Multi-Family Development for People with Special Needs - USDA
From the USDA Website:
"Multi-Family Housing Direct Loans
What does this program do?
This program provides competitive financing for affordable multi-family rental housing for low-income, elderly, or disabled individuals and families in eligible rural areas."
They'll loan up to 90%, including money for land development, etc.
I'm interested in this for a couple of reasons:
1. I have three kids with special needs, and there is a shortage of housing for people with special needs in our area (I'm obviously very plugged into this community here.)
2. I own 13.2 acres of agricultural land free and clear, and I'm trying to figure out what the best use for it is
3. I love building, and have always wanted to do a development project
What I'm running into:
1. I can't imagine rents received will be more than HUD FMR, which is $863/month for a 2 bed in this zip code. $702 for a 1 bed. (I believe those numbers are supposed to include utilities though, right?)
2. Using $100 per square foot for all-in cost puts my cost for 16 units (probably 2 buildings) around $1.42 Million (seems really high to me at second look)
3. Assuming all 2 bedroom units, and assuming getting $700/month for them (leaving $163 for utilities) gross monthly rent would be ~$11,200
Using pretty standard expenses, and a USDA loan, my numbers show this losing almost $10,000 a year.
If I do some eraser math and make construction costs all-in at $75 per square foot, it winds up making around $12,000 year (with a CoC of around 10% using USDA money.) One concern is that using typical Cap Rates for the area, the property will be worth less than it cost to build when it's done.
My question: Is there any point in exploring this further? Does anyone have any experience doing this type of development work? Especially with USDA loans?
Even in today's market, it doesn't seem like there is any way to justify new construction in my area, whether SFRs or Multi - rents just don't seem to support it.