How I made money and did good at the same time
I wanted to take a moment to describe how I raised hundreds of thousand dollars, developed over 100 units with OPM (other people’s money) and feel good about it.
I am a circumspect introvert and often get trapped by my own thoughts. I could see how I personally would feel bad if I offered someone a low ball price or if they were going through a troubling time. I would naturally want to help that person. But this endeavor allowed me to do something I didn’t know I loved but would grow to love, make lots of money, and feel really good about it.
Long story short I was working at a nonprofit Organization and we started developing affordable housing. Here are some of the major benefits: our finders would often require a lot of what I call pre-development costs (appraisal, Phase I environmental, downpayment, architectural drawings, home inspection, State Historic Preservation Office ruling, etc.). These costs would run anywhere from $10,000-$25,000. However we secured a 0% predevelopment loan for up to $50k.
Then the acquisition of the property and construction cost was funded by the State with a 25% cash flow loan. The state wouldn’t fund up to 80% of the deal meaning we would have to find other sources to cover the remains 20%. This was completed through other grants either at the county, state, or federal government. Meaning no money out of our pocket.
Real life example:
10 unit building.
Acquisition and construction was $2.2 million, and my company made $150,000, without putting any money into the deal.
Plus on the operating side since it was "affordable", the rents would be around $110,000 and the operating costs (incl propert management, facilities management, taxes, insurance, annual painting, etc.) was around $70k, meaning our NOI (net operating income every year was $40k.
Typical Single Family Home:
$500,000 acquisition and construction. Our profit from developing the home was $40k and then we would also have annual cash flow.
I completed over a hundred units, raising literally hundreds of thousands of dollars in capital, and operating (project based rental assistance), made money, and housed people that desperately needed good affordable housing.