We've got a multifamily project (200 units) here in the Southeast that we are putting on the back burner right now given all the uncertainty (plus we have a few other ongoing projects). I know these loans can take a year plus to get done, but this isn't a turn off since we aren't going to start on it soon.
Here's some info for those who are going to ask: https://www.hud.loans/fha-221d4/
We are not typically merchant builders, but this is a build to sell deal we are doing. A 40 year assumable loan is pretty nice. I assume that a lot of buyers would be interested in that sort of product (any thoughts on this?). If interest rates go down after you lock the loan, you can always pay a 0.3% fee to refinance, so that's nice.
The whole Davis-Bacon wages for everyone working during the construction process seems like a turn off to me, although I have no experience with that. Is it a pain to make sure who is paid what?
Anyways, I'm curious to hear everyone's thoughts on this.
We looked into it in depth as they go high leverage, rates are low, and you can transition to perm easy. Downsides are the union labor which really kills any deal, it takes a long time to qualify, and I thought there were heavy prepayment penalties but could be wrong. Either way the union labor will blow your budget 15-20%.
I live in Georgia - unions aren't much of a thing here that I am aware of. After posting this, I was able to find some stuff online where the wages actually weren't too crazy although it was from 2019.
Agreed with the union comment, I had a lender to a proforma for me on a project and it was DOA due to the wage estimates. Best bet was to do a refinance post build, but at that point why bother with HUD?
DOA? Dead on arrival?
Huge headache to go through. Can still be worth it but just know its a really big headache.
Awesome link/site, thank you
Are you sure you can refinance for 0.3%? I thought their prepay penalty started at 10% in Y1 and declined by 1% annually. This has been our biggest hold-up from really looking into this program. Don't mind the long-term hold, but not being able to refi and take some cash out reduces some of the attractiveness.
Voluptas error magnam architecto non et nulla aspernatur. Blanditiis ducimus reprehenderit laudantium odit.
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