Expert: Out-of-state investors buying houses to flip for rent, driving Indy prices up
INDIANAPOLIS (WISH) — Investment companies are buying up houses in Indianapolis and it’s causing rent prices to skyrocket.
Sara Coers, an associate professor with the IU Center for Real Estate Studies, says rent prices have doubled and even tripled in Indianapolis because of the practice.
“They can offer all-cash, very short closing times, no due diligence, no inspections,” Coers said. “Basically, they’ll take whatever they can get. They’ll then do what we would call a flip, but they’re not going to sell it, they’re going to rent it.”
Coers says many of the investment companies have been buying out entire neighborhoods and making them “for rent” only.
Because Indianapolis is a relatively affordable place to live compared to other cities across the country, it can make single-family homes an attractive investment for companies to buy cheap and then make rent high, Coers says.
Indianapolis has been a buyer’s market for the last five years and there has been an estimated 15% increase, per year, in home prices, according to Coers.
Brandon Beeler, housing law center director for Indiana Legal Services, says investment companies make certain offers to people interested in renting.
“We’re not going to give you a new lease, but we’ll let you be a month to month tenant going forward, increasing the rent by 100% or 200%,” Beeler said.
Beeler says ILS has been trying to keep its clients from entering into popular “rent-to-buy” agreements because they tend not to work in the favor of tenants.
“This is not an out-of-state owner’s desire to provide rental housing. It’s a desire to exploit vulnerable tenants,” Beeler said.
Beeler says that many times, the rent will become so high that a tenant ends up not having the ability to buy the home at all. He says many are now facing eviction since the federal moratorium on evictions has ended.
Coers says it’s difficult to find a solution to the problem.
“I don’t have the ‘sun’s coming out tomorrow’ message about this, because it’s a long-term problem in Indianapolis, [and] people are trying to address it,” Coers said. “The best thing that people can do is, if they want to stop it, to spread the word. And people have to be willing to say, ‘I may not take the highest offer; I might take an offer from someone who I know is going to live in the home.’”