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Community development corporations (CDCs) are not-for-profit organizations run by a board of directors made up of residents of the communities they serve. CDCs provide services and programs and engage in activities that support communities. One of these services is to provide affordable housing for low income families. Through partnerships with city, state and federal programs, CDCs can bring in grant money that can help buy down the cost of housing for first time homebuyers. Sometimes this extra financial boost is just what some for-profit investors and builders need in order to move a house or make a project's numbers work.
For instance, if an investor purchased a home to rehab and wanted to sell it for $100,000 after the work was completed, they would have to find a buyer to qualify for that amount. But if the investor partnered with a CDC that had grant money available of up to $20,000 per homebuyer, then the buyer would only have to qualify for an $80,000 loan. Not only would that broaden the available base of buyers, it would add incentive to the buyer, who would be getting a $100,000 home for $80,000. Other opportunities exist with larger projects where grants can be obtained to offset the cost of construction on a project. (For more information, see Financing Low Income Housing Projects.)
One of the stumbling blocks that some non-profits have is in capacity building. Some CDCs would like to increase the amount of houses being produced but lack the internal capacity to make that happen. This is where the private sector comes into play. Private investors and builders partnering with non-profit CDCs can be win-win for both. The CDC is able to apply for and obtain grant funding for the low to moderate income earner to help buy down the cost of the housing purchase, while the private investor can bring in the knowledge, skills and leverage of rehabilitation or new construction. When working together, the CDC gets increased capacity building by outsourcing and the private investor gets access to funds to help buy down the cost of a project that could otherwise be unobtainable.
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Author: Scott Grummer
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