Building Low-Income condominium?

Question

If there are low-income housing for apartments and homes, is it possible to build a low-income condo with 20+ units (studio sized) and sell them to qualified low-income families or individuals? Does Sec 8 or anything similar apply in this scenario? If not, how profitable would this venture be as opposed to selling average priced condominiums relative to market price?

This is regarding the Southern California area.

Jay Hinrichs · Answer

@Patti Robertson  at one time I owned 350 SFR's of which at least 300 were section 8.. and I camped out at our partners PM office in the deep south for almost a year.. so saw and interacted with the tenant base first hand.. And as Greg pointed out concept of owning is just not something I think these folks embraced or even dreamed of..

I always thought it was subliminal but very true when tenants would come in they would say  I stay at this address I stay at that address. they never said I live here or there .. so to me they are just staying.. and usually for less than 3 years.. very rare did we have one go over 3 years.. and many moved annually to a new fresh rehabbed investors house.. cycle repeats just move down the block. And U can do that when the homeowners decide to sell and move out when investors start flooding the areas with rentals.. once they go that way they are done values will always stay at what ever an investor will risk for a given cash flow and tenant risk.

Patti Robertson · Answer

HUD does allow the housing choice voucher to be used to purchase a home, and in my opinion they should make the education requirements for it mandatory for all voucher holders, because mortgages would be way less than what the government is paying us for rent!  The problem is hardly none of the low income people in our country appear to have much interest in becoming self sufficient.  I’ve been accepting SEC 8 for at least 10 years and currently manage 85 SEC 8 leases.  Whenever we have one who has decent income (relative concept I know), and seems to have a good head on his/her shoulders, I tell them about this program.  I almost beg them to consider it and tell them I will do anything I can to help, because one of my goals is for one of our SEC 8 voucher holders to become a homeowner.  The all seem excited and are happy I am supportive, but as of today, not a single one of my tenants has even tried to meet the requirements that are required to purchase vs rent.  Here are the stats from the largest housing authority in our market.  Out of 6162 people being helped with a housing subsidy, only two have ever completed the required education and saving milestones so their subsidy can be used to pay their mortgage instead of their rent.

You know the old saying - You can lead a horse to water...

Greg Dickerson · Answer

People have to want it for themselves and it does not make sense for someone who is paycheck to paycheck to own. One major repair issue, property tax increase, insurance increase etc can put them behind and in jeopardy of foreclosure. They are much better off renting in this new economy and saving all the extra costs of ownership for emergencies.

Jay Hinrichs · Answer

I think NACA does about the best job taking low income and those with limited knowledge of how business and fiancé works and makes them homeowners..  but like your saying.. the wash out is probably 80 to 90% of those that start the year long education program..

I have sold 3 homes to Naca buyers and they get smokin deals as NACA at least the ones I did in Mississippi require the seller to buy down the rate.. so these folks were getting 1 and 2% interest rates on 100k purchase homes over 30 years  payment was less than insurance.. these were wet closings so I saw all the numbers..

Scott Hutter · Answer

@Andrew Chung

I've worked with these programs before and yes they do exist.

Typically what happens is a developer received a grant from a Housing Finance Agency or Community Development Corporation (CDC) to build affordable homeownership units. These units are then sold to qualifying buyers at a certain Area Median Income (AMI). Usually these households have a gross take home pay that is 60 to 80% of the AMI. The buyer can purchase the home for a reduced price; however, the home has a deed restriction that limits the future sale price and could require profit sharing with the CDC. Usually the developer receives a developer fee of 10 to 15 percent of the hard costs.

While these do exist they're complicated and you do them 1) if you're a non-profit or 2) if you're very savvy with affordable deals. Otherwise I'd avoid these programs- too much brain damage for the returns.

Building Low-Income condominium?

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