March 19, 2013

What to Know When Applying for a VHDA Multifamily Loan

Number One: Site Control

Location, location, location. The old phrase is most relevant when making an application. To get the process started, you need to have site control of the property.

There are three ways to obtain site control:

A) You already own the property. Obviously, this is the most secure position.

B) You have a valid contract on the property. A "valid" contract is one that puts a deposit from you at risk should you not be able to close the transaction. Some contract contingencies are acceptable and prudent. They include due diligence with respect to environmental issues, obtaining financing, verifying compatible zoning with your intended use and doing a market analysis on the potential demand for your rental units.

C) You have an option on the property that "ties up" the property while you complete some due diligence or have other potential pieces of real estate under consideration.

Number Two: Understand the Demand

Understanding the demand for your rental units (or at least having a good idea...). "Affordable housing" is needed in most areas; however, some submarkets are saturated. Markets within affordable housing are distinguished by the relative income of the renter. Who is your target?   People making 80% of the area median income (AMI) or those with extremely low incomes (30% and below)?  See the actual HUD Median Income Limits.

More to come in future blog posts.

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