The pandemic shifted many of our perspectives, including the idea of real estate investment in Indiana. As a result, the formerly overlooked Hoosier State is increasingly becoming the darling of multifamily investors’ eyes, and the opportunity remains ready to take advantage of. Read on to discover some of the most promising counties for multifamily investment in Indiana.
Kent Ritter is an experienced multifamily investor and entrepreneur empowering you to build real wealth through real estate syndication. Learn More.
The Role of Location in Multifamily Investment
When searching for a promising real estate investment property, location is one of the essential filters. We rely on research and analysis of a property’s location on both a macro and micro-level to judge the suitability of a project.
Of course, location determines the depth of the tenant pool and possible demand, but it also lends clues as to the type of property likely to succeed in that area. The most successful multifamily buildings tap an unmet need. Therefore, a key part of the location analysis is determining that need.
A nationwide shortage of single-family homes and ever-increasing home prices create a simple, ongoing demand for multifamily properties across the county. The challenge becomes finding the right property in the right place and at the right time. Luckily, Indiana is home to several areas ripe for multifamily investment.
Outsiders often assume that rolling farmland is the only investment opportunity in Indiana, but several counties serve as excellent launch pads into multifamily investing.
1. Marion County
Indianapolis frequently makes the top 25 lists for best multifamily markets in the country, so Marion County, home to Indianapolis, tops this list of best counties for multifamily housing in Indiana.
Indianapolis is one of the cities that experienced unexpected population increases during the pandemic, as some newly remote workers chose new places to call home. What makes this so appealing for the multifamily market is that over 30 percent of the population in Indianapolis rents their home rather than owns. That trend is expected to increase as more Hoosiers are priced out of the single-family home market in the city and have to turn to renting for housing.
For investors, multifamily properties are still affordable, and generous returns remain possible. However, opportunities will diminish as national attention turns to the Indianapolis area for its promising investment potential.
Even as prices increase, demand should remain strong thanks to the city’s popularity. It boasts a strong economy, entertainment, and cultural activities, all in a Midwest setting. In fact, we expect the population in the Indianapolis metropolitan area to increase by 26% over the next 30 years.
We expect multifamily housing to continue to play an important role in providing homes in the coming years, as the affordability of homes is becoming a concern for many in the area.
2. Allen County
Home to the Fort Wayne Metropolitan Area, Allen County is another Indiana county worth a closer look at by multifamily investors.
Fort Wayne is another city with substantial population growth, but the current residents are only one part of the excitement around the area. Out-of-state buyers comprise a significant portion of new real estate purchases in the area.
Throughout the pandemic, Americans displayed a renewed interest in suburban living and in smaller cities. Suddenly, we cared more about living and outdoor spaces than whether we could walk to a bar.
Fort Wayne happens to be uniquely sited among several other cities; it is nearly equidistant to Chicago, Indianapolis, Cleveland, Detroit, and Columbus, making it exceptionally attractive for remote workers interested in a lower cost of living. In fact, the cost of living in Fort Wayne comes in at about 16 percent less than the national average.
While these factors traditionally indicate a strong single-family home market, they create trickle-down benefits to the multifamily market. Most notably, Fort Wayne suffers from the single-family home shortage that is quickly becoming the calling card of hot housing markets.
The Fort Wayne area only has a housing inventory of .7 months. Keep in mind a 6-month inventory indicates a balanced market. This data indicates a lack of housing, which in turn leads to increased home prices.
As we have seen across the country in the past year, the single-family home market can become too competitive, driving would-be buyers to rent to avoid the unsavory consequences of an over-heated housing market.
3. Vanderburgh County
Home of the University of Evansville and the University of Southern Indiana, Vanderburgh County demographics indicate a promising demand for multifamily housing in the near future.
While it has the same single-family home supply and demand issues as Allen and Marion counties, Vanderburgh County is one place experiencing increased average monthly rent. This indicates an already-robust multifamily market.
Still, prices remain affordable compared to other parts of the country. Additionally, Vanderburgh County is one place seeing an increase in occupancy rates despite pandemic challenges, signaling an ongoing demand regardless of other economic issues.
4. St. Joseph County
College towns make for promising multifamily markets, and St. Joseph County — home to Notre Dame — is no exception. Fortunately, students are not the only prospective tenants in the area. Several large employers and proximity to other cities make the county appealing to young professionals.
College towns often have a certain reputation for less-than-desirable student accommodations. However, St. Joseph County is one area where investors still see good revenue, no doubt because of the professional population. As a result, South Bend multifamily buildings actually command some of the highest rental rates in the state.
5. Hamilton County
Finally, Hamilton county shares many of the same qualities as neighboring Marion county. It benefits from the booming Indianapolis economy but also captures the increasingly popular suburban multifamily market.
Investors often make the mistake of assuming that apartment dwellers fall into either the category of wealthy renters who enjoy the urbane qualities of city life or into the economically disadvantaged looking for affordable city housing.
Suburban multifamily housing offers affordable, often relatively luxurious housing to those who prefer a suburban location and a little more space — just like homeowners who move to the suburbs. Suburban multifamily properties often have elaborate amenities, like pools, tennis courts, and even movie theaters, because space is not at a premium. All of these amenities, all warrant increased rent.
Demographics of the area all indicate that the area’s population can support a variety of multifamily housing types. Hamilton County boasts an average income above the national average, a lower unemployment rate, and projected job growth over the next ten years of 42 percent.
Multifamily Housing Outlook in 2022
The Indiana counties explored above embody many of the factors that we expect to shape the multifamily housing market in the next year: low single-family home inventory, increased home prices, and a growing population in need of shelter.
While the multifamily market has remained surprisingly strong since the onset of the market, we expect continued vaccine eligibility and improved treatment options to encourage more Americans to return to multifamily housing and the urban areas where multifamily housing is most popular.
Real estate remains the best option for investors to hedge against inflation and create significant growth in their portfolios. Multifamily properties, in particular, remain appealing due to their steady income generation from resident rent, giving investors early and consistent returns during the holding period.
Why Consider Indiana for Multifamily Investment
Making money in multifamily real estate is relatively simple — at least in theory. Some investors look for turn-key properties that already bring in high rental revenue and wait for the property to appreciate. Others prefer value-add properties that need some renovation and repair to help rental income grow exponentially. Of course, with increased profit comes increased property value.
These characteristics are not unique to New York or Los Angeles, and in fact, those areas provide some of the most skim margins for investors because they are already so popular.
Places like Indiana, where investors can purchase multifamily properties at reasonable prices, give investors the best opportunities to realize gains. And, as remote work seems to be here to stay, smaller cities like Fort Wayne and Indianapolis have a new place in American life.
How to Get Started with Multifamily Investing in Indiana
Indiana holds significant appeal to out-of-state investors, but working in a market with which you are unfamiliar can be risky. Through real estate syndication, investors from across the country can take advantage of a booming local market — no trips to Indiana required. Passive investors contribute capital to projects sourced, researched, and strategized by the project sponsor.
Out-of-state investors benefit from the expertise of local sponsors who specialize in the idiosyncrasies of a specific area. For me, that area is Indiana.
In syndications, passive investors earn a portion of the profits from the building’s operations and even the appreciation upon the sale of the property, all without the responsibility of operating an income property.
Final Thoughts
Syndications allow investors to explore markets beyond their own areas of familiarity. If the Indiana market is appealing to you, learn more about investing with me.
Kent Ritter is an experienced multifamily investor and entrepreneur empowering you to build real wealth through real estate syndication. Learn More.
