and he also pointed out the very low birth rates in Europe, Eastern Europe, Australia, Canada, USA, Singapore, Japan, Korea, China and Singapore versus higher birth rates in the rest of the world. There are two ways to look at this:

Written by Clifford A. Hockley
May 23, 2006 

Technorati Tags: listings, real, estate, homes, condominiums

Whether you are an advanced real estate investor or just getting started, real estate options can be an ideal investment technique. A real estate option is a way to control a property without owning it and it locks in the buying price for a specified time.

Most investors don’t understand how to use a real estate option, which is unfortunate because it is one of the most powerful tools in real estate investing. In fact, super successful investors such as Donald Trump routinely use real estate options for maximum leverage.

Here are 7 reasons why options are ideal for real estate investors, beginner or advanced.

1. Since you don’t own the property, you are not obligated to make house payments. You also don’t have to deal with repairs, holding costs or tenants. Imagine how flexible you can be if you don’t have to deal with monthly mortgages or on going repairs.

2. Getting started with real estate options doesn’t require a lot of cash. In many cases, we have controlled a $100,000 property for $10. This is especially important for a new investor since startup capital is often an issue.

3. Options are great at generating quick cash. Once you have the option locked up, you can market the property to create quick cash. You should focus on making at least $5,000 per option deal, and there’s no practical upper limit to how much you can make (one of our colleagues made over $300,000 on a land option deal)…all without having to deal with tenants, repairs or holding costs.

4. Using options is a great way to enter the luxury home market or control properties in hot markets. Since these are higher priced homes, you should expect to pay a higher option fee. We have controlled $500,000 properties using $100 to $1000. In many markets, a $500,000 is a starter home but the point is that you can control a lot of real estate for a very modest fee.

5. Options are scaleable because a single real estate option can be used to control a small deal or a large one.

6. Options offer multiple exit strategies. You can either exercise the option to buy the underlying property; you can sell or assign the option to another party; or you can ensure that the seller has to pay you off because the option creates a flaw in the title.

7. Using options allows you to convert dead leads into viable ones. For an experienced investor, this alone can add tens of thousands of dollars to his business because most deals that are not viable with other techniques (foreclosures, short sales, etc.) are often great candidates for real estate options.

8. BONUS REASON: Real estate options are very flexible and can be used with all types of properties including single residential homes, multi-units, apartment buildings, commercial properties and land. You can also specify the option period, which offers additional flexibility. In many cases, you can even extend the option period, often for an additional modest fee.

In summary, using a real estate option is an ideal investment technique for beginners because options don’t require much cash and can generate cash quickly. For advanced investors, using options to convert dead leads into deals can add tens of thousands of dollars per month. About the Author

Alex Nghiem is the co-founder of Wealthautopilot, which provides coaching and educational products/events for real estate investors who want to turbo charge their results immediately. To get a weekly free newsletter on cutting-edge real estate tips and a 6-part course on real estate options, visit http://www.wealthautopilot.com/course-a

Written by: Alex Nghiem

As the owner of over $5 million worth of quality real estate investments in the Indianapolis and the surrounding area, the Crager-Bartels Real Estate Team knows what it takes to own, rehab, purchase, and sell investment properties. Looking to invest in something other then the stock market? Let us sit down with you and discuss your real estate investing options. Check out pictures of some of the real estate we own at http://pictures.zionsvillehomesonline.com

Technorati Tags: real estate investing, real, estate, homes, residential, buying, commercial, rehab