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Indiana is a Hidden Gem for Real Estate Investors: Check Out These 8 Cities

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Disclaimer: This post is meant to be used for educational purposes only and does not constitute legal or financial advice. If you are considering a real estate investment in Indiana, HomeLight always recommends doing your own research to determine which investment option is best for your situation.

Looking for an unassuming place to invest in real estate? Look no further than Indiana. The state hasn’t seen the astronomical real estate growth that other areas in the U.S. have seen over the past few years, but it did see a 4.9% year-over-year growth in real estate values in 2021.

This slow and steady growth is likely a good thing for investors. “States like Texas, California, New York, and Florida have home prices that are much higher as far as the average home price but at the same time they’re the ones that also get hit by the market the hardest whenever the market starts to shift,” says Jesse Allen, a Jeffersonville real estate agent who sells property 52% faster than other agents in the area. “Here, things are just starting to level out a little bit. We’re not necessarily seeing a dip in home prices,” he adds. The market in Indiana sees smaller changes that are great for long-term real estate investments.

Population growth continues in many parts of Indiana, with growth happening in both rural and metro areas. And rents have gone up 13% from 2021 to 2022. With an average cost of living of $38,097 per year (the U.S. average sits at $61,334 per year), living in Indiana is quite affordable compared to other areas in the U.S. All this adds up to a great state for real estate investors with a moderate budget to make a property purchase.

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What to look for in an investment property

When you set out on your journey to invest in real estate, it’s important to know what you’re doing. You can’t just purchase any property to be a successful investor. Consider several areas before you decide where to look. And, it’s important to look at certain factors to figure out which properties will give you the greatest return.

So, what factors help you determine the best investment properties?

  • Desirable area: If nobody wants to live there, the property values won’t keep going up.
  • A growing economy: A thriving economy means plenty of jobs. These jobs attract people to the area and keep the local real estate market healthy in the process.
  • Population growth: Population growth in an area means there will be more demand for housing. As demand grows home prices will also go up, improving your chances for a return on your investment when you go to sell.
  • Average rental rates: One method for real estate investment is investing in rental properties. With this type of investment, evaluating the rental rates in the area is key to making sure your investment will generate income.
  • Purchase price: In real estate investment, “The only thing that you can control is what you are paying for a property,” says Allen. Getting a purchase price that is below market value is one of the most important determining factors of a successful investment.

As you make your plan for real estate investing, make sure you consider each of these factors.

Best cities in Indiana to invest in real estate

A midwest state that flies under the radar, Indiana has a lot going for it, and a variety of locations with attractive features. The state is known for its sports teams and being home to the Indy 500 race, but it also holds things to do outdoors, vibrant cities, and a cost of living that is well below the national average. There are plenty of places in Indiana to look for investment properties. Here are our picks:

Charlestown

Located along the Ohio River not too far from Louisville, Kentucky, Charlestown is a small city with a lot of potential. “Charlestown has a ton of growth right now,” says Allen, “With new construction that’s being built out there, it’s come a long way.”

Charlestown has the small charm that many look for. And, it’s close to outdoor activities with lots of hikes nearby and the Charlestown State Park right in town. Whether you are looking to flip homes or purchase a property as a rental, Charlestown is an attractive location for those looking to live away from the city.

Median home list price: $289,000
Average rental rate: $987/month
Population size: 8,147

Clarksville

In a shifting real estate market, Allen recommends that investors look to areas with growth opportunities, and he cites Clarksville as one such city. Clarksville is part of the Southern Indiana region referred to as SoIN. This region is experiencing a lot of growth and is expected to continue seeing that growth. The area boasts great restaurants, a rich culture and arts scene, and lots to do in the outdoors.

Median home list price: $200,000
Average rental rate: $953/month
Population size: 22,071

Indianapolis

As the largest city in Indiana and one of the largest metro areas in the Midwest, Indianapolis is full of real estate investment opportunities. Indianapolis has a lot to offer its residents at a lower cost of living than many other large cities. Plus, events like the Indy 500 draw visitors to the city and bring opportunities for short-term rental properties.

And the great thing about a city this large is it gives real estate investors a lot of flexibility in choice. There are many different types of properties to explore, and there are many different neighborhoods within the city offering different price ranges and benefits.

Median home list price: $239,900
Average rental rate: $1,108/month
Population size: 882,039

Jeffersonville

Another city in the up-and-coming SoIN region, Jeffersonville is another top recommendation from Allen. “The city’s pouring a lot of money into the community there,” says Allen. And from his estimation, this means a lot of growth potential. He also notes that the addition of a new Amazon warehouse in the area will draw a lot of new people there for the jobs, meaning real estate values will increase.

Median home list price: $224,900
Average rental rate: $1,077/month
Population size: 50,315

Floyds Knobs

Floyds Knobs is another city in the Southern Indiana corridor. With real estate prices that are a bit higher than the surrounding areas, some investors may be priced out. However, there are great opportunities here if investors have the money to spend.

The area has a rural feel but it’s not too far out of Louisville, Kentucky. With an upscale vibe, homes in Floyds Knobs would appeal to wealthier folks who work in the city but are looking to live away from the hustle and bustle. Floyds Knobs has mainly single-family homes, so it would be a great place to look for single-family properties to flip if you have a higher budget.

Median home list price: $434,900
Average rental rate: $1,469/month
Population size: 12,324

Fort Wayne

Fort Wayne is the second most populous city in Indiana, and it provides an affordable option for real estate investors. With home values growing and expected to keep going up, investors can rejoice. The city has a fairly large population and population growth is expected to continue, providing ample opportunities for prospective investors.

Median home list price: $214,900
Average rental rate: $1,025/month
Population size: 265,974

New Albany

Also known as River City, New Albany is growing, too. The city is hard at work on improving its roadways and public institutions with the goal of attracting new residents. Allen recommends this city as another one that’s expected to see overall property value appreciation. With regular tourism in the area, investing in properties for short-term rentals could be profitable, along with the option of investing in a long-term rental property

Median home list price: $198,000
Average rental rate: $970/month
Population size: 37,411

Sellersburg

Another suburb in the Louisville, Kentucky area, Sellersburg has some of the higher home prices in the area. However, Allen expects this town to see continued growth in real estate values.

The city is a draw to young families with its bustling calendar of activities and high-ranking public school system. Sellersburg is also home to an Ivy Tech Community College campus, meaning the potential for college students looking for rentals.

Median home list price: $299,200
Average rental rate: $1,050/month
Population size: 9,583

Tips for finding a great investment property in Indiana

When you are looking for a stellar investment property in Indiana, do your research and understand the real estate market in the area. Follow these tips as you embark on the search for your investment property:

Partner with an expert real estate agent

Working with an agent who is experienced in real estate investing will help you get the support you need in the purchasing process. Also, they might be able to help you connect to other investors.

Allen recommends getting a mentor if you are new to real estate investing — an agent can help you find one. “Every real estate professional should know one or two investors and if you start hearing the same name over and over and over, that’s probably somebody that you want to be mentored by,” he says.

Understand local landlord/tenant laws

Check your local government for specific landlord/tenant laws. It’s always a good idea to understand your legal responsibility if you plan to rent out your property.

Tenant rights in Indiana require that landlords give notice ahead of time if they plan to visit the property. Landlords in Indiana don’t legally have to give tenants more than 10 days’ notice of lease termination if tenants aren’t paying rent. Educating yourself on these laws ahead of time can give you the knowledge you need to operate a legal rental property.

Stay consistent

There are lots of ways to be successful in real estate. And, there are a lot of different formulas you can use to help you. “Find [a formula] that you like and that you understand and stick to it. Don’t waiver from it. That’s when people get in trouble is when they start wavering away from the formula,” advises Allen. Making money on your investments takes patience and being consistent in what you do over time will keep you on the path to success.

Leave room in your budget for maintenance

Every property has maintenance costs. Sometimes you can expect them, but there are often unexpected costs, too. Smart investors have a fund for maintenance and they understand how this will impact their investment. Planning for maintenance costs will help you keep your investment profitable.

Header Image Source: (Steven Van Elk / Unsplash)