Module 8

Presentation Transcript

Module 8 – Eligible Use B Scenarios: Homebuyer and Rental Housing Purchase and Rehabilitation

Module 8 Content Eligible Use B Scenarios: Homebuyer and Rental Housing Purchase and Rehab Administrative Structures: Grantee, Subrecipient, or Developer as Lead Entity Property and Homebuyer/Renter Pipelines Grantee/Subrecipient Homebuyer Project Case Study 1: Startup Activities and Financing Options Developer Rental Housing Project Case Study 2: Startup Activities and Financing Decisions

Helpful Resources NSP Website: http://www.hud.gov/nsp To pose a question: Click on the connection "this shape" at the base of the site page above.

Review of NSP Eligible Use (B) Purchase and restore homes and private properties that have been relinquished or abandoned upon, with a specific end goal to offer, lease, or redevelop such homes and properties NSP Substantial Amendment Goals and Objectives Location of Properties—Target Area, Stabilize Neighborhoods Performance Measures—Number units gained, restored and sold or leased Beneficiaries Income—<50%, 51-80% and 81-120% AMI Threshold—25% of NSP assets advantage <50% AMI

NSP Administrative Structures Grantee as Lead Entity? Subrecipient as Lead Entity? Designer Role Property and Homebuyer/Renter Pipelines and Tracking Tools

Grantee as Lead Entity Internal assentions are not required Centrally overseen property and homebuyer/leaseholder pipelines additionally serve as an execution estimation device

Subrecipient as Lead Entity Grantee chooses if subrecipient keeps program wage or come back to the grantee All UGLGs are subrecipients Subrecipient understanding ought to meet all prerequisites in the directions including recordkeeping and review necessities Grantee can relegate duty regarding the homebuyer/tenant pipeline to a subrecipient

Developer's Role Developers can be for-benefit or not-for-profit substances Developers may charge expenses and gain benefits Grantee must endorse all exchanges Developers may not bring about managerial costs Grantee's concurrence with the engineer is not subject to recordkeeping or review necessities that apply to subrecipients Developers can redesign the property pipeline

Things to Consider in Assigning Responsibility Homebuyer and rental lodging recovery ventures. *rent-to-possess *resell *own/oversee restored lodging Amending significant revision Change in dispossession advertise? Great Recordkeeping

Grantee Homebuyer Purchase & Rehab Startup Activities Step 1. Property Pipeline Step 2. Homebuyer/Renter Pipeline Step 3. Coordinate property with Homebuyers/Renters Financing Options Step 4. Buy and Rehab Costs and Sales Price Step 5. Homebuyer Financing Options Step 6. Proceeded with Affordability Final Steps: Things to Consider

Grantee Homebuyer Purchase and Rehab Startup Step 1: Setup Property Pipeline Sources of Intake: Lenders/Servicers Subrecipient/Developer Applications Property Types Foreclosed Abandoned

Grantee Homebuyer Purchase and Rehab Startup Step 1: Setup Property Pipeline Property Acquisition Environmental Review Appraisal Purchase Discount Initial Investments

Grantee Homebuyer Purchase and Rehab Startup Step 2: Setup Homebuyer/Renter Pipeline Sources of Intake Homebuyer/Renter Outreach Housing Counseling Agencies Screen potential NSP members Income Eligibility Affordability/Bankable Credit Homebuyer/Renter Counseling

Grantee Homebuyer Purchase and Rehab Startup Step 3: Matching Pipelines NSP Eligible Homebuyer NSP-Assisted Property Match potential homebuyers/leaseholders with NSP-helped properties

Grantee Homebuyer Purchase and Rehab Financing Step 4: Manage Rehab Scope of work Rehab standard Lead-safe lodging necessities Energy protection prerequisites Develop cost evaluate Establish development contract Solicit contractual workers Review offers Select temporary worker

Grantee Homebuyer Purchase and Rehab Financing Step 4: Manage Rehab/Establish Rehab Cost Construction Inspections Pay Contractors Final Inspection Establish Final Rehab Cost

Grantee Homebuyer Purchase and Rehab Financing Step 5: Purchase/Rehab Costs & Sales Price Acquisition Cost + Rehabilitation Cost = Total Development Cost Total Development Cost = Maximum NSP Sales Price

Mortgage Gap Homebuyer's Income 30 year advance 20% downpayment Maximum home loan Does contract + downpayment = Sales Price? Contract hole? Grantee Homebuyer Purchase and Rehab Financing Step 6: What Can the Buyer Afford?

The Downpayment GAP Downpayment necessity Lender 10%—20% Buyer must have half of that NSP can give other half Required downpayment = to accessible assets? Up front installment hole Financing Step 6 Continued: What Can the Buyer Afford?

NSP Tools Reduce the Sales Price—Close Mortgage Gap Downpayment Assistance—Close DP Gap Financing Step 7: Establish the Subsidy

Cost-based Sales Price $104,000 Buyer Income $45,000 Maximum mortgage $190,500 20% Downpayment $20,800 Mortgage $76,000 NSP DPA $10,000 Buyer DPA $10,000 Gap $400 Financing Step 7 Continued: Establish the Subsidy

NSP Fills the Gap Reduce Sales Price to $100,000 Downpayment $20,000 Mortgage $80,000 NSP DPA $10,000 Buyer DP $10,000 Mortgage + Downpayment = Sales Price Financing Step 7 Continued: Establish the Subsidy

What is the NSP Subsidy? Important concede reduction $ 4,000 DPA $10,000 TOTAL $14,000 Affordability Period (HOME) 5 years Resale or Recapture? Financing Step 8: Period of Affordability

Financing Step 8: Continued Affordability Resale Option – Sell to another LMMI homebuyer Protects grantee's speculation of advancement endowment Protects against quick cost increment Provides more noteworthy confirmations for long haul moderateness Recapture Option – Repay the NSP sponsorship to Grantee More attractive to purchasers since they can offer to any pay purchaser. More straightforward to regulate Opportunity for grantee to recover bit of beginning venture

$30,000 Household Income Maximum Sales Price $140,000 (costly recovery) Supportable Mortgage $126,900 Mortgage Gap $13,100 DP Required $28,000 Buyer portion $5,000 DPA $14,000 DP GAP $9,000 Financing Step 8 Continued: Low-Income Buyer

Reduce deals price $50,000 DP $10,000 Mortgage $40,000 DPA $5,000 Buyer DP $5,000 Financing Step 8 Continued: Low-Income Buyer

Sales Price Reduction $90,000 DPA $5,000 TOTAL $95,000 Period Of Affordability 20 years Financing Step 8 Continued Low-Income Buyer—Total Subsidy

Higher advance to-esteem proportions and lower downpayment prerequisites FHA-endorsed and VA affirmed banks State/nearby HFA credits Public advance by NSP grantee Add HOME downpayment help Financing Step 8 Continued Financing Options

Grantee Homebuyer Purchase and Rehab Final Steps: Things to Consider Alternative financing choices Developer appropriation Closing costs Low-enthusiasm financing (NSP Eligible Use A) Rent-to-Own Reporting Requirements Recordkeeping You may get inspected – Be readied Program Income

Case Study 2 Developer Rental Housing Purchase & Rehab Startup Activities Step 1. City issues RFP Step 2. City chooses Affordable Developers, Inc. Step 3. City guarantees and supports extend Structuring Financing Step 4. Rental Income Analysis Step 5. Set up the Subsidy Step 6. Proceeded with moderateness Final Steps: Things to Consider

Developer Rental Housing Purchase and Rehab Startup Step 1: City Issues RFP Sources of Intake: City issues RFP for a designer to buy and recovery 1 of 3 rental lodging properties that has been abandoned Target properties and inhabitants RFP Content: Purchase Discounts Applicable FMRs Income Eligibility Affordability Program Income Scoring Criteria

Developer Rental Housing Purchase and Rehab Startup Step 2. City Selects Developer Affordable Developers, Inc. Wining Criteria Purchase Discount—20% Low-salary Targeting (< half AMI) Green Building and Energy Efficiency Experience of Management Company Marketing/Tenant Selection Plan Lease Agreements

Developer Rental Housing Purchase and Rehab Startup Step 3: City Underwrites/Funds Project Community Gardens Apartments Project Units at < half AMI NSP stores versus TDC Let's Discuss Financing Options…

Developer Rental Housing Purchase and Rehab Financing Decisions: Very Low-Income Benefit Program Requirement 25% NSP $ Occupants at or underneath half AMI Community Gardens Apartments Project 2 low-salary units—lease $400 4 low-& direct pay units—lease $500

Developer Rental Housing Purchase and Rehab Financing Decisions: Rental Income Analysis Gross rental pay less costs accidental to its era. Such expenses include: Allowance for opening/non-installments Management Property upkeep and repairs Contributions to substitution holds Taxes and Insurance Balance partitioned Monthly obligation benefit installment Owner's benefit

Developer Rental Housing Purchase and Rehab Financing Decisions: Rental Income Analysis 2 4 units @ $500 $2,000 2 units @ $400 $800 Gross Rental Income $2,800

Developer Rental Housing Purchase and Rehab Financing Decisions: Establish Subsidy TDC $300,000 Monthly Rental Income $2,800 Minus Vacancy Loss $150 Operating Costs $600 Net Income $2,050 Less Debt Service Coverage $410 Available for Debt Service $1