Posting a Surety Bond on Low Income Housing Deal

[Dave Hall]

Hello,

I recently submitted an LOI on a low income housing multifamily property which has tax credit obligations through 2017 - the end of the 15 year period. I am in the first round of negotiations and the owner has asked for "bonded assurance that the tax credit requirements" be honored so he doesn't have a tax issue in the future.

Do any of you have any expertise in this area? I suppose I need to know how much of a surety bond to post and some ideas about what I should get in exchange for this concession.

The seller believes the property is worth $1.7M. I have initially offered $1.28M and the seller countered with "an offer closer to $1.7M." I estimate that the property will be worth $2.28M after minor rehab and lease up. The property is a C in good shape with 85% occupancy. The area is a C- to D+ but there are some strong signals that employment in the area will be increasing soon.

Thanks,

Dave