Indianapolis Industrial Refinance

George says: “I live in Marion county, which is in Indianapolis. I think it’s a heavenly place. Lush green vegetation is everywhere. There is plenty of water. The real estate is very handsome. The temperature Is quite moderate. When the rest of America is frying from the heat, Indianapolis is a very pleasant high-80’s. Sooner or later, the world is going to discover Indianapolis, and then there is going to be a major migration here."

Blackburne & Sons is pleased to present this First Mortgage secured by a 11,151SF industrial building on a 0.44-acre lot, located in Indianapolis, Marion County, Indiana.

The proceeds of this $350,000.00 loan will go towards paying off the current land contract of $179,000, and paying off roughly $45,000 in debt to improve cash flow. The remaining funds will be cash out in the amount of roughly $95,000. The borrower plans to use some of the funds for property upgrades, and the rest for business development and investment opportunities.

Marion County is located in the U.S. state of Indiana and is the central county of the Indianapolis–Carmel–Anderson MSA in Central Indiana. The 2020 United States census reported a population of 977,203, making it the most populous county in the state and 51st most populated county in the country. Indianapolis is the county seat, the state capital, and most populous city. The county is consolidated with Indianapolis through an arrangement known as Unigov.

The White River flows southwestward through the central part of the county. It is joined by Eagle Creek and Fall Creek, both of which have dams in the county forming Eagle Creek Reservoir and Geist Reservoir, respectively. Marion County has two Indiana State Parks, Fort Harrison State Park and White River State Park, as well as many municipal parks. Adjacent counties include Hamilton County (north), Hancock County (east), Johnson County (south) and Hendricks County (west).

Indianapolis is the capital and most populous city of the U.S. state of Indiana. Located in Central Indiana, the city lies along the White River's West Fork near its confluence with Fall Creek. At the 2020 census, the population was 887,642. Indianapolis is the 16th-most populous city in the U.S., the third-most populous city in the Midwest after Chicago and Columbus, Ohio, and the fourth-most populous state capital after Phoenix, Arizona, Austin, Texas, and Columbus. The Indianapolis metropolitan area is the 34th-most populous metropolitan statistical area in the U.S., home to 2.1 million residents. With a population of more than 2.5 million, the combined statistical area ranks 27th. Indianapolis proper covers 368 square miles, making it the 18th-most extensive city by land area in the country.

In 2021, Indianapolis city had median property value of $156,300, with a home ownership of 54.5%, and a median household income of $54,321. The largest universities in Indianapolis city (balance), IN are Ivy Tech Community College (30,789 degrees awarded in 2021), Purdue University Global (13,709 degrees), and Indiana University-Purdue University-Indianapolis (8,406 degrees). The economy of Indianapolis employs 432k people. The largest industries in Indianapolis are Health Care & Social Assistance (62,929 people), Retail Trade (49,790 people), and Manufacturing (48,200 people), and the highest paying industries are Utilities ($84,399), Mining, Quarrying, & Oil & Gas Extraction ($76,477), and Management of Companies & Enterprises ($64,917).

The subject property is in a Medium Industrial District (I-3) located along the north side of Bloyd Ave. The area is urban in nature. The subject building consists of approximately 0.44-acres with an 11,151SF building, erected in 1959. The property sits on a fairly level site that backs to an old railway ROW, though the tracks have been long ago removed. The subject has easy access to I-70, located a couple of blocks to the east.

The improvement is a single story, class C - Masonry building equipped with concrete and ceramic tile flooring and drywall and concrete block walls in finished areas, open to the structure in warehouse. The east end of the property is fenced/paved parking for an estimated 15 vehicles. There is some additional parking at the west end of the property, about 5 vehicles as well as along the front of the building, about 5 more vehicles. The property has two exhaust fans, a 2-ton bridge crane, per CoStar and two OH door entries on the east end.

The subject building consists of approximately 8.6% finished office area with 12' ceiling heights. The current operation is a pet cremation operation, which does not require any significant infrastructure beyond a typical industrial use. According to the borrowers, there is a state of the art crematory unit that is OSHA approved on site. They estimate the value of this to be over $300,000. We will secure this, amongst the other fixtures, using a UCC1 Filing. Per the owner, the property has had some renovations over the last 10-12 years including a new roof, HVAC, etc. The property is currently leased for $3,209 per month to the cremation company.

The borrowers are a married couple who will hold title through a Limited Liability Company. They will also provide a personal guarantee on our loan. The borrowing entity does not file separate returns, and the income for this property is reported under the borrowers' 1040s. The property is leased, and the rent is $3,209/month until July 31, 2024, where it will increase to $3,273. There are rent increases every year, on July 31st, and the lease runs until 2034. Part of our loan will be used to pay off $44,471 in debt, which will reduce their outgoing cash flow by $1,487/month.

Working as an insurance agent and manager, the guarantors reported an adjusted gross income of $108,823 in 2022 and $87,950 in 2021. They self-reported a net worth of $164,912 and have mid credit scores of 659 and 707. It should be noted that $482,437 of their liabilities is student loan debt and the net worth is exclusive of their primary residence, which is owned in a separate LLC.

Our guarantor plans on using the cash out to make improvements to the property, which will include cosmetic improvements to the front hand railing, 5 windows, possible window replacements and potentially paint the rear. They are also looking at purchasing a fork lift, pick-up truck, utility trailer and other small equipment for the business.

We engaged a local MAI appraiser who provided an AS-IS valuation of $545,000. We also engaged a local broker to perform a Broker’s Price Opinion and they valued the property at $615,000.

You should spread your mortgage investment portfolio out among lots of different deals. If you have $300,000 to invest, you should invest $10,000 to $20,000 in 15 to 20 different fractionalized first trust deeds. For example, if the deal is a $300,000 first trust deed on an office building in Boise, with a $15,000 investment you would own 5% of the loan. By spreading your money out into a bunch of different deals, you are achieving the diversity of a fund without the failed fund sponsor problem. If you are extremely wealthy, you could double (or even triple) my suggested investment amounts, but be careful about pouring too much money into a single deal. We once had a whole building fall into an old coal mine. Ouch.
Be wise and resist investing in any first trust deed yielding more than 9%. I would personally never invest in a first trust deed with a double-digit yield. The payments slowly grind the borrowers into the dust.
Blackburne’s Law theorizes that a portfolio of 8% and 9% first trust deeds will outperform a portfolio of 11% and 12% first trust deeds over a seven-year term. Only our wisest (and eventually the happiest) investors listen to me.
You can also buy some of our smaller deals in their entirety, but I only recommend this if you are richer than Crassus.
It is very easy to lose money in hard money first mortgages, so fight-fight-fight against the temptation to invest in high-yield deals. As Nancy Reagan used to say, “Just say no.” But if you choose 7% to 9% first mortgages, I predict that you will be very, very pleased.
During the S&L Crisis, commercial real estate fell by 45%. Within three years, values reached new highs. During the Dot-Com Meltdown, commercial real estate fell by 45%. Within three years, values reached new highs. During the Great Recession, commercial real estate fell by 45%. Within three years, values reached new highs. Some time in the next decade, we will have another opportunity to snatch up prime commercial real estate at a huge discount. You will be terrified, but when Blackburne and Sons invites you to join a syndicate to buy a nice commercial property at a 35% discount off its prior high, just remember that the best time to invest is when blood is running in the streets. Why not when real estate has fallen by 45%? You’ll never catch the very bottom because historically the bounces off the bottom happen much too fast. Bounce-soar. You will be terrified, but just remember that the best time to invest is when blood is running in the streets.

Blackburne & Sons Realty Capital Corporation--For more information, contact Tom Blackburne
555 University Ave., Suite 150, Sacramento, CA 95825
Telephone: (916) 338-3232 * Fax: (916) 338-2328
Real Estate Broker -- California Department of Real Estate -- License Number 829677 -- NMLS Number 103430
Publicly advertised to California residents only under California Department of Business Oversight business plan permit.
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