Stable and affordable: real estate investing in Indianapolis

The name of Indiana’s capital city was formed when state Supreme Court justice Jeremiah Sullivan combined Indiana, “land of the Indians,” with the Greek word for city, “polis.” It has been subject to some unflattering nicknames, like “Indiana-no-place,” but this Midwest city of about 2 million inspires loyalty among some of its famous natives.

In 2015, when comedian David Letterman said, “It’s the highlight of my career,” he wasn’t referring to a moment from his 33 years in late-night television. He was talking about his name and a caricature of his goofy grin splashed on the car driven by Oriol Servia’s car at the Indianapolis 500. (He became a co-owner of the team in 1996.)

Maybe there’s something in the water that fosters a self-deprecating sense of humor. Novelist Kurt Vonnegut, known for his willingness to poke fun at himself, once said: “All my jokes are Indianapolis. All my attitudes are Indianapolis. … What people like about me is Indianapolis.”

When a New York Times writer (and another native son) visited the 15th-most populous city in the union and third-largest in the Midwest (after Chicago and Columbus) in 2019, he said that while it has changed over the years, it remains true to its nature: “Short on pretension, heavy on pork and still, for the most part, incomprehensibly cheap.”

And the Indianapolis real estate market provides stable and affordable places for real estate investors to find rental properties. 

Home prices on a tear, yet still affordable

The pandemic-era Indianapolis real estate market saw a precipitous rise, but homes are still within reach of most real estate investors. 

The great prices on investment property have attracted buyers from all over to the Indianapolis real estate market.

During the heights of the pandemic-fueled rise in prices, Sara Heidtman Coers, lecturer in real estate at Indiana University’s Kelley School of Business, witnessed a frenzy. 

“We had record-setting price increases that would be unusual in a Midwest market,” Coers said. “Like 20 percent year over year, which is just nuts for us. “We are a 3-percent-a-year type of location.”

The increases have meant that different real estate investment strategies became feasible.

“Things like flipping had been really hard to do,” Coers said, “but suddenly people could buy a house and sell it for $60,000 more the next year.”

The pressure on the real estate market has driven up prices at the lower end of the market.

“A lot of people flooded into the sub-$350,000 market,” she said. “There are a lot of cities that don’t have anything in that price range.” Consider what's happened to real estate prices in cities like Tampa, Dallas, and Phoenix, among other markets. 

Homes in her neighborhood that used to be priced at $120,000 to $150,000 sold for $310,000 to $330,000.  

And a senior economist at Zillow told Business Insider in December 2022 that Indianapolis may attract homebuyers and real estate investors because of the affordability of homes, even if mortgage interest rates remain high, and their relative stability compared to "more speculative and erratic markets elsewhere."

A planned community, with big plans

Indianapolis was planned on a grid by the same surveyor-engineer who worked on Washington, D.C., and the policies of generations of ambitious mayors and other administrators have helped make the city what it is today. 

While Coers has seen the city change in the two decades she has lived there, “These are things coming to fruition that are the brainchild of people many years ago,” she says. 

Sited at a former Delaware Indian village, the city was founded in 1821 and was named the capital of Indiana four years later. The first federally funded highway, the National Road, came through a few years later, and railroads arrived two decades after that, such that Indianapolis became a major rail center by the beginning of the Civil War in 1861. 

It was a crucial logistical hub for the Union army, leading to the doubling of its size between 1860 and 1870. 

By 1880, Indianapolis became the world’s third-largest pork packing city, and by 1888 it was the second-largest railroad center. It was the birthplace of pharma giant Eli Lilly and of cosmetics manufacturer Madam C.J. Walker, famously founded by a Black woman who was possibly America’s first female self-made millionaire. 

As a stop on the Underground Railroad, Indianapolis had one of the country’s largest Black populations before African-Americans flooded out of the South during the Great Northward Migration. 

The Indiana Ku Klux Klan was active in the 1920s, when nearly half the native-born white population claimed membership. Of the more than 250,000 Hoosiers who joined the Klan, some believed in its racist, anti-immigrant, anti-Semitic, anti-Catholic message.

Others realized associating with the Klan opened doors in business or politics. But by the end of the 1920s, the conviction of Grand Dragon D.C. Stephenson for the rape and murder of a young school teacher reduced it to a fringe organization.

Indianapolis rivaled Detroit as an auto manufacturing capital, and the Indianapolis Motor Speedway, where the Indianapolis 500 race is held, opened in 1909 as a test track. A locally made car won the first 500-mile race, in 1911, and it is traditionally run on the Saturday of Memorial Day weekend each year. 

Other major tourist magnets include amateur athletics; starting in the 1970s, the Indianapolis Project sought to establish the city as a sports destination, with millions invested in facilities and a public relations campaign. 

The junior-sport U.S. Olympic Festival landed here in 1983; the NFL’s Baltimore Colts relocated to Indianapolis a year later; and in 1987, the city was the site of the Pan American Games. 

Major investments in the 1990s and 2000s included revival of downtown with infrastructure, cultural amenities and more sports venues: a new $1.1 billion terminal at Indianapolis International Airport, the new $270 million Lucas Oil Stadium (home to the Colts), and a $275 million expansion of the city’s convention center. 

Flyover country no more

Hoosiers like to dismiss misconceptions of their city as being another burg in flyover country.

“We offer everything that you can get in other cities and parts of the country, whether you want a city with a lot to do, or you can get out of the city very easily,” said Hensley.

“People have mocked us as ‘Indiana-no-place,’” said Coers. “But I think we’ve debunked that, hosting the Final Four and one of the best Super Bowl games ever.” 

In 2012, Super Bowl XLVI, in which the New York Giants bested the New England Patriots 21–17, broke the then record for most-watched television program, with an estimated audience of 166.8 million, or over half the American population.

“We have put ourselves on the map, becoming a more diverse and cultured city over the last 20 years,” she says. “People don’t know until they’ve been here what we have.”

Conceptions of the city as being part of the Rust Belt are also outdated. While it’s true that the city lost many manufacturing jobs in the period between 1990 and 2012, its economy has since diversified. Moody’s associate economist Matt Colyar says that his company’s diversity rating of the city is a 77 out of 100; by comparison, Chicago gets an 80. 

“As far as population trends, prior to the pandemic, people were moving into Indianapolis, by contrast with other places in the Midwest,” Colyar said. “Logistics is huge there, and that’s an industry that’s hiring at high rates. It’s got a cool identity that some other Midwest cities can’t boast.” And the Indianapolis housing market reflects that. 

Pharmaceutical companies like Eli Lilly and Roche help attract college educated young workers. 

“Having a draw for jobs that require a college degree is crucial,” Colyar added. “Any mayor is looking to expand that.”

Fortune 500 health care company Anthem was founded and remains headquartered here. Eli Lilly is the largest private employer, with 11,000 staffers. Amazon has a major presence, employing 9,000, and FedEx has a national hub that employs 7,000. 

The city is home to one of the country’s largest life sciences clusters, employing between 20,000 and 30,000 among nearly 350 companies. It’s also a hub for academic medicine and research, with such institutions as Indiana Biosciences Research Institute, Indiana School of Medicine, and the American College of Sports Medicine.

“We have very stable employers and economics,” Coers said, “with great employers like Eli Lilly, Elanco Animal Health and Cummins [maker of diesel engines, power generators and other parts] close by in Columbus, Indiana, that have been stable for a long time.” All of this makes for an equally stable Indianapolis housing market. 

A rising culinary scene in a diversifying heartland city

Those looking to explore this heartland city from elsewhere can touch down at Indianapolis International Airport, which won top ranking among medium-size airports in J.D. Power’s latest survey, which said it offers “an open, airy experience that feels more like a well-designed shopping mall than an airport.” 

They might choose to stay at the Alexander Hotel, opened as a joint venture with the Indianapolis Museum of Art, featuring a bar designed by the Cuban-American artist Jorge Pardo, a 2010 recipient of the MacArthur Foundation’s “genius” grant.

The culinary scene has diversified along with the population. 

“We used to be dominated by chains like Applebees,” says Coers. 

At one time, the city’s homogeneous population served as a test group for recipes at national chain restaurants. It was 80 percent white in 1970; that’s dropped to 50 percent now, while the Hispanic population has boomed, from less than one percent to 13 percent; the Asian population has soared from 0.1 percent to 4.2 percent; and the Black population has grown from about 18 to nearly 28 percent.

“Now it’s more interesting,” says Coers. 

No kidding: in 2016, Food & Wine called Indianapolis a “rising star of the Midwest,” and Condé Nast Traveler called it “the most underrated food city in the U.S.,” with several chefs making it to the semifinals for the James Beard Award. 

Coers points out burgeoning Central American, African, East Asian, and South Asian culinary scenes. But diners can still get the pork tenderloin sandwich, which that New York Times writer, Austin Considine, called the closest thing Indiana has to a state food.

Or he recommends a diner head to St. Elmo’s Steak House, which is considered to be the best of many, where the “rightfully famous” shrimp cocktail contains so much horseradish you can eat it with a fork. The Travel Channel called it the world’s spiciest food, and the James Beard Foundation dubbed it an American classic.

Speeding cars, amateur sports, and museums galore

If Indianapolis is known for one thing, it may be the “Greatest Spectacle in Racing.” The Indianapolis 500 is the world’s largest single-day sports event, drawing about 300,000. (Letterman had an early television appearance doing a trackside interview with the driver Mario Andretti. Funny enough, the announcer got his name wrong.)

Known as the Amateur Sports Capital of the World, the city was even the subject of the 1986 film Hoosiers, about a small-town high school basketball team that makes it to the state championship. It stars Gene Hackman as a coach with a checkered past and Dennis Hopper as the basketball-loving town drunk in a performance that won him an Oscar nomination.

And the city does well in professional sports too; the Indianapolis Colts have been to the Super Bowl twice, winning with quarterback Peyton Manning in 2006. The NBA’s Pacers have a conference title and six division titles to their name, while the WNBA’s Indiana Fever have won three conference titles and a championship. 

Other amenities include the Children’s Museum of Indianapolis, which is ranked among the best in the world (with a record-setting 1.3 million visitors in 2019). Outdoorsy types thrive in Eagle Creek Park, one of the largest municipal parks in the country, covering 4,766 acres and attracting 1.3 million visitors in 2020. 

Cultural offerings include the Indianapolis Museum of Art, the eighth-largest encyclopedic museum in the country and the ninth-oldest, which is sited on the former Eli Lilly estate; the Eiteljorg Museum, known for its Native and Western art and artifacts; and the Kurt Vonnegut Museum and Library, featuring his drawings and an array of rejection letters. 

Other big draws are the annual state fair, the 10-day Indiana Black Expo Summer Celebration, and the Indy Jazz Fest. 

“The weather’s not fantastic,” Coers admitted. Average days below freezing here number 122 (the national average is 88). Summer’s humidity can be almost as rough. And the city is one of a number of urban areas that have seen distressing rises in crime in recent years, but it has invested some $45 million in grass-roots programs to address the problem. 

It is a bifurcated place whose neighborhoods in the east are especially vulnerable to crime but whose suburbs, like Carmel and Fishers, get high rankings on Niche, no. 4 and no. 24 respectively. (The city overall gets an A-.)

“It’s a wonderful city,” said Coers. “You know people have been thinking about its future for so long.”

The 5 best places to invest in Indianapolis real estate market

Jon Hensley, an agent with Coldwell Banker Kaiser, recommends five areas that are especially promising for real estate investors looking to get into the Indianapolis rental market. 

1. Broad Ripple Village

“Broad Ripple Village is a trendy area, where a lot of homes are being rehabilitated,” says Hensley. “There's been a focus on revitalization for years now.”

According to Austin Considine, Broad Ripple Village has evolved but maintained its bohemian roots, with plentiful vintage stores, cafes, brew pubs and locally owned restaurants. 

There's also Monon Trail, a wooded walking and biking trail on an old railway line that is used by over a million people a year and runs through this part of town.

And investment properties remain highly affordable. 

2. Fountain Square 

Considine called Fountain Square “the hottest area in town.” 

Situated on the southeast side of downtown, this is another area that is “revitalizing” through the rehabilitation of older homes, says Hensley. 

It features plentiful choices of eateries, including farm-to-table James Beard Award semifinalist Bluebeard as well as Iaria's, a family-style Italian restaurant. (They not only serve good food but have a sense of humor, too: their website has labeled pictures of various entrees; the shot of spaghetti and meatballs is captioned “You know what it is.”)

The local real estate market provides affordable homes and stable appreciation. 

3. Hamilton County

“Hamilton County is seeing a population explosion,” says Hensley; between the 2010 and 2020 Census counts, the population grew by more than a quarter, from about 275,000 to around 347,000.

Hamilton County encompasses beloved suburbs like Carmel, Westfield, Noblesville, and Fishers (all of which get an A or better on Niche, based on factors like public schools, housing, and being good for families). 

The local real estate market reflects the explosion in growth, with slightly higher prices and high rates of appreciation.

4. Greenwood

There is an “explosion” of revitalizing new building in the city of Greenwood, which is situated about 15 miles to the south of downtown, according to Hensley. The city's population grew by more than 28 percent between the 2010 and 2020 Census counts, to about 64,000.

5. McCordsville

The bedroom community of McCordsville, 18 miles northeast of downtown, affords its residents many of the same amenities as Hamilton County, but is a much more affordable neighborhood, says Hensley. 

Its population grew more than 75 percent, from about 4,800 to about 8,500, between the 2010 and 2010 Census counts.