When you think of Indiana, what comes to mind? Some may say the vibrant agricultural industry, with budding fields and the eighth-largest agricultural export in the nation. Other answers may follow their favorite racecar to the Indianapolis 500 or talk about the advanced automobile manufacturing plants. There are colleges and sporting events, concerts, and museums.
With the right DSCR loan, Indiana investors can enter a lucrative rental property market.
Indiana is a destination and a home, a bright and bustling midwestern state that continues to grow and attract more people, residents, and visitors alike. With high occupancy rates and job growth, Indiana's economy is surging now that they've recovered from the nationwide pause in 2020.
Visio Lending is the preferred DSCR lender for thousands of rental investors wanting to generate a steady income from rental property in Indiana; we've been helping finance investment residential and commercial investment properties for almost two decades. Our financial experts can help you choose the right loan type to tap into the market - without requiring you to submit tax returns and other personal income information to get a DSCR loan.
Indiana offers various bustling markets for rental property investors, with cities like Indianapolis, Fort Wayne, Evansville, and South Bend all providing ample investment opportunities. Mashvisor shows a seller's market in Indiana's real estate, with good cash-on-cash returns for investment properties and an Airbnb occupancy rate in the high fifties for many neighborhoods.
Current Indiana rent trends vary from the low $500s to over $2,000 based on region and property type, but most apartments (as in, 68%) fall into the $1,001-$2,100 range.
Indianapolis presents an exceptional market, which is exactly why a DSCR loan makes sense here. With a population of over 890,000 and a strong potential for cash flow and price appreciation, the city is ripe for real estate investors. Indianapolis offers numerous attractive neighborhoods to live in with great cost of living, so there is no shortage of potential renters.
Additionally, the state of Indiana is considered 'landlord friendly,' making it one of the better states to invest in real estate. In fact, it's number 9 on RealWealth's list of the top twenty and number 3 in Steadily's top 12. DSCR loans help investors break into the market quickly and easily without worrying about their personal financial situation.
As of Summer 2022, Indiana boasted a rental vacancy rate of 7.8%, with 30% of households renting. Home price appreciation in Indianapolis was on the rise in Q1.
Despite the large opportunity for most forms of property, single-family residences are in high demand throughout Indiana. With a DSCR loan, Indiana investors can build a lucrative real estate portfolio fairly quickly by investing in neighborhood homes.
With the current work-from-home culture, more renters are looking for a nice place to work and spend time with their families away from the crowds in the city. The affordability of Northwest Indiana properties, as well as their proximity to the major town of Chicago, makes Indiana DSCR loans incredibly popular in the northern reaches of the state.
However, don't discount commercial rental property here, either. The strong focus on work-from-home means that residents are spending more time in their own neighborhoods: they might pop out for a quick coffee from a local cafe between meetings, or decide to indulge in a staycation nearby. A DSCR loan for small shops like boutiques, restaurants, and gyms would be an excellent option for rental investors who would like to fill these niches for homegrown goods.
According to Clever, the top five regions for an Indiana DSCR loan in 2023 are as follows:
Home value median: $144,200
Average rental price: $1,100
Home value median: $132,700
Average rental price: $1,099
Home value median: $265,500
Average rental price: $1,550
Home value median: $117,400
Average rental price: $1,089
Home value median: $139,000
Average rental price: $1,425
In areas with large populations, commercial property under a DSCR loan can offer an experienced investor a substantial amount of rental income. Indiana's pro-business stances draw in employers from all industries, leading to ample demand for commercial space to rent.
Commercial real estate in major cities like Indianapolis and South Bend can be a lucrative investment, helping raise a borrower's overall ratio for future investments. From apartment complexes to office space, everyone needs a place to work and a place to live.
**At this time Visio Lending only offers loans for 1-4 unit residential rental properties, including vacation rentals.
DSCR loans and Conventional loans both have their merits. However, conventional rental loans must adhere to strict underwriting guidelines laid out by Fannie May and Freddie Mac. Traditional loans do offer lower interest rates, by 1-2%, but borrowers must provide their W2s and a higher down payment.
With a DSCR loan, Indiana rental investors don't have to worry about pay stubs or personal income verification like tax returns.
To get a DSCR loan, you'll need a good DSCR ratio, which is calculated from the property's income potential and estimated expenses, with no need for the borrower's tax returns. DSCR lenders will calculate DSCR by dividing the expected income of the rental properties by the loan amount, which will then prove whether or not the property's income will cover the loan repayments.
This primary focus on the property's income rather than your own makes DSCR loans a very investor-friendly loan type in comparison to a conventional loan.
Benchmarks for a DSCR Loan | Indiana
DSCR loan requirements include a debt-service coverage ratio of at least 1.25 and a minimum credit score of 640.
Most DSCR Lenders also like to see proof of prior successful property management, though new real estate investors aren't automatically declined.
Many Indiana investors find the lower down payments and faster processing time worth the slightly higher interest rate.
Check out some of Visio Lending's recently closed DSCR loans in Indiana.