Hello all, I recently went to South Bend over this past weekend and looked at a handful of SFRs. Some were in better shape than others. I'm looking at a place west of downtown and Marion street between Colfax and Route 20 that was built in 1999 and that is a 3 bed, 1 bath that is selling for $50k and probably will get rent of around $700/mo and currently getting $605/mo. tenant is M2M. It is about 2.5 miles from Notre Dame. Property tax around $600. I think the price is a little high for the location and time it has been on the market. I would appreciate some help from others in terms of if this is a reasonable area to invest, typical rents for this location, and what would be a reasonable purchase price assuming no major rehab ~5k?
I can’t tag Vishal for some reason so hopefully you see this.
It sounds like you are on MLK drive between 20 and Colfax. Marion turns into MLK south of 20. So my advice is predicated on that.
This is a difficult area to give advice on. It is in general not a bad area BUT just to the north and west of there it isn’t so nice so be careful. I think your rents are pretty close and taxes maybe 100-150 too low.
I also think this area has a possibility for gentrification as South Bend gentrifies.
This decision depends highly on what your risk tolerance is and how you will manage it.
Without knowing the specific address, it is difficult to comment. Going by your locates, sounds like you are in the 46601 zipcode which is erratic especially near downtown. Lots of old dilapidated stock and historic homes that need work. If it was built in '99 it is probably a Habitat for Humanity tear-down and rebuild. Some investors are putting money into the old stock and there are even some new builds in the area but it is still far from turning the corner in values, desirability and tenant quality.
Unless you have a really good (and tough) Property Manager to deal with the rental demographic in this general area, I would pass on this IMO. For your first time around, $50K in South Bend/Mishawaka can get you a 3/1 in better area, better tenant quality, around $850.00/mo rent or more and $1,000.00+/- in property taxes.
You can PM me the details or call me to discuss.
I agree with @Anthony M. and @Aaron Linden about the area. I do not recommend a first time purchase in the South Bend market in such a rough area. It would be very worthwhile next time you are in town to sit down with the Citys Director of Development to discuss the plan for that area. There are a ton of exciting things on the horizon for the city. I think we are going to see areas that no investor would touch change in the next few years. @Vishal Didwania I think it all depends on your tolerance for risk and comparing that with your short term goals. There are other areas in the city that are more conservative for a first time purchase in this market. Looking forward to hearing feedback.
I was just in SB last week again. I am not a local, and so I am constantly trying to get to know the market better as well. My impression is that the west side is rough, the down town is rough, and there are a lot of rough patches. You can $50,000 houses all day long.
I really like the River Park neighborhood after having explored SB more. I also like Mishawaka, as everyone I have talked to says it is hard to go wrong there.
Lastly, if you do buy in the tougher areas, just know that there are not a lot of property management companies that can/are willing to handle them. Chicago has plenty of companies that will handle C and D properties, but I have not found this to be the case in SB!
I have made contact with several local realtors who have knowledge of the area that is obviously far superior to mine. PM me and I can put you in touch as well.
I can tell you my experience of owning and losing my butt on low end / High cashflow homes. It hurt me so bad that we could not get out without a major hit financially. The only solution was to create a company to handle these things because no one would manage them. In hindsight it was the best thing we could have ever done as we are building the fastest growing PM business in Texas with over 700 doors and in 3 cities in less then 5 years of operating. I feel a lot of that success is owning these problem properties and I explain to people interested in buy them. They are not a bad deal, but you better have the right business model wrapped around that type of business. If not you could fail and fail big.. lIke Bankruptcy big.. I have no problem sharing my story and more importantly my failures with people just to help people avoid the pitfalls and sleepless nights I dealt with.
I am too lazy to look it up , but pretty sure South bend was on a list of lowest appreciating markets in the country, along with Schenectady, NY. I remember because I was surprised to see a college town there and also because Fort Wayne is on the other end of the spectrum. Point being that your numbers had better be terrific...my daughter lives near Schenectady and her rent is going up 2% on her new lease and her building is so new she was the first occupant. Isn't inflation a tad higher?
Thank you all for the fantastic feedback. I was able to contact someone at Centier Bank and they have a portfolio home loan program for community improvement for investors for up to 4-6 properties under one name with no minimum, 20% down, 30 year amortization, and market interest rate. I think you might be able to do lower down payment but there will be a PMI.
@Marian Smith Point well taken. I agree that appreciation would be nice but i'm not counting on it in my numbers and they're still pretty good without it in terms of cash flow.
@Steve Rozenberg That's some great advice and you are absolutely right. You gotta own and cannot expect it to be the same as a A or B class neighborhood. Just have to figure out a business model but I think that will be a learning process as things move along unfortunately.