Posted by John SirJohnathon Grounds on June 20, 2001 at 21:43:29:
We have been involved with these deals since 1985. The loan is actually through the Rural Housing Agency, which used to be known as FmHA.
The government does not actually make the loan, they only guarantee it. You will typically have a three year construction loan period followed by a 40 year payoff amortization. The government also does not guarantee the rents…what they do is they will subsidize them based on income. (Title 42)
In exchange for the loan, you will have extensive monthly, quarterly, and annual reports. You will have an audit of approximately 10% of all files on an annual basis, as well as several on-site inspections. The cost of the audit is usually somewhat prohibitive unless you plan on doing more than one development.
The package is extremely difficult to complete. It will cost you an average of $20,000 to put together the needed studies, reports, environmentals, and engineering plans. Once you have done a couple, that price will drop.
You will need to prove development experience in the past, show that you have a business plan and marketing plan…and have at least 6 months operating capital in reserve.
You will have to prove economic reasons within the area you are interested in. This usually means an area with a county population of less than 40,000 with an average income in the high 20’s. Also, they will do a vacancy study.
If you want more info, feel free to e-mail me. You can go to any Rural Housing office and get more info. Problem is, most of the offices will not be familiar with it, as they are not done very often in some areas.
I don’t want to scare you off…they are a good deal. Just be aware that they are not like the “Gurus” would lead you to believe.
Hope this helps,
John “SirJohnathon” Grounds