ROOTS DEAL SHEET (8.14)

If you own real estate in Indianapolis, or you are seriously thinking about it, this email was written for you.

Roots Fam,

Almost everything we know about buying real estate in this city, we learned by getting something wrong first. Paying too much. Trusting a rent roll we should have questioned. Funding a reserve line only after the furnace quit in February.

Every week we put deals in front of you and show you the numbers. What we have never done is sit down and explain how any of it actually works.

On Thursday, August 27 we are going to:

The Roots Summer Masterclass starts at 6:00 PM at Guggman Haus Brewing Co., 1701 Gent Ave. Our whole Roots team will be there, alongside other investors, entrepreneurs, etc. We’re expecting 100-150 in the room!

Here is what makes it worth your evening. We have two Indianapolis community experts coming in to talk commercial development, how to invest at scale, and more. These two guys have incredible stories into the real estate space, and it will be entertaining just as much as it is educational.

If you have been reading this email for months and quietly wondering what half the numbers mean, you are exactly who we built this night for. Nobody is going to make you feel behind for asking.

It is free, and we do three of these a year. Grab a seat below, then come look at what we found this week.

THE DEALS

Four on the board this week. Every one is verified active on the MLS as of Wednesday, and every one is run on the same model so you can compare them honestly: 25% down, 6.69% on a 30-year (Freddie Mac's number as of August 6), $2,000 closing, and real reserves at 5% repairs, 5% capex, 3% vacancy, 10% management.

Two of them are ours.

$259,900 · $1,345/mo already collected on one side · 8.02% cash on cash

The 1117 side is leased at $1,345 a month through October 31, so you own this thing collecting rent on day one. The 1119 side is vacant and go-and-show, which means you set that rent yourself at today's market instead of inheriting somebody's 2023 mistake. Run at $1,345 plus $1,300, it throws off $447 a month. This is our listing, so if you want in, you are talking to us.

$309,000 · both sides vacant · 8.88% cash on cash

Straight talk on this one. Both units are empty right now. The last tenants paid $1,600 a side, and that is the number we ran it at, but that is history and not a lease, so treat it as a target rather than a promise. If it rents there, this is $586 a month in Willard Park, the best cash flow we have seen on the board in weeks. Go look at it before somebody else prices it properly.

$193,900 · vacant both sides · 2.43% cash on cash

Thin on paper at $102 a month, and we are not going to dress that up. What makes it interesting is the second exit: one modification turns this duplex into a 3 bed, 2 bath single family near Hawthorn Park, and that is a different buyer pool entirely. Clean dry basement. Both sides empty, so the $950 a side is a market estimate and not a lease. Also worth knowing we re-ran the taxes here, because the current bill is homestead-depressed and roughly doubles for an investor.

$399,900 · 3.24% cash on cash by the room · negative as a straight rental

Here is the honest version. Rent this as one house at $2,600 and it loses about $456 a month. Rent it by the room at four times $900 and it makes $275. The reason the second one is real and not a spreadsheet trick is that it was rehabbed with two primary suites, one up and one down, plus 3.5 baths, so four adults can actually live there without fighting over a bathroom. Finished basement, two decks, minutes from Bottleworks. This is the higher end of what we are showing, and it is a strategy play, not a passive one.

ONE OFF THE BOARD ENTIRELY

We also got sent an off-market brick ranch in Warren Township this week: 130 N Bazil Ave, $132,000, 4 bed 1.5 bath, 1,784 square feet, 1961, detached garage in the back. Seller needs about two weeks after closing and the closing date is already set for September 3. No MLS, no Zillow, no competition.

Reply BAZIL and we will send you the photos and the comps.

THE INDY READ
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The number on the listing is not the number you will pay. Three deals died on this yesterday.

Here is the single most expensive thing an out-of-state investor gets wrong in Marion County, and it is hiding in plain sight on every listing you have ever looked at.

Indiana caps property tax at 1% of assessed value for a homestead, meaning an owner who lives there. Buy that same house as a rental and the cap goes to 2%. The tax line on the MLS is whatever the current owner pays. If they live there, that number is roughly half of what you will pay, and it resets the year after you close.

We ran twelve properties this week. Watch what the reset does:

• 1724 Woodlawn Ave, a fully occupied Fountain Square duplex at $499,000. Current tax bill: $1,708, which is 0.34% of the price. Reset to the non-homestead floor and it is about $9,980. The deal goes from looking respectable to losing $1,142 a month. We benched it.

• 919 Prospect St, Fountain Square, $425,000. Tax $2,756, or 0.65%. Reset and a positive deal turns negative. Benched.

• 22 N Tremont, the third card above. Tax $1,022, or 0.53%. We reset it before we published, which is why it shows 2.43% and not the prettier number you would get from the MLS figure.

The rule of thumb we use: if the tax line is under 0.8% of the asking price, it is homestead-depressed and you should re-run it at 2%. Do that before you make an offer, not after.

Nobody is lying to you. The MLS is reporting the current owner's bill accurately. It is just not your bill.

One line on rates, since it feeds all of the above: Freddie Mac had the 30-year at 6.69% on August 6, up from 6.43% a month ago. Every deal in this email is run at 6.69%, not at a friendlier number, because a cash-on-cash figure built on a stale rate is a story and not an underwrite.

Sources: Indiana DLGF circuit-breaker caps; Freddie Mac via HousingWire, August 6.

Four deals, all run on the same model. Two of them are ours, and we will tell you the truth about the other two just the same.

And if any of the above made you realize you cannot yet read a rent roll, a T12, or a cash-on-cash figure without squinting, that is the entire reason we are standing up in front of 150 people at Guggman Haus on August 27. Come take the seat.

Plant roots, build wealth.
Max

P.S. The 8.88% on Parkview is only 8.88% if it rents at $1,600 a side. Nobody is going to tell you that in a listing description. We just did, in writing, on the deal we would most like you to buy.