Three and half years ago I stepped up my real estate investing game when I started buying properties out-of-state. I was living in Austin, TX at the time where the market was so hot and the cash flow was extremely hard to find which is what led me to Indianapolis. Wow I can’t believe that was so long ago. Time has really flown by and so much has changed for me since then. Anyhow, I got caught up in purchasing turnkey rental properties because I was still in my early real estate investing days, the numbers looked amazing to me and I really believed these cities I was purchasing in were headed in the right direction. I ended up purchasing 4 turnkey rentals all within a 10 month span. 3 of these were in Indianapolis and one was in KC, MO. It was very exciting times for me but also a bit scary because well its just flat-out scary when you start buying rental properties so far away from where you live. Am I right!?
To this day, those turnkey rental properties in my portfolio have been cash flowing and appreciating. I have had very little problems with any of them and to date, they have been great investment properties. As of late lat week however, I have sold one of those off. The property I sold has been listed as Rental Property #4 in my net worth update posts from my May 2018 posts and earlier in case you have been keeping track of my properties through those posts.
Why I Sold One of My Turnkey Rental Properties
When I originally bought this turnkey property, I knew very little about the city of Indianapolis however I had researched as much as I possibly could and had even made a trip out to Indy to check out all the neighborhoods. This particular property was in a neighborhood called Devington which is in Lawrence township of Indianapolis. By all means, this is not really considered to be a desirable neighborhood (in my opinion) and I had never really planned on this particular property appreciating much. It was though a good blue-collar C class neighborhood with low crime when I purchased it. I bought this bad for cash flowing purposes only and it did just that.
A few months ago I noticed on Redfin (How to find sold comps for free) that a property of the same size and year in the very same neighborhood had sold for $100k. This was very exciting for me because I knew it meant my rental property had appreciated a lot more than I originally thought it did. I have been this property as rental property #4 in my net worth posts and estimating it to be worth $60k. Boy was I wrong about that price as you will see below. On top of that, my tenant (who had been there since I purchased the property by the way, yes that’s right, same tenant for 3 years!!) was finally vacating. I have also been noticing a trend in which it appears crime has been steadily increasing in this area for the last year or so. It seems to me that the gentrification occurring on the east side of downtown Indy might be pushing some of the crime out toward this area. It was not a trend I like to see so that also helped in my decision-making process to sell off this property. In a nutshell here are the 3 factors of why I sold this property.
1). Crime was steadily increasing and being pushed into this area. The property no longer fit in my rental property criteria. This property would no longer meet my criteria of today’s standards and if this crime trend continues, I know I will be better off selling now as opposed to later.
2). My tenant of 3+ years finally vacated. I never had a turnover in this property in the time I had owned it. It still had the same tenant from when I purchased the property from a turnkey seller. The vacancy gave me an opportunity to be able to sell this property retail to a traditional home buyer. Having the ability to list the property to traditional home buyers (non investors) is a huge advantage especially when trying to fetch top price!
3). The property almost DOUBLED in value since I purchased it only 3 years ago!! Woah there!!! That is a lot of appreciation for a rental property in C class neighborhood. It’s almost shocking to me really. I am telling you folks, what is happening here in Indy is amazing and real estate investors are making money!! Including myself!! 🙂 I mean as you may already know, real estate was the major determining factor in why I decided to leave Austin and move to Indianapolis.
How Much Did I Originally Purchase This Turnkey Property For
Read the following article If you want to read all the original details and info on when and how I purchased this property. However here are the original numbers
Original Purchase Price: $55,000
Closing Costs: $4070
Original Total Purchase Price: $59,070
How Much Did I Sell This Property For 3 Years Later
Sold Price: $105,900
Repair/Listing Costs: $11,434
Total Profit: $35,396
Considering this is a C class neighborhood that I had very little faith in appreciation for, I am extremely ecstatic about this. Wow! I just love investing in Real Estate and I am so happy I got in when I did.
How Did I Sell This Property?
Awhile back when I sold my first property in Austin, TX, I sold it For Sale By Owner using a flat fee MLS listing service. I had saved over $14k doing it this way. Was it harder? Yes but I wouldn’t say it was hard work, just a bit time-consuming. After selling a property that way I knew I would always want to sell using this method again. Well that is exactly how I sold this one too here in Indianapolis.
I used a flat fee MLS listing service and paid $700 to do this. The catch was I had to take my own pictures, write my own description and make my own decisions without consultation from a realtor. Well all that is actually pretty easy for me and it’s totally worth it for me to save thousands of dollars. The other catch which isn’t really a catch is I still have to pay a buyer’s agent if they bring a buyer but I set it so that I would actually only pay 2.5% commission instead of the normal 3%. The house was only listed for 7 days before I had multiple offers on it. It actually sold for above asking price. Talk about awesome!!!
At the end of the day, I ended up making really awesome returns from this property with the profit from the sale and not to mention all the rental income I made from it in the 3 years that I had it rented I haven’t even accounted for all that cash flow, the equity paid by the renter and the tax savings yet. I consider this to be a huge win in my world and I am very satisfied with how I handled every aspect of it from purchasing out-of-state, renting/cash flowing, then selling for sale by owner.
What do you think? Would you have sold?