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

ROBERT C. KUTSCHBACH

HONDROS COLLEGE&

CARLETON REALTY

Non-Profit Housing Orgs – The New Market

in Real Estate Education

History of Non-Profit Housing Organizations

1900’s Church Sponsored Organizations

Homes for the Aged

Homes for Wayward Children

Homes for Orphans

1970’s & 1980’s Fair Housing Period

Community Monitoring & Enforcement

Housing for Disabled

Low Income Housing

Consumer Credit Counseling

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

2000’s Current Era

Loan Restructuring

Short Sale Advisory

Foreclosure Counseling

Credit Repair

Energy Efficiency Initiatives Green Construction Solar & Wind Energy Star

Advantages of Being a “Not-For-Profit”

Organization

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

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

Target Markets &

Educational Subjects in Demand

Target Markets

Retirement Housing Providers Independent Living Assisted Living Skilled Nursing

Housing Providers Low Income Persons with Disabilities Homeless Housing Providers

Target Markets (continued)

Fair Housing Agencies

Homebuyer Assistance Agencies

Credit, Delinquency & Foreclosure Counseling Services

Types of Educational Subjects in Demand

Financing Programs

Credit Reporting

Property Management

Construction Management

Fair Housing

Types of Educational Subjects in Demand (continued)

Consumer Rights

Environmental Issues & Regulations

Home Buyer Budgeting

Energy Saving Techniques

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

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

Financing Programs of Special Interest

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

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)

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

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

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

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

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

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

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

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.

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.

Recent Laws & Regulations

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)

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.

2011 Government Regulations

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

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.

Contact Information

Robert C. Kutschbachcarletonrealty@sbcglobal.net

Hondros Collegewww.hondros.edu