I am looking at an opportunity to build a new 100 unit apartment building in Kentucky. While doing my due diligence I came across a USDA rural development loan. The loan can be used for construction of new apartments. The loan has a 40 year amortization with a fixed rate and only requires 10% down. The catch is the income limits of the prospective tenant can't be more than 30% of 115% of area mean income. Does anyone have any experience with this loan?
sound like a tax credit situation.
It requires more admin work from the PM to verify income and make sure you're always in compliance and there are inspections and standards you have to comply with for the life of the loan.
It really depends on your exit strategy. Most investors don't like buying a property with deed restrictions on the rent so your buyers pool will be limited.
A similar but less restrictive loan would be a HUD loan 221-4D. Google it for more details.
Thanks Joseph. I did look into the HUD 221-4D program. It looks like a better way to go. Thanks for the tip!
Did you end up using the USDA 515 loan? I am interested in this process and how to get started.