Recent volatility in the capital markets has many multifamily housing owners and operators “clutching their pearls” about the availability of financing at reasonable terms and conditions. And in some sectors of the marketplace, that is likely true. However, we believe that HUD-insured Section 223(f) and 221(d)(4) multifamily financing remains a very attractive – and readily available – source of capital.
In current tribute to the list-mania of today’s social media and Internet, and with a historical nod to a former late-night talk show host, we present our Top Ten reasons you should use these HUD programs – preferably with our company! – for your next multifamily project.
1. Fixed rate of interest and amortization up to 35 to 40 years. Great for long-term “buy-and-hold” owners not looking to flip a property.
2. Loans are assumable, subject to HUD approval. Great for shorter-term owners looking to sell and buyers wanting to access long-term fixed- rate debt. Everybody wins!
3. No personal guarantees. Keep your stuff to do other stuff.
4. Loans are prepayable under flexible options. No expensive and restrictive yield maintenance provisions like those required by HUD’s cousins Fannie and Freddie.
5. High loan to value/cost ratios – market rate deals at 85%, affordable deals even higher at 87% – 90%. What bank is going to do that, huh?
6. Low debt service coverage ratios – 1.17 for market rate deals, affordable deals at 1.15-1.11. Like we said above…
7. Construction loans under Section 221(d)(4) provide an opportunity to leverage 100% of the replacement cost using BSPRA. What’s BSPRA? Call us to find out, but if we tell you….
8. Refinancing loans offer a cash-out option at 80% loan-to-value. Have a partner or investor you want to buy out? Want to benefit from an increase in property value? Take the money, please!
9. Purchasing or refinancing a fixer-upper? You can include up to $40,000 per unit in repairs and improvements. The work would not require the use of Davis-Bacon prevailing wages!
10. HUD will reduce annual mortgage insurance premiums by .35% to .40% if the property can meet certain energy-efficient standards. HUD makes it easy – and profitable – to follow green requirements and be a friend of the environment.
We look forward to hearing from you!