Indianapolis Named America's Best City for Renters in 2017
Indianapolis has emerged as a top destination for homeowners and residential investors alike due to a number of economic and social factors. Downtown Indianapolis was ranked #3 on Livability’s 2015 Top 10 List of Best Downtowns in the United States and more recently, America’s Best City for Renters in 2017 by Forbes. Its vibrant downtown scene makes it an attractive place for young professionals and families alike. A bevy of entertainment options, beautiful outdoor scenery, art districts, locally owned stores, cafes and galleries pepper the highly walkable and bikeable streets. Indianapolis is home to a host of charming historic neighborhoods accented by emerging posh restaurants and shops as well as the Indy 500, the world’s largest single-day sporting event held at the revered Indianapolis Motor Speedway. Nicknamed the “Crossroads of America,” Indianapolis serves as a major transit hub for the Midwest.
Two of the most notable trends driving growth in the Indianapolis-metro area are an increasing population, with almost 2MM[i] people in the Metropolitan Statistical Area (MSA), and a strong economy, home to three company headquarters in the Fortune 500.[ii] Robust sports and tourism, manufacturing, agriculture and pharmaceutical industries create a good opportunity for rental property investors. Indianapolis’ thriving economy has a gross domestic product (GDP) of $134,081 million[iii] and has attracted 16,956[i] new residents and 32,721 new jobs in 2015 alone.[iv] The metro area unemployment rate is just 3.9% in 2016, down from 5.2% in 2014,[iv] and below the national unemployment rate of 4.9%.
Indianapolis’ rapid economic growth has led to a strong increase in rental rates and a decline in vacancy. The current median rent is $1,134 per month, a 34.5% increase from 2011.[v] Demand for rental housing has surged as single-family residential (SFR) vacancy has plummeted down to 4.4% from 8.6% five years ago.[v] Indianapolis’ vacancy is also significantly lower than the national average of 7.4%,[i] a good indicator to savvy investors.
The Indianapolis MSA is a mature SFR investment market, with more than 88,000[v] investment properties in the market and a rental saturation rate of 18.8%.[v] The average SFR rental property only stays on the market for 27 days,[v] indicating strong local demand. While 3 bedroom home prices on average in the metro area have declined 24.3% over the past 5 years, from $115,000 in 2011 to $87,000 in 2016,[v] the average Gross Yield has held steady at 12.1%[v] because of rent prices continuing to rise.
It’s also important to note that the cost of living in Indianapolis is 6.5%[iv] lower than the national average. That fact, coupled with a growing economy and strong demand for rental properties, makes Indianapolis an affordable and fast-growing market for investors looking for new investment opportunities.
[i] Census 2014
[iii] Moody’s Analytics
[iv] Bureau of Labor Statistics