Colorado Investors: Success with CHFA Multifamily Loan Programs?

Question

All,

Learning about the Colorado Housing and Finance Authority (CHFA) Multifamily loan programs, curious if any of you have had success. I have steered away from CHFA for down payment assistance (DPA) as I understand this would indefinitely limit rental income for an investor. That said, it appears that CHFA's multifamily loan programs encourage investment activity, but focus on providing low- to medium-income housing options. I understand affordable housing can come with its own batch of issues for a landlord, so insight on that is also welcome.

Kind regards,

-Brandon

Brandon Hagen · Answer

@Teri Feeney Styers great point.

This is indeed one of the questions I had after my calls w the state agencies. I had read various criteria of 30%, 60%, and 100% AMI. The “cap” will always be a % and not a fixed number, so you can count on the % likely tracking in proportion to inflation. I’m no expert and anyone looking to confirm these numbers should contact CHFA or CO DoH directly.

For those curious about what qualifies as a 100% of AMI in CO (and other percentages), CHFA provides this list by county here: https://www.chfainfo.com/arh/asset/Documents/2021-Rent-and-income-limits.pdf

Unless you’re committed to squeezing Every. Last. Ounce of rent out of your tenants, I imagine the average MFH landlord would be able to set themselves up for solid cash flow down to 60% AMI on a certain % of units in certain properties. This may not be ideal for those focused on extracting only top-of-market rents, but again may open different doors at a state or county level if you are a “mission-minded” investor and not just looking to cashflow. And networking with other likeminded investors could help when resale becomes immanent in your investment plan.

Teri Feeney Styers · Answer

In my one discussion with a CHFA lender I was actually surprised at the AMI formula - the resulting rents were "market" rates at that time. It wasn't as restrictive as you might think...

Brandon Hagen · Answer

@Ben Rhodin

Thanks for your feedback.

I’ve spent some time speaking with CHFA and CO Dept of Housing to learn more since my original post. My understanding is that CHFA as a residential lender is simply built to help borrowers own a home. They are not built to accommodate investors, and in fact outright disallow use of the property as a rental. Great to help low income homeowners who do not plan to use their home as a rental revenue generation vehicle.

Conversely, CHFA as a multifamily lender is built to assist those investors who help them fulfill the CHFA mission of providing affordable housing in underserved communities. So, to work with CHFA as a multifamily lender, you’ll end up signing onboard with a lending program that, amongst other criteria, requires 75% of the units in the property to meet their affordable housing criteria based on a % of AMI (area median income). This caps the amount of rental revenue you have access to per property (which you may or may not be comfortable with). So, for formula-driven investors, this may be a wet blanket. However, if being a philanthropic landlord is part of your investment plan, that may offer a whole different level of access I can not speak to.

A final note on CHFA multifamily criteria: the agreement to use the property as an affordable housing vehicle locks the property into a certain term of providing that to the community - typically 30 years. Unlike a conventional mortgage on a residential SFH or small MFH (for example) that involves a 30 year period for repayment terms (and the contract duration can be truncated once paid in full), the CHFA expectation of that property providing affordable housing to the community for a set duration must be met until the end of the term. This agreement would then taken on by any subsequent buyer during that 30 year period. This would likely impact the resale ability of your property if your investment plan includes selling before the term is fulfilled.

Ben Rhodin · Answer

Hi @Brandon Hagen!

This is definitely a question that I come across a lot with my clients. It seems very enticing and like it help further increase the approachability of property in this market. I will say that it depends on your situation and strategy, the biggest hurdle that I hear from my lenders regarding all the different assistance programs is the fine print. Most of these programs want to make sure that you are occupying the property for an extended period, and will have increased fees, and stipulations. This hinders any house hack situation if you are planning to spend one year in the property and move onto the next one. Most of these programs require you to occupy the property for at least 3 years typically, so it really slows your growth if you are house hacking (which I am assuming if you are planning to use these programs).

I have not dug into the Multifamily programs as much, and they may be different. I would contact a lender and get insight from them, as they will be better suited to discuss all the terms and pitfalls with the programs. Typically when you deal with the government there are more strings attached.

Colorado Investors: Success with CHFA Multifamily Loan Programs?

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