HUD Financing as a Strategy for Rising Rates and Affordable Housing Projects 

For owners of multifamily housing, a HUD (Department of Housing and Urban Development) loan provides financing and liquidity that allow for lower interest rates, longer amortization, construction to perm financing options for multifamily housing projects. However, achieving HUD financing can be a difficult process and requires a lender who has the knowledge and experience to get the deal closed successfully. 

Why think about HUD financing? 

Now is a fantastic time to think about HUD financing as a strategy when it comes to affordable housing projects. HUD offers up to a 35-year amortization, compared to a typical CRE loan which only offers amortization of 20-25 years with terms as short as 5 years. 

Additionally, loans are fixed-rate, non-recourse, and have no balloon payments. 

Unlike a lot of multifamily financing options, HUD has no geographical restrictions and no minimum population requirements. Because the Federal Housing Administration (FHA) insures the loan, your lender can offer you a better deal. This includes lower down payments, lower closing costs, and easier credit qualifying.  

Here are some other benefits of HUD financing: 

  • One of the highest LTVs (loan-to-value) available 
  • Allows supplemental financing 
  • No financial capacity requirements 
  • Offer 80% LTV without limitations on the market 

Drawbacks of HUD loans 

There are pros and cons to HUD financing, but with the right lender, a lot of the difficult aspects can be avoided. HUD financing is not an easy process.  

Common problems when it comes to closing a deal are the government red tape, as well as working with a lender who might not have a lot of experience with these types of loans.   

A few other things to consider with HUD financing: 

  • Property inspections required 
  • Annual audited operating statements required 
  • Owner distribution and cash out restrictions 

Rent costs are not going down any time soon  

With rent increasing nationwide, cities like Orlando, Los Angeles, Atlanta, Dallas, Las Vegas, and more saw rent surges of 10% or more. Nashville, Jacksonville, Austin, and Seattle (just to name a few) saw surges between 8-10%. 

Local areas Lincoln James Capital serves saw drastic rent increases as well. Residents of Charlotte, North Carolina experienced a rent increase of 14.1%, while Tampa saw a surge of more than 28%. 

In an article by Greystone called “Rising Rents, Low Supply: Multifamily Data Analysis” Kimberly Byrum, managing principal for multifamily for Zonda, a housing market research and analytics firm, said that “rents and occupancy rates are at an all-time high in the multifamily sector as of the first quarter of 2022. Rents rose 19% between the first quarter of 2021 and the first quarter of 2022.” Byrum said nothing in current data indicates that the rent surge will reverse.  

Lincoln James Capital can get HUD deals closed successfully 

Traditional have risen significantly and projected to continue to rise,  and HUD financing is a great alternative to get lower rates and favorable terms. Our experienced team members can help you get HUD deals closed successfully and form strong partnerships with lenders. You shouldn’t have to settle for an undesirable loan. Nobody wants to experience buyer’s remorse or feel like they’ve been taken advantage of. And nobody should attempt to go through the lending process alone. Lincoln James Capital is here to help. 


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