The information below is particularly important to consider when purchasing properties in South Bend:
VACANT LOTS
If you are interested in purchasing a vacant lot in South Bend, know that there will likely be a cost to get dormant sewer and water reconnected to the property.
NEW CONSTRUCTION:
In South Bend, the current average estimates for new construction can range from $150-200 per square foot. So, for example, if you are interested in building a 1400 square foot home, then you need to be able to sell or rent the new construction for at least $210,000. This does not include any of the associated costs with acquiring a property, getting sewer and water connected if it is a vacant property, or other costs.
ZONING
If you have a specific purpose for the building in mind, make sure that property is zoned correctly for that purpose. Information on South Bend zoning can be found at https://southbendin.gov/department/community-investment/planning-community-resources/zoning/
TAX SALES
If you purchase a property at the annual tax sale in September, there is a 12-month waiting period for the original owner to pay off the property taxes before you take ownership of the property. If the original owner does pay off the taxes, you will receive 10% added on to your original investment that the original owner also has to pay. Nevertheless, during the 12-month period, your capital is sunk and not available to be invested elsewhere.
- United Tax Sale Service will do all the legal and administrative requirements for a tax sale purchase for a fee. This is in addition to the $175 that it costs to legally file a tax certificate to tax possession of the property.
- If you purchase a property at the Commissioner Tax Sale in March, the property will only have a four-month redemption period but be aware that these often are the ones that did not sell at the September tax sale.
- At the Sheriff Foreclosure Sale, the properties move in 30-40 minutes and possession is immediate. The process is an auction (where the property is sold for what is owed on it or what the bank is willing to accept) but the qualities of the properties can vary widely. Be aware though that many of these properties can be put up for sale in exploitative ways through land contracts or by requiring little credit.
TITLES
Think of the title to a property as anything and anyone who currently has a legal claim to the property. If the property was left as an inheritance to a family with multiple people, that can make it very hard to have a “clean” title because several people can have claim on it. You can use the MACOG GIS to determine who owns a property.
A title company can perform a search to make sure there are no liens, claims, or anything that you could be sued for with a property. If there isn’t anything, then that’s what makes the property “clean.” If the property has recently been sold, then it is very likely “clean.” If you purchase a title through a tax sale, then it will likely cost around another $400 to go through a title company or broker (like Meridian) to “clean” the title.
ENVIRONMENTAL
The most common environmental issues with a property in South Bend will be asbestos, lead, and old oil tanks. If the asbestos is limited, then it can be cleaned from a house fairly quickly. Lead is more challenging and costly but can also be fixed. Oil tanks are the most difficult and expensive. You will need to contact a local environmental consultant to help you to assess this.
COSTS
We have just covered two possible ways that you can run into unexpected costs – through clearing the title and environmental issues. Another possible cost to look out for is the foundation of any existing building – check that it is sound and that there are no water issues.
- If the title, environmental, and foundation check out, then the next big costs will be HVAC, the roof, safety & security issues, and landscaping.
- We cannot repeat this enough: clean, clean, clean. First and foremost, make the outside look nice and appealing. People won’t even go inside if the outside does not look good. Then, for interior expenses like fixtures, install quality products that are simple and elegant. You will eliminate many potential buyers if you get too creative or style-heavy with interior design.
- Consider that smaller is often better; especially in lower-income areas. Think simple but good quality.
FINANCING
This toolkit contains a few proformas. A proforma is a document that allows you to estimate what the costs and income of the project will be. This is crucial for developing a property because a good proforma can help you to see if a project will be profitable and how much financing will be needed in order to complete the project. Again, the first rule comes into play here – do not fall in a love with a property because the proforma may show that the project will not work financially. If you can’t get the revenues, then you just should not do the project.
- Put together a personal financial statement. This will include any tax returns that you have for the past few years (personal and business) and a breakdown of all assets and liabilities. More information is included in the “Secure Financing” section.
- Credit scores are unfortunately part of this process, but they do not have to make or break your project. Consider participating in a credit repair course if this is a concern.
- When you have determined which banks are most likely to offer funding (again, see the “Secure Financing” section), start to build a relationship with one or two bankers. Many bankers want to help people get funding and improve the local community. It is the first loan that is hardest to secure. Once you have proven that you are professional and capable, future funding often just requires a phone call to that banker. So build relationships now! Contact mmechtenberg@southbendin.gov and provide specifics of your project so that he can help direct you to several credible financial institutions.
DESIGN
Lawsuits happen at the intersection of the trades. This means that if you are bringing in a lot of different workers to have to do something, then there is an increased chance of something going wrong. And if something goes wrong, no one wants to take responsibility to fix it which will mean that you have to take responsibility to fix it. Simpler is better.
- A building that is the most valuable is generally one that will stand the test of time, both in terms of construction and style. Think of building design not as making something super hip or contemporary, but like designing the “little black dress” or blue blazer. Approach the style with an eye to the timeless.
- If you are designing a commercial space, providing shelter, shade, or seating is ideal. Also include large signage (16”+) which is lit and high ceilings on the ground floor (15’ +). Natural light is appealing as well.
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