Indianapolis Real Estate Blog and Real Estate Investments Resource

Beautiful 2-story 4 bedroom home in Sycamore Springs, southern exposure with open and spacious floor plain, raised ceilings, hardwood floors, great room with fireplace, lots of windows, large breakfast bar, den, main floor master suite with tray ceiling and separate garden tub and shower with walk-in closet. Large loft, formal dining room, 2-story entry, large basement, private patio, oversized 2 car attached garage.

Available for lease at $3,000/month, lease option price is negotiable, but will be in the mid $400’s.  5% down minimum, 2 or 3 year option available.    Buy it out right for $425k

Do you have a home you need to sell but can’t because of the marketplace?  Sign up for our newsletter for our unique marketing program that gets your home exposed to triple the number of potential buyers.  Indianapolis Lease Option Homes and Lease option purchase homes.  Or contact Craig at 317-490-5074 or Derek at 317-796-9825 to schedule your listing appointment.

Appointment times are limited because of the high demand for this unique selling approach.

Take a look at the Indianapolis Homes For Rent right now!

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

From the article on CNNmoney.com

Indianapolis

Projected median sales prices for single-family homes:

Q1 2008: $122,940

Q4 2009: $130,630

Growth rate: 6.3 percent

Indianapolis is riding a few trends that are bringing about an early recovery in its real estate market. While Indiana’s capital city did join in the housing boom this decade, prices didn’t reach the stratosphere. Indianapolis still suffered through the downturn, though: Building permits for new homes dropped 30 percent from their peak in 2005. But the housing market hit bottom earlier here than in most parts of the country - during the last quarter of 2006. Now, with the local economy poised to grow faster than the national average over the next two years, house prices are projected to post a respectable gain.
Indianapolis’s low unemployment rate has made it a destination for people fleeing cities like Fort Wayne, Gary, and Terre Haute. It’s also relatively cushioned from slowdowns in the national economy because more than a third of its workforce is employed in stable sectors like professional and business services, health care, education, and government. Those white-collar corps also help boost Indianapolis’s median household income to $50,500 a year. Given that you can buy a four-bedroom, 2,000-square-foot home for less than $200,000, that makes the place the nation’s most affordable major metro.

How to Play The Real Estate Bounce-Back

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

Due diligence is a crucial part of real estate investing. A seller may claim that all units in his building are rented, but your physical inspection could reveal an empty one. A look at the books could show that his reported income included the one-time sale of ten used washing machines. That $900 of extra income, if not subtracted out, would artificially inflate the value of the property by $11,250, based on a capitalization rate of .08.

Simply put, due diligence is your investigation of the details of a potential investment. The point is to avoid unpleasant surprises. You need to know what the real numbers are and what you are really getting into. This is especially important with income properties, because their are so many ways that they can “surprise” you.

When investing in real estate you’ll often start the due diligence process before you even make an offer. You might do your own walk-through inspection of a property, for example. In addition, your offer will normally have provisions allowing for you to review (and approve) certain records, and have certain inspections done before you close on the property.

There is normally a deadline in the offer, by which time you need to complete your due diligence and approve of the results. If this deadline passes without your canceling the offer or notifying the seller of problems you have found, the legal presumption is that you are satisfied with what you found, and committed to close according to the terms of the offer.

Due Diligence - What You Are Looking For

Proper due diligence should start with a good due diligence checklist (more on that in a moment). It is just too easy to forget something without one.

What are you looking for? You can see the property when you walk through it, and the seller can tell you all the financial details. The problem is that sellers may exaggerate things, fail to mention things or just lie. Your goal is to verify everything the seller says about the property, and find any potential problems.

For example, you will want to look at the property closely, and have professional inspections done if you need them. Often sellers will put off necessary repairs prior to selling. This lowers expenses, which increases the net income - which makes the property appear to be worth more (income properties are valued primarily according to the net income they produce).

You will of course make a look at the “books” a part of the offer. You need to see how that net income was arrived at. You also are looking to see if the expenses recorded make sense. You may need the help of your accountant. On the other hand, you can certainly see that there is a problem if no expenditures are listed for snow-plowing of an apartment building parking lot, and you are in Minnesota.

Bottom line? Play it safe - do your homework. You want to look at the physical property, the service contracts (landscape companies, cable TV, etc.) that you may be obligated to, the rental agreements, the legal compliance issues, and the statements of income and expenses. Each of these areas has its own elements, so use a good checklist when doing your due diligence.

(Washington - May 17, 2006) - Indianapolis, Ind. was the nation’s most affordable major housing market for a third consecutive quarter in the beginning of 2006, according to the National Association of Home Builders’/Wells Fargo Housing Opportunity Index (HOI), released today.

Meanwhile, nationwide housing affordability remained virtually unchanged from the end of 2005, as slightly lower home prices and higher household income helped offset an upward movement in mortgage rates to keep the index almost flat. The HOI rose marginally from its lowest level on record, 41.0 at year-end 2005, to 41.3 in the first quarter of 2006.

“The latest HOI shows that only 41.3 percent of new and existing homes that were sold during this year’s first quarter were affordable to families earning the national median income,” said NAHB President David Pressly, a home builder from Statesville, N.C. “This is down from just over 50 percent of all homes sold in the first quarter of 2005 that were affordable to the average family.”

“Compared to the fourth quarter of last year, the median price of all new and existing homes that were sold during the first quarter of 2006 declined 1.5 percent, while the national median income, as calculated by the federal government on an annual basis, was adjusted upward from $58,000 to $59,600,” explained NAHB Chief Economist David Seiders. “These factors kept housing affordability from sliding further despite the fact that the national weighted interest rate on fixed and adjustable-rate mortgages rose 18 basis points in the period, from 6.21 percent to 6.39 percent.”

In the nation’s most affordable major housing market of Indianapolis, just over 90 percent of homes sold in the first quarter were affordable to families earning the area’s median household income of $65,100. The median sales price of all homes sold in Indianapolis during that time was $113,000 - down from $120,000 at year-end 2005. Also near the top of the list for affordable major metros was Youngstown-Warren-Boardman, Ohio-Pa., followed by Detroit-Livonia-Dearborn, Mich.; Rochester, N.Y.; and Buffalo-Niagara Falls, N.Y., in that order.

Four smaller housing markets outranked all others in housing affordability this time around, including Lansing-East Lansing, Mich. at the top of the list; Davenport-Moline-Rock Island, Iowa-Ill.; Lima, Ohio; and Battle Creek, Mich., respectively. Bay City, Mich., was the fifth-most affordable market smaller than 500,000 people.

Los Angeles-Long Beach-Glendale, Calif. maintained its standing at the very bottom of the affordability chart in the first quarter, with just 1.9 percent of new and existing homes sold in the area being affordable to families earning the median household income of $56,200. The median price of all homes sold in the metro during the first quarter was $500,000, which was unchanged from the previous HOI. Other major metros at the bottom of the housing affordability chart included Santa Ana-Anaheim-Irvine, Calif., followed by San Diego-Carlsbad-San Marcos, Calif.; New York-White Plains-Wayne, N.Y.-N.J.; and Nassau-Suffolk, N.Y.

Among metro areas smaller than 500,000 people, Santa Barbara-Santa Maria, Calif. was the least affordable housing market. Four other small California markets also fell at the bottom of the affordability chart, including Modesto as the second-least affordable small market, followed by Salinas, Merced, and Napa.

Please visit www.nahb.org/hoi for tables, historic data and details.

EDITOR’S NOTE: The NAHB/Wells Fargo HOI is a measure of the percentage of homes sold in a given area that are affordable to families earning that area’s median income during a specific quarter. Prices of new and existing homes sold are collected from actual court records by First American Real Estate Solutions, a marketing company. Mortgage financing conditions incorporate interest rates on fixed- and adjustable-rate loans reported by the Federal Housing Finance Board. The NAHB/Wells Fargo Housing Opportunity Index is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public.

About NAHB - The National Association of Home Builders is a Washington-based trade association representing more than 225,000 members involved in home building, remodeling, multifamily construction, property management, subcontracting, design, housing finance, building product manufacturing and other aspects of residential and light commercial construction. Known as “the voice of the housing industry,” NAHB is affiliated with more than 800 state and local home builders associations around the country. NAHB’s builder members will construct about 80 percent of the more than 1.93 million new housing units projected for 2006, making housing one of the largest engines of economic growth in the country

Got a call from the owners of 4 duplexes we purchased from on contract. The owners dad wants to get rid of some commercial property he owns in Muncie. Getting to old to manage it now.

Wants to see it to us on contract with nothing down.

Has 5 acres, 3 businesses established on the site, built 25 years ago.

I do not have other numbers at this time, but if I don’t buy, I have other investors from out of state that may want to purchase. I just have to many things going right now!

Would you like to know the value of your home for free? Just go to http://MyIndianapolisHome.com and fill out the simple form. You will receive a free CMA via email, no obligation to you!

Real estate flippers got a new set of marching orders last week — at least those flippers who want to use FHA mortgage financing.

The Federal Housing Administration issued long-awaited final regulations on property flips last Wednesday. The rules take effect nationwide July 7. Flipping involves resales of houses or other real estate shortly after acquisition, typically at a substantial price markup. Say you buy a rundown rowhouse at a bargain price, do cosmetic fixups, and then sell it a month later for twice what you paid for it.

Sounds like a high payoff short-term investment, right? It is. But the FHA found that too many property flips using its insured mortgage program involved outright fraud — hyped appraisals, shell games where property flippers never actually took legal title to the house before selling it for huge profits, sometimes overnight.

Often the end purchaser of the flipped property was not financially qualified, and used fraudulent income, employment and assets information to obtain the FHA loan. Then the buyer quickly defaulted, leaving FHA with insurance losses and a house that was worth nowhere near its appraisal valuation. The flipper, meanwhile, pocketed all the sales proceeds financed with the FHA mortgage.

To rein in such practices, FHA proposed — and last week adopted in final form — new restrictions. Specifically, FHA will now require that:

* Only owners of record — listed as such in the local court house real estate recordations — may sell properties that will be financed using FHA insured loans.

* Any resale of a property may not occur 90 or fewer days from the last sale to be eligible for FHA financing.

* For resales that occur between 91 and 180 days where the new sales price exceeds the previous sale price by 100 percent or more, FHA will require additional documentation of the property’s true value before insuring the mortgage.

* The agency may also require additional evidence of the accuracy of appraisals whenever properties are re-sold at high price gains within 12 months.

The FHA 90-day no-flip time restrictions will be waived when the sellers of properties to be financed are:

* HUD itself, disposing of its REO (real estate owned) acquired property portfolio.

* Sales of properties that were acquired by the sellers through an inheritance.

* Fannie Mae, Freddie Mac or other federally-chartered financial institutions disposing of REO.

* Local or state housing agencies.

* Nonprofit organizations that have previous approvals to purchase HUD REO properties at a discount.

* Properties located in a presidentially-declared disaster area, provided FHA has issued a formal announcement of eligibility for a specific disaster area.

Real estate investors, particularly those who specialize in rehabilitations of rundown structures in central city areas, had complained to HUD about possible negative impacts on their business activities stemming from the new rules. But HUD decided that banning most 90-day or under flips, and by scrutinizing flips between 91 and 180 days of acquisition where the price markup exceeded 100 percent, FHA should be able to protect itself against the worst abuses.

Investors with questions about the new regulations can call 1-800-CALL FHA for guidance. The rules are contained in HUD Mortgagee Letter 2006-14, issued June 8.

Related Articles: # A Diverse Coalition is Pushing Major FHA Reform Legislation on Capitol Hill # Toxic Reverse Mortgage Gobbles up a 94-year-old Widow’s Home Equity # Title Insurance Pricing, Kickbacks Criticized on Capitol Hill

Written by Kenneth R. Harney June 12, 2006

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We have both sides of Vine Street rented out!

One side for $695, the other side for $850. I planned on getting $895, but I can live with $850. We are cash flowing nicely on this one….Payment with taxes/insurance right now is $900/month. Tenants pay all utilities. About $645 cash flow per month.

Well, we did put 32k into this, so it’s about $525-$550 cash flow per month if this is factored in.

Would you like to know the value of your home for free? Just go to http://ZionsvilleHomesOnline.com and click on “FREE CMA” at the top of the page. You will receive a free CMA via email, no obligation to you!

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Have you heard that commercial about interest-only mortgages…the one where you’re told about what a wonderful benefit it is to have a low, low mortgage payment and all the wonderful tax write-offs you will receive?

Before you decide to buy now and pay later, that is pay “big time” later, take a moment to enlighten yourself a bit more about these so-called “interest only mortgages.” Think about it for a moment. If you just pay the interest on your home, will you ever start paying on principal and will you ever earn any equity into your property?

By definition, a mortgage is a temporary, conditional pledge of property to a creditor as security for performance of an obligation or repayment of a debt. Simplified, that means you borrow money from a financial institution and they essentially buy your house and you pay it back. How can this happen if you’re just paying interest? More accurately, interest-only mortgages are a temporary reprieve for paying off a traditional mortgage. You may actually be prolonging the inevitable and eventually making it even more costly to pay off your mortgage.

Far too many people are in debt way over their heads because of interest-only mortgages. They took advantage of attractive offers to buy now and pay later. With an interest only payment you’re keeping the principal at minimum value while continuing to pay interest at 100%. With a more conventional mortgage you’d be slowly dwindling down the total interest amount.

Most interest-only payment schedules are offered on Adjustable Rate Mortgages (ARMs), but they can also be found on a fixed rate mortgage. Interest-only payment periods almost never run for the entire term of the loan which is typically 15 or 30 years. Depending on the terms of your contract, you could be expected to start paying on the principal in five, seven or ten years. Once the interest-only period ends, your monthly payment will go up because then you’ll be paying on both principal and interest.

Conversely, interest-only mortgages can be a good thing for some people. For those people wanting to purchase a bigger/better home for a lower down payment AND who anticipate moving within seven years, the interest-only payment method may be the way to go. However, keep in-mind that in a “down” realestate market you generally won’t be building equity and making money by doing it this way. The majority of the money made from investing in real estate comes from an increase in value to the home. The average person moves every seven years anyway. Gone are the days when people stay in a home thirty years. Hence, if you anticipate moving before you’ll have to start paying on the principal, then an interest-only payment may be ideal for you.

There’s a great deal of fine print to any mortgage. Evaluate your own goals; be vigilant when reviewing the terms on the loan you’re considering before acting.

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