Buying A House In Benton Harbor

I bought my first home in Benton Harbor, MI for $48,500 at the age of 20.  This move was the stepping stone that got Mrs. C and I on a solid path towards building wealth.  I still own that house, although I moved to a house on a larger piece of land a few years ago. I think buying a house in Benton Harbor can be a great investment because the barrier to enter the real estate market in Benton Harbor is much lower than other areas. Benton Harbor has many amenities of much larger cities, is uniquely situated on Lake Michigan, and prices for real estate are incredibly low.

Benton Harbor Housing Prices Are Low:

Once you are ready to be a first time home buyer, Benton Harbor, MI is an excellent choice, especially if you already live in Southwest, MI.  In Benton Harbor you can get a pretty nice place for around $40,000.  With a 20% down payment of $8,000 a $32,000 15 year loan at today’s rates of around 3.5% would run $229 per month.  Add in $40 per month for insurance and $70 per month for taxes and you’re looking at $339 per month. This is far cheaper than you can rent a house, and a good chunk would be building wealth every month.  At the 5 year mark you would only have $23,000 left on the house and at the 10 year mark would only owe $12,000.

Don’t believe me, check out this house that is priced just under $40,000:

  • Buy A House In Benton Harbor775 Territorial Rd:
  • List Price: $38,900  
  • Built 1930
  • 3 bed / 1 bath
  • 1,485 Square feet
  • .43 Acre lot
  • SEV $14,800

 

On the North side, this property runs into a ravine, owned by the city, and on it’s East side it boarders land owned by the city next to a cemetery (possible future side lot acquisition).  The house has a partial basement and recent upgrades to the roof and furnace. The best part? It’s currently rented out for $600 per month. The SEV is low, cutting monthly taxes to $50, and thus the total house payment to $319 per month.  If kept as a rental, that’s a hell of a cash flow on a 15 year note!  It also shows that buying the same house is much cheaper than renting in the Benton Harbor market. If we weren’t so focused on paying off our house right now, I would be tempted to buy this one. You could qualify to buy this house based on a minimum wage job at 30 hours per week under most lending standards.

The home above is fairly modest, but Benton Harbor also has its share of more stately homes at amazing prices.  For under $100,000 you can get damn near a mansion.  Currently on the market, this house on Pipestone Avenue is large and in decent condition.

  • Buy A House In Benton Harbor 2681 Pipestone Ave
  • List Price $89,900
  • 3 Bed / 3 Bath* (extra room could be used as 4th bedroom)
  • 3,077 Sq. Ft
  • 1.81 Acre Lot
  • Finished Basement
  • SEV: 39,900

This house has a fenced in yard, an in ground pool, and a large expanded 2 car garage! Located in the historic district of Pipestone Ave, virtually all of the neighboring houses are in restored condition and well maintained.  The lot is half wooded and backs up to, I swear I’m not making this up, the same abandoned railroad bed that I own a section of about 4 miles down the line; at this location it is owned by the city and is heavily wooded. The 1.81 acres includes the side lot on the North side.  Tons of space, tons of land, room between neighbors, and a wooded lot, what more could you ask for? It’s also only 600′ away from my family doctor’s new office.  He is one of the few doctors who takes walk in patients, so this should be a big plus to any prospective buyer with kids!

At the list price, a 20% down payment would be $18,000 with a loan amount of $72,000.  On a 15 year mortgage at 3.5%, the payment would only be $515! You can barely rent a 2 bedroom apartment for that in Benton Harbor! The taxes would be $1,750 per year,or $145 per month, bringing the monthly total to $660.  Adding in $50 for home owner insurance would bring it to $710 per month.  5 years into the loan there would only be $52,000 left on the loan and at 10 years only $28,000.

If $710 per month is a bit high, I would stretch to a 20 year mortgage in order to get this place (no 30 years though).  A 20 year mortgage would reduce the total payment by $88 per month to a more palatable $622 per month. 5 years in you would only owe $58,500 and at 10 years the balance would be $42,400.

Okay, so if I was in the market for buying houses right now, I suppose I would have to go with this one over the one on Territorial.  My point is there are some amazing bargains to be had in the city of Benton Harbor.

 

Local Amenities:

Benton Harbor may be a small city, but there is a lot in Benton Harbor and the surrounding area that you can’t get in other locations.

Waterways And Geography: Benton Harbor is located in Southwest Michigan where the St. Joseph river meets Lake Michigan.  Benton Harbor has about 1 mile of frontage on the St. Joseph river and several miles on the Paw Paw River. A day on some of the best beaches in the world is only a five minute drive from any where in the city.  The city of Benton Harbor and the neighboring city of St. Joseph both have extensive parks on the rivers and Lake Michigan, and we have the best sunsets in the world over Lake Michigan. 10 miles south of Benton Harbor is Grand Mere State Park, which features 2 miles of Lake Michigan beach front with protected sand dunes and covers a total of 985 acres. Another 10 miles down the road will take you to the 1,952 acre Warren Dunes State Park.

Harbor Shores: If golfing is your thing, Benton Harbor is home to a Jack Nicklaus Signature golf course as part of the Harbor Shores development. Benton Harbor City residents can get a reduced rate for golfing at Harbor Shores of $35, which is substantially less than the daily rates charged to residents of Berrien County as a whole, from $57 – $117 depending on the day. There are two other golf courses in Benton Harbor as well. Benton Harbor/St. Joseph is also the host to the Maytag Steelhead Ironman 70.3 (half Ironman) race, which has 30 qualifying spots for the Ironman world championship 1/2 Ironman race.

Major Employers: Benton Harbor is the world headquarters of Whirlpool Corporation, which employs over 2,000 workers between it’s world headquarters on M-63 and its newly constructed office building on Main Street in Benton Harbor.  Benton Harbor is under a 20 mile commute from two nuclear power plants that each employ over a thousand people year round and over a thousand more during refueling outages. Lakeland Regional Health Care employs over 3,000 people, based in St. Joseph, MI.

Major Retailers: Benton Township is home to the following large businesses: Wal-Mart, Target, Meijer, Lowes, Home Depot, Best Buy, Family Farm and Home, Staples, and Celebration Cinema. We also have a Sonic opening up soon, I can’t wait to get some slushies. Benton Harbor is also great for bargain hunters. We have a Save-a-lot, an Aldi’s, a Habitat for Humanity Restore, a Goodwill store, a Valueland thrift store, two used appliance shops, and a metal recycling center that sells used metal products.

Sarett Nature Center is located just a few miles northeast of Benton Harbor and has over a thousand acres of forest, wetlands, and natural grasslands on the Paw Paw River watershed accessible by over 8 miles of trails. They also have summer classes for kids and activities for the entire community year round.

Lake Michigan College: Benton Harbor is home to Lake Michigan College, a community college offering a much cheaper education than four year public schools.  LMC also offers 30 credit hour certifications and job training for Welding, Nursing, and other trades.   LMC partners with both Western Michigan University and Siena Heights University to help students earn a bachelor’s degree in Benton Harbor.  I earned my bachelor’s degree through the Siena Heights program.

In addition to the education, LMC also houses The Mendel Center, a 1,517 seat auditorium, which attracts various performers, plays, and speakers.  As Host to the Economic Club of Southwest Michigan, the Mendel Center has had the following speakers in the last 5 years: Dr. Ben Carson, Magic Johnson, Katie Couric, Felipe Calderon, Gordon Brown, Laura Bush, and many more.

House of David and Eden Springs Park:  The House of David is a religious colony that started in Benton Harbor MI in 1903 and peaked in the 1930s at around 1000 members, the current population of the colony is around 3.  The colony built some amazing houses to provide lodging for all of its members on its property on Britain Avenue, Three of these homes are still standing today, including the enormous 100+ room Shiloh mansion.  The House of David operated an amusement park on the land South of the main buildings called Eden Springs Park until the 1970s.  Over the last few years work has been done to start renovating the park and during the weekend in the summer you can ride the miniature trains.

Lest We Forget: Lest We Forget has put on several free WWII re-enactments on Tiscornia beach and at the Benton Harbor airport with helicopters, landing craft, and even flame throwers.  My family has watched two of them, and they were really well done (crowded, but awesome). This year they had a Vietnam Veterans tribute and re-enactment at the airport.

Best Fruit in the World: The land and climate in southwest Michigan is special (for scientific reasons that I don’t understand, but take my word for it) which makes it an amazing place to grow fruit.  The world’s largest peach was grown just up the road in Coloma, MI by Paul Friday, who has cultivated multiple varieties of his Flamin’ Fury peach.  Apples, cherries, and blueberries also do extremely well in southwest Michigan.  The Paw Paw fruit grows native in our area and can be found on local river banks. Grapes also do well in Southwest, MI and there are several nearby vineyards.

 

Reduced Crime Rates:

People have this perception of Benton Harbor as being an extremely violent city; that if you go there you will be a victim of a violent crime; this is far from the truth.  In the early 1990′s the murder rate in Benton Harbor was high and the 2003 riots over the death of Terrance Shurn certainly gave the city a black eye. We are now a quarter century away from the worst violence in Benton Harbor history and 12 years away from the riots.

Violent crime is still a problem in Benton Harbor, but the statistics can be misleading. In 2013 there were 236 violent crimes while Benton Harbor had a population of 10,020 people.  This gives Benton Harbor a rate of 23.6 violent crimes per thousand people; about four times the national average.  Detroit’s rate is 21.9.  Even so, if every crime was against a different person, residents had a 97.6% chance of not being a victim of a violent crime.

Benton Harbor Crime RateThe big difference between Benton Harbor and Detroit is that Benton Harbor is a small city and the total number of crimes is small, therefore each criminal taken off the streets makes a big difference in the crime rate percentage.   As recently as 2008 crime in Benton Harbor was only 33% more than the national average, a far cry than the 414% more it is for 2013. This demonstrates how quickly these percentage numbers can change in a small town.

Crime in Benton Harbor does need to go down, and the city is taking steps to reduce it. The State of Michigan this summer is giving Benton Harbor some extra help by doubling the size of the Benton Harbor Detective Bureau. This should help with getting cases closed on many of the violent criminals in Benton Harbor. The city is also much more economically sound than it was 5 years ago before the State take over.  Benton Harbor has exited from the leadership of an emergency financial manager, and currently has a balanced budget.

 

Massive Reduction in Blight:

Benton Harbor Population

In 2012 through Federal NSP funding the county was able to tear down 241 blighted homes.  Our county treasurer, Bret Witkowski has systematically been working on the problem for years. Funds generated in excess of the back taxes owed on properties from the yearly tax sales go towards demolition costs of tax foreclosed properties that need to be torn down.  In 2015 alone 89 tax reverted houses are scheduled for demolition. The county also received a state grant this year, providing an additional $250,000 in funding for demolitions. Driving through downtown Benton Harbor there are still some boarded up houses, but it is night and day compared to 10 years ago. Empty lots left over then go to the Berrien County Land Bank and can be sold to homeowners with adjoining lots for as little as $1.

Stabilized Population:

A big part of the downward pressure on housing prices was due to a constant reduction in the population of over 10% per decade since 1960, leaving thousands of vacant properties.  Since 2010 Benton Harbor’s population has remained stable. Coupled with the quick reduction in excess housing stock, property values in Benton Harbor should start to rise.

 

Benton Harbor Promise Zone:

All kids who graduate from a school in the Benton Harbor district (including charter schools) will have tuition and fees covered for 2 years at an in state community college.  The current retail price is $8,280 at LMC with a per credit hour tuition and fees rate of $138 across 60 credit hours. If you have two kids this can save $16,500!, and delay the need to take the American Opportunity tax credit, which is good for 4 calendar years, potentially saving another $2,500 to $5,000 per child. The Promise Zone Scholarship will cover what costs remain after any Federal Pell grants the child may be entitled to.

The Benton Harbor Promise should be a major draw for parents to the district.  I have 4 kids that I am responsible for, so at a maximum, the Benton Harbor Promise can save me $33,000 plus $10,000 – $20,000 by delaying the use of the American Opportunity tax credit. I can see this as a big tipping point in choosing Benton Harbor as the city to call home.

State Incentives

The State of Michigan started a program last year called MI First Home to give a big incentive to potential buyers to purchase a home in cities with a depressed real estate market, including Benton Harbor.  Home buyers may be eligible for up to $7,500 in down payment assistance through the program. The program is now open to not only first time home buyers, but seasoned home buyers as well.  The credit is for 4% or $7,500, whichever is less.  In the above examples, this would mean a $1,600 credit on the $40,000 house and a $3,600 credit on the $90,000 house.  This article mentions upper income limits of around $60,000 to $100,000 based on household size, which would cover a lot of people. The State of Michigan’s website recommends talking to your lender about details of the program.

There is a catch however, the money does need to be paid back.  It is essentially a 2nd mortgage at 0% interest that needs to be repaid when the house sells.  No payments are made until the sale of the house, so if you buy the house now and receive a $3,600 credit, nothing has to be paid back until the house sells or you refinance the loan, whether that is in 3 years 10 years, or 50 years.  The program also has an asset limit of $7,500; making it a really good fit for young adults just starting out. The program is paid for out of Michigan’s share of funds from the $50 Billion nationwide settlement with the 5 big banks in 2012 following the mortgage crisis.

 

 

What do you think?  With everything mentioned above would you consider buying a house in Benton Harbor?

John C. started Action Economics in 2013 as a way to gain more knowledge on personal financial planning and to share that knowledge with others. Action Economics focuses on paying off the house, reducing taxes, and building wealth. Check out the Action Economics archives section for all past posts.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>