My daughter has been best friends with the girl next door since they were both in preschool. So, of course, my wife and I are on friendly terms with her parents. Her dad, Frank, is a jovial mid-level manager for a local manufacturing company. He was always politely interested in my business of flipping houses in Indianapolis, but the other day he asked me how I do it and if I thought he could do it, too. Yes, I told him, you certainly can. But Indianapolis has a real estate market that is getting more competitive. For investors, it’s getting harder to find a distressed house to buy, renovate and sell for profit. Foreclosure auctions still provide some opportunity, but you need to know what you’re getting into. After weighing the pros and cons of local auctions, as I told Frank, you might decide that the best opportunity for entering the Indy real estate investing market is something else entirely.

Where to Start Flipping Houses in Indianapolis

New investors, or even those like Frank, who are just thinking about dipping their toes in the investing waters, often focus on the foreclosure market. But the foreclosure market here in Indy has been shrinking fast. In the second quarter, inventory of all foreclosure properties amounted to just 132 units—that’s a 47.8% decrease over the same period last year. In addition, the median sales price of foreclosed single-family homes rose by 17.3%, according to the MIBOR Realtor® Association. Indianapolis is following national trends in this regard as the effects of the housing bubble continue to wear off. But that doesn’t mean you still can’t try to buy an inexpensive foreclosure house at a local auction here in Indianapolis. Here is a couple that I mentioned to Frank, along with some potential problems that you should be on the lookout for if you choose to go this route to find a deal.

Marion County Tax Sale

The Marion County Tax Sale, which is conducted once a year in October, sells properties with overdue state and county taxes or other liens. The list of available properties is published in both the Indianapolis Star and the Court & Commercial Record every Wednesday starting the August prior to the auction as well as on the auction website. Expect activity at the auction to move fast. So, it is recommended that you pre-register for bidding online to avoid long waits that could cause you to miss some properties. To register, you’ll need at least $1,000 in cash or certified funds. But be prepared with much more cash-in-hand than that, because the opening bid on each property will be the total amount of all overdue taxes, penalties, and special assessments owed on the property. Payment on winning bids must be made on the spot and all sales are final.

If you are not already turned off by the fact that this once-a-year sale with a lot of rules is not going to help you build a solid investing business, let me tell you something worse: You are not actually buying a property; you are buying a tax lien. That means the IRS can claim redemption rights on any house you buy that has Federal taxes owed. For up to one year, you are required to maintain the outside of the property. If you fail to do that, you will face nuisance liens, which could include demolition of the property. In addition, there may be other liens against the property that you could inherit if the title actually becomes yours in the end. So, do your research carefully before getting involved with this auction.

County Surplus Auctions

The County Surplus Auction offers properties that were not sold in the tax auction, are abandoned, or are no longer needed by the city or county. These auctions take place three times per year in the City-County Building and are much smaller in scale than the annual tax auction. That said, this is a popular auction and you can expect to be elbow-to-elbow in a room filled to capacity with other investors, so be sure to pre-register and have your funds ready. You’ll need at least $1,000 for a deposit and up to $2,000 to pay in full if the total cost of your winnings is beneath the amount. If your winning properties cost more than $2,000, you will need to pay at least 50% in earnest money and return the next day to pay off the rest.

But, even if you put your money on the table, the property will still not be yours. The transaction is not complete until you get the Mayor’s approval for the sale, which may take up to 60 days. Until then, you will not be allowed to even access the house to see what kind of rehab work needs to be done. If you don’t know anything about the extent of the renovation you signed up for, you also don’t know if your budget can handle it. This is a pretty big risk, especially for new investors who may not have the capital or know-how to take it on.

Marion County Sheriff’s Sales

Marion County Sheriff’s Sales are held monthly in Indy’s City-County Building to auction off properties with judgments against them. There is a small fee to get the property lists, which are prepared about three weeks in advance of the auction. Winning bidders must have payment for their purchases deposited in advance and cash is not accepted—use a certified or cashier’s check. Unsuccessful bidders can pick up their deposit checks immediately after the auction. Properties that do not sell by written bid are offered again by oral auction in the afternoon of the same day, so that may be your best opportunity to get a bare-bottom price on an investment house.

But even the cheapest property won’t be worth it if the house becomes a money pit. Unfortunately, you won’t know what you’ve bought at this auction until it’s too late. You can look at the properties going up for auction from the street, but you cannot enter the property to evaluate the extent of its rehab needs. In addition, the original owners, tenants, or even squatters may still be living in the house, and it will be your responsibility to evict them, which could not only be costly but significantly delay your ability to begin renovations.

If you are lucky enough to find a house that has the potential to provide good returns, however, your luck might continue on the sell side once the rehab is complete. Indianapolis real estate market trends are on the upward swing. House prices are rising and inventory is down on the traditional market all over Indianapolis. In August, active listings were down 18% compared to last year in Central Indiana, driving prices up. But, you won’t likely find that potential in a house that you got from one of our local auctions. Don’t worry, though, there’s another way to get a hold of some of the most promising properties for house flipping in Indianapolis.

Finding the Best Investment Houses in Indianapolis

I was happy to tell Frank all about how I find Indy’s best investment properties, and I’m just as happy to tell you, too. As an independently owned and operated HomeVestors® franchisee, I have one of the best qualified lead generation resources you could ask for: the nationally known and trusted “We Buy Ugly Houses®” advertising campaign. I don’t have to spend evening after evening sorting through auction listings, nor do I need to try to squeeze my way to the front of a bidding room anymore. Instead, qualified leads come to me. Frank was impressed and, after mulling it over for a few days, he called to find out how he could become a HomeVestors® franchisee, too.

To find out more about how you can get qualified leads that come to you, contact HomeVestors® today.

Each franchise office is independently owned and operated.