Non-Profit Housing Orgs – The New Market in Real Estate Education

1. Non-Profit Housing Orgs – The New Market in Real Estate Education Robert C. Kutschbach hondros college & Carleton Realty

2. History of Non-Profit Housing Organizations

3. 1900’s Church Sponsored Organizations Homes for the Aged Homes for Wayward Children Homes for Orphans

4. 1970’s & 1980’s Fair Housing Period Community Monitoring & Enforcement Housing for Disabled Low Income Housing Consumer Credit Counseling

5. 1990’s Home Ownership & Education Promotional Period • Private Charitable (Nehemiah, AmeriDream®) • Government Sponsored (OHFA) • Community Based (Homes on the Hill, Gladden Community House, Columbus Neighborhood Housing Service) • Environmental Education • Lead Paint • Radon • Mold

6. 2000’s Current Era • Loan Restructuring • Short Sale Advisory • Foreclosure Counseling • Credit Repair • Energy Efficiency Initiatives • Green Construction • Solar & Wind • Energy Star

7. Advantages of Being a “Not-For-Profit” Organization

8. Advantages of Being a “Not-For-Profit” Organization • Tax-free income allows more capital to be retained • Ability to raise capital in more ways – Loans only available to non-profits • Many preferences are given to non-profits • HUD – first chance at bidding and reduced prices (10%-30%) for repossessed properties & rental • GFE’s – first chance at bidding & reduced prices on repossessed homes. • Tax Credit Financing – Over 90% of tax credits for financing are awarded to non-profits

9. Advantages of Being a “Not-For-Profit” Organization (Continued) Can raise money through tax exempt donations Non-profit offer competitive salaries & wages to attract and retain qualified staff Limits personal liability Eliminates property taxes Allows eligibility for public & private grants Provides for support from political advocacy groups

10. Target Markets & Educational Subjects in Demand

11. Target Markets • Retirement Housing Providers • Independent Living • Assisted Living • Skilled Nursing • Housing Providers • Low Income • Persons with Disabilities • Homeless Housing Providers

12. Target Markets (continued) Fair Housing Agencies Homebuyer Assistance Agencies Credit, Delinquency & Foreclosure Counseling Services

13. Types of Educational Subjects in Demand Financing Programs Credit Reporting Property Management Construction Management Fair Housing

14. Types of Educational Subjects in Demand (continued) Consumer Rights Environmental Issues & Regulations Home Buyer Budgeting Energy Saving Techniques

15. HUD Approved Housing Counseling Courses Financial Management / Budget Counseling Mortgage Delinquency & Default Resolution Non-Delinquency Post Purchase Workshop Pre-Purchase Counseling Pre-Purchase Home Buyer Education Fair Housing Pre-Purchase Education

16. HUD Approved Housing Counseling Courses (continued) Predatory Lending Education Rental Housing Counseling Home Improvement & Rehabilitation Financial Budgeting & Credit Repair Courses are offered in English, Spanish, Arabic, Cambodian & Portuguese HUD’s annual budget for homeowner education & counseling is $88 Million

17. Financing Programs of Special Interest

18. Financing Programs of Special Interest • Section 202 - Supportive Housing for the Elderly • Special program for low income senior housing communities • HUD determines “certificate of need” within various communities • All residents must meet low income guideline • Federal Government pays for all allowable expenses including reserve for replacements for amounts exceeding tenants rental contribution • The advance is interest free and is not repaid if the housing is available to low-income persons for not less than 40 years

19. Financing Programs of Special Interest • Section 202 - Supportive Housing for the Elderly (continued) • Owner gets a “management fee” but no other profit • Requires a guarantee from sponsor • No down payment required. Capital advances are made to eligible non-profit sponsors • 40 year amortization (property is free & clear thereafter)

20. Financing Programs of Special Interest • Section 203(k) - Rehabilitation Loan • Allows for the acquisition & rehab of residential houses (1-4 family) • Rehab costs are financed into the loan • Buyer may add-on appliances to the loan • Buyer may add-on energy efficiency improvements to the loan

21. Financing Programs of Special Interest • Section 203(k) - Rehabilitation Loan (continued) • Processing time is longer • Minimum $5,000 rehab required • 3.5% of the total cost required as down payment • Fees & interest rates are higher than normal FHA loans & interest rates

22. Financing Programs of Special Interest • Section 221(d)(3) & (4) - Multifamily Rental Housing for Moderate-Income Families • Program designed for the construction or major rehab of large multifamily complexes (Over 20% of loan must go to rehab) • Reserve for replacement required • 90% LTV financing (however general contracting services may be used in lieu of down payment) • 40 year amortization • Non-recourse loan which is assumable

23. Financing Programs of Special Interest • Section 207 & 223(f) - Existing Multifamily Rental Housing • Program designed for rehabilitation of large multifamily complexes • Loan covers acquisition & rehab costs • Reserve for replacement required • 85% LTV • 35 year amortization • Non-recourse loan which is assumable

24. Financing Programs of Special Interest • Section 232 - New Construction or Substantial Rehab of Nursing Homes, Intermediate Care Facilities, Board & Care Homes, & Assisted Living Facilities • Must accommodate 20 or more patients requiring skilled nursing care by licensed & trained professionals • Major equipment needed to operate facility may be included in mortgage • Facilities for day care may be included • Reserve for replacement required • 40 year amortization • Non-recourse loan which is assumable

25. Financing Programs of Special Interest • Section 811 - Supportive Housing for Persons with Disabilities • Project rental assistance covers the difference between HUD approved operating costs and the tenants contribution toward rent • The advance is interest free and is not repaid if the housing is available to low-income disabled persons for not less than 40 years • Capital advantages are made to eligible non-profit sponsors • Requires a guarantee from sponsor • Low down payment required. (½% of loan amount not to exceed $10,000) • 40 year amortization

26. Financing Programs of Special Interest • USDA 515 - Rural Rental Housing Loans • Program designed for construction of multifamily complexes in rural locations for non-profit entities • Cooperative Housing • Downtown Renewal Areas (Rural) • Group Homes / Disabilities • Rural Housing for Seniors

27. Financing Programs of Special Interest • USDA 515 - Rural Rental Housing Loans (continued) • USDA issues (NOFA) Notice of Funding Availability for Targeted Communities • Competitive applications are submitted • State directors approve loans to $1,500,000 to selected projects • Loans are written at a current rate, but can be reduced to an effective rate of 1% based on income of tenants • Requires a guarantee from sponsor • No down payment • Loans are for up to 30 years, but amortized over 50 years • Owners may obtain guaranteed equity loans after 20 years as a incentive for participation.

28. Tax Credit Financing Federal tax credits are allocated to state agencies to assist with financing of targeted needs in the community The state agency chooses which projects are most deserving These tax credits are used by the project to raise money from investors The interest paid to investors is federal tax-free Not only is it easier to raise capital, but also, at a lower rate.

29. Recent Laws & Regulations

30. 2009 American Recovery &Reinvestment Act 250 Million designated to “green” retrofit low income multi-family housing complexes 13.61 Billion was allocated to other programs administered by HUD (75% was to be administered by state and local agencies)

31. 2010 EPA Regulations In April 2010, EPA Regulations require contractors that remodel homes built prior to 1978 obtain certification as a “lead renovator”. Today, this certification is being provided only by a few national paint companies.

32. 2011 Government Regulations Recent Government Regulations require special disclosures if companies are offering “pre-foreclosure or short sale” services or counseling

33. Summary Real estate education goes far beyond pre-licensing, post-licensing, & continuing education for licensees. The needs in our society for real estate education are great. Non-profit organizations are just one example of this need. Real estate education providers should be exploring these other opportunities.

34. Contact Information Robert C. Kutschbach carletonrealty@sbcglobal.net Hondros College www.hondros.edu