Where do homeowners go when they lose their house?
Market rate housing or subsidized housing?
Traditionally, people do not have anything upon foreclosure and market rents are staying high in competitive markets. This leaves the affordable market as a great source for former homeowners.
A recent Associated Press Article outlined this crisis but also warned of another pending crisis.
]]> The value of tax credits - what us developers are often given by the government when doing large deals - is worthless.Keep reading...
"The government knows there is a crisis" and are looking for ways to fix it.
In fact, as I have been saying quite frequently, the Stimulus Bill is actually providing for holders of tax credits through the tax credit exchange program.
This isn't bad, this is good!
So instead of working your tail off to get the tax credits, then getting your award, you now may not need to seek a investors.
Why? Because they are buying the credits back!
It's time to figure out what deals are working and how best to get that next deal structured. Look for areas hard hit by foreclosures and see if you can put a larger scale project together.
The tax credits come through and you can either search for an investor or seek government assistance.
Easy enough? Don't forget your developer fee - yep, that's cash at closing!
]]>My most common response to many who ask the question is that make sure you have a lawyer and accountant who know more than you.
Don't get into a position where you need to educate your vendors.
]]> Having a quality lawyer can get your deal closed that much quicker, while having a quality accountant can make sure your finances are in order.A few questions for your potential staff:
At least 2 of the three questions should be "yes" and should help you to make an informed decision. You may also want to inquire about the program you are seeking as well.
Count it as a bonus question!
]]>Is it taking longer to get a deal done? Have you stopped looking for new projects to acquire?
The last year has been a very difficult period in real estate history. Some markets have declined upwards of 50% in value with no light at the end of the tunnel. Not very good news if you started your "buy and hold" in 2007, but will certainly work better for you now in 2010 as you pick properties up for a fraction of their price three years ago.
]]> Not to mention cap rates are heading into the two digits in larger metropolitan areas. For some, this is an area of the market they have never experienced.So what can we do to get some of these declining assets?
The banks that were lending up to 125% a few years back have either left the market or cap an acquisition at 70% loan to value. The remaining 30% is up to the investor. But raising the 30% slows down transactions and your friends in Congress have attempted to help.
In July 2008, the President signed the Housing & Economic Recovery Act (HERA), which among other things, provided $4.5B to all 50 states, some territories like Puerto Rico and the Virgin Islands, and the District of Columbia, to combat neighborhood declination by foreclosure.
These funds, known as the Neighborhood Stabilization program, were supposed to help investors, both for and non-profits, buy and rehabilitate foreclosed buildings in order to prevent the stable households from losing too much value. In February 2009, Congress added an additional $4.5B to the program, now known as NSP II, to further carry out the NSP mission.
This is nothing new. The federal government has been investing in real estate for years, at least since HUD was conceived during the Johnson administration in 1965 as part of the Great Society initiative.
HUD allocates through the individual States and territories upwards of $20B per year to facilitate economic development and housing activities. Additionally, many states have programs of their own that can match federal funds in addition to over $5B in tax credit programs available to stimulate acquisition, rehabilitation and new construction of real estate projects.
Buying and holding certainly isn't what it used to be, but now the government wants to help you out more than ever. You just have to know WHERE to find the money and HOW to get the funds.
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