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Update on LIHTC Programs and RAD Midwest Lenders Conference Chicago, IL

Join Rebecca Arthur from Novogradac & Company LLP as she presents the nuances of appraising LIHTC transactions, including rent calculations, expenses, valuation methods, and more. Learn about valuing public housing and Section 8 developments.

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Update on LIHTC Programs and RAD Midwest Lenders Conference Chicago, IL

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  1. Update on LIHTC Programs and RAD Midwest Lenders Conference Chicago, IL  Wednesday, October 14, 2015 10:15 – 12:00 noon Presented by: Rebecca Arthur, MAI Partner Novogradac & Company LLP Rebecca.arthur@novoco.com (913) 677-4600 ext. 1515 www.novoco.com

  2. NUANCES OF APPRAISING LIHTC TRANSACTIONS • RENT: • Achievable Market Rent • The rent that a particular unit, considering its condition, location, features, unit size and amenities, would command in a market assuming no rent or income restrictions or rent subsidies. Based upon analysis of comparable market rate properties. • Achievable LIHTC Rent • The rent that a LIHTC unit can achieve taking into account comparable LIHTC competition, AMI level restrictions, market conditions, and features. May be less than Maximum allowable LIHTC rent for that unit. • Maximum Allowable LIHTC Rent* • Maximum allowed by Federal Program (based on Area Median Income) • Gross LIHTC Rent (tenant paid utilities have not yet been deducted) • Net LIHTC Rent (tenant paid utilities have been deducted) • *Even though its allowable to charge this rent, the rent may not be achievable in the market • Novogradac’s Rent & Income Calculator: • http://www.novoco.com/products/rentincome.php

  3. Example #1: Aurora, Kane County, Illinois – 2015 • Maximum Allowable LIHTC rents are achievable • Achievable LIHTC rents are more than 10% below Achievable Market Rents (rent advantage more than 10%)

  4. Example #1: Aurora, Kane County, Illinois – 2015

  5. Example #2 : Collinsville, Madison County, IL • Maximum Allowable LIHTC rents are NOT achievable • Achievable LIHTC rents are greater than 10% below Achievable Market Rents • Even though Maximum Allowable LIHTC rents are Less than Achievable Market Rents, Maximum Allowable LIHTC Rents are still not achievable

  6. Example #3 : Des Moines, Polk County, IA • Maximum Allowable LIHTC rents are NOT achievable • Achievable LIHTC rents are less than 10% below Achievable Market Rents (rent advantage less than 10%)

  7. NUANCES OF APPRAISING LIHTC TRANSACTIONS • Expenses: • Admin Fees –higher • Mgmt Fees – higher • Taxes – may have PILOT, abatements, valuation of LIHTC heavily contested/debated in certain areas • Utilities • Maintenance – generally similar • Capitalization Rates: • LIHTC Sales Comps? • USING MAP APPRAISALS FOR DETERMINATION OF LIHTC ELIGIBLE BASIS (Save the borrower some cash)???

  8. RAD/ LIHTC Transactions • VALUING PUBLIC HOUSING DEVELOPMENTS • As Is Value - Very Important for LIHTC Eligible Basis Determination • Highest & Best Use of the Property As Is? • Two Scenarios to Test • As Is Achievable Market Rents utilizing unrestricted – market oriented operating expense and capitalization rate • CHAP Rents utilizing market-oriented Restricted operating expenses and capitalization rate

  9. VALUING SECTION 8 DEVELOPMENTS

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