Transcript Document

November 2009
Welcome to CAHEC’s 2011
Partner’s Conference:
Surviving our Changing Tax
Credit Environment
Property Manager’s
Workshop
June 8, 2011
Overcoming the Challenges of
Compliance (Part I)
Erik Whitton, Spectrum Enterprises
June 8, 2011
2011 CAHEC Conference
June 8, 2011
Advanced Tenant Certification
Erik Whitton – Spectrum Enterprises, Inc.
“Advanced Tenant Certification”
Tax Credit Compliance
“Beyond the basics; an examination of complex noncompliance issues discovered in tenant files. How
to look at a file from an auditor’s perspective and
gain insight on the types of indicators that raise
flags during a file review.”
“Advanced Tenant Certification”
We will examine actual tenant files and discuss issues such as:
• Inconsistent information within a file
• Incorrect math
• Applicants failing to disclose all income/assets
• Being aware of federal laws impacting compliance
• Due diligence requirement
• Applicants adding minors to the household in order to qualify
• First recerts showing income increases
• Etc.
“Advanced Tenant Certification”
• Over the past year our staff has been setting aside files that
contain more advanced issues of non-compliance which could
lead to a credit loss.
• Files used in this presentation are meant to illustrate the
concepts being discussed.
• In all cases we cautioned our clients that the household could
jeopardize the tax credit.
• In most cases we work with investors reviewing first year
qualifying tenant files for new deals. These files are
extremely important as the initial qualified basis triggers the
flow of tax credits into the deal.
• Mistakes made with first year files can be very damaging to
the overall tax credit funding for the project.
“Advanced Tenant Certification – ARTHUR FILE”
• Be aware of file inconsistencies. Check and double check all
information.
• Sometimes 3rd party verifications can contain errors!
• Arthur File:
• TIC listed $20,688.28
• Applicable income limit was $21,960
• A checking account verification from the bank stated the
average 6 month balance as $814.88
“Advanced Tenant Certification – ARTHUR FILE”
• However, the file also contains bank statements (required by the
management company) as supporting documentation. These list
the following balances:
• OCT - $1,220.69
• NOV - $131,973.18
• DEC - $128,296.50
• JAN - $128,587.36
• FEB - $127,578.15
• MAR – missing
• The actual 5 month average checking account balance computes to
$103,531.18
• The imputed asset income would be an additional $2,070.62
• This would place the HH over the income limit
• There’s no way the 6 month average balance could be $814.88. It’s
mathematically impossible.
“Advanced Tenant Certification – ROSANNA FILE”
• Spectrum has a policy which we strongly encourage all clients to
adopt. Where an applicant has provided inaccurate information
during the screening process we do not issue an approval for them
to move into an affordable unit. NO EXCEPTIONS ARE MADE!
• If you can find false/inaccurate information about one aspect of
eligibility how can you trust any of the other information provided?
• ROSANNA FILE
• On 4 different documents in the file the HOH certified zero assets.
• Our auditor noted that a pay stub showed a direct deposit.
• Upon further questioning the applicant revealed over $53,000 in
assets.
• Suggest adding to your tenant selection criteria that providing false
or inaccurate information will result in an immediate rejection of the
application.
“Advanced Tenant Certification – JASMIN FILE”
• When a household is very close to the income limit additional
steps are needed to meet the due diligence requirement
• This is especially true with first year qualifying households at
new LIHTC properties
• Jasmin File:
• Tenant has 2 jobs. The PT job is not in question. Income
is $3,612.62
• For the FT job EV listed a current weekly salary; no raise
expected.
• $623.66 x 52 = $32,430.32
• Letter from employer echoes the salary but also mentions
a $500 year end bonus. Manager did not include this on
the TIC.
• $32,430.32 + $500 = $32,930.32
“Advanced Tenant Certification – JASMIN FILE”
• Plus PT job and small amount of asset income =
$36,545.70
• Income limit is $36,840
• Less than $300 from the income limit.
• This property is required to submit pay stubs in addition to
the EV. Our auditor noticed that the salary went from
$598.66 to $623.66. The increase was shown on the first
2010 pay stub (January 4).
• This could be an annual scheduled raise. We asked the
manager to follow up with the employer to obtain a history
of pay raises (tenant had the same job for 4 years).
• If the follow up came back showing sporadic raises we
would have accepted the file.
“Advanced Tenant Certification – JASMIN FILE”
• However, the follow up showed a raise every year in
January. Therefore we feel the TIC should reflect a raise
(anticipated income for the 12 months following move in).
• This was an April 1 move in. We counted 39 weeks at the
current rate and 13 weeks with an additional $28/week.
The additional $364 places the HH over the income
limit.
“Advanced Tenant Certification – JENNY FILE”
• Be aware of file inconsistencies. Check and double check all
information.
• Jenny File:
• TIC listed $27,144; Applicable income limit was $27,420
• Since the household was close to the income limit (less than $300)
and there was a question regarding OT, we asked the manager to
submit pay stubs.
• Both the EV and phone verification list $24,109.23 as the amount of
YTD pay
• Our staff compared this to the pay stub which listed $26,109.23
• Note that the YTD amounts are only off by one digit
• How is this possible? A simple mistake or something more sinister?
• Using the pay stub YTD placed the HH over the limit
• 26,109.23 divided by 49 weeks = $27,707.75
“Advanced Tenant Certification – DWIGHT FILE”
• When reviewing 1st year recertification files we always look for
income increases, changes in jobs, etc.
• All recertification files with a change in income, household
composition, etc. must include very detailed explanation.
• Include the nature and timeframe of the change.
• Ask whether the change should have been known at time of initial
move in.
•
•
•
•
•
Dwight File. Moved in 06/04/2009
Household Income = $26,903.24
Income Limit = $27,720.00
June 4, 2010 Recertification Income = $29,816.28
$2,000+ over the income limit.
“Advanced Tenant Certification – DWIGHT FILE”
• Our staff began to examine the nature of this income increase.
• At move in the tenant worked at Heavey’s earning $9.15 per hour.
EV is dated 05/02/2009.
• Recert shows a job at Neill Corp which started on 06/08/2009
paying $12.24 per hour.
• At time of move in (06/04/2009) the tenant would have known he
was starting a new job in 4 days.
“Advanced Tenant Certification – DWIGHT FILE”
• We asked the manager to obtain & provide additional explanation
including
• When did he apply for the job?
• When did he interview?
• Sometimes the follow-up provided by the manager does not help put
the issue to rest
• The original (Heavy’s) job was verified to have terminated on
02/23/2009.
“Advanced Tenant Certification – MICHIO FILE”
• Another 1st recert that went over income.
• This particular property has a pattern of first recerts where people
went over the limit.
• Examining the recert file our team found an EV form for a job that
listed a hire date preceding the date of move in, yet the job was not
disclosed when the HH was processed for move in a year ago.
• Very clear that the tenant did not reveal all income at time of move
in.
• In this scenario you should not renew the lease or complete the
recertification. Household should be evicted and replaced by a
qualified tenant.
• IRS 8823 audit guide says that an owner should not lose credits for
tenant fraud.
• However, due diligence requirement must be met. No loose ends.
Overcoming the Challenges of
Compliance (Part II)
Erik Whitton, Spectrum Enterprises
June 8, 2011
2011 CAHEC Conference
June 8, 2011
HUD Income Definitions
Erik Whitton – Spectrum Enterprises, Inc.
“HUD Income Definition”
• An applicant applies for an apartment. His EV form
says he is paid $12/hour and works 35-40 hours per
week. There is no other pay from overtime, shift,
commission, bonus, tips, or raise. The correct way
to factor the job is:
a)
b)
c)
d)
$12 x 35 x52 = 21,840
$12 x 40 x52 = 24,960
$12 x 37.5 x52 = 23,400
$12 x 40 x 4 x 12 = 23,040
“HUD Income Definition”
a)
b)
c)
d)
$12 x 35 x52 = 21,840
$12 x 40 x52 = 24,960
$12 x 37.5 x52 = 23,400
$12 x 40 x 4 x 12 = 23,040
• Always use the highest amount when a range is
given.
• Best Practices: Call employer for further clarification
•
Especially if eligibility is on the line
“HUD Income Definition”
• An applicant applies for an apartment. His EV form
says he is paid a weekly salary of $480. There is no
other pay from overtime, shift, commission, bonus,
tips, or raise. The correct way to factor the job is:
a)
b)
c)
d)
$480 x 4 x 12 = 23,040
$480 x 2 x 24 = 23,040
$480 x 52 = 24,960
$480 x 4.33 x 12 = $24,940.80
“HUD Income Definition”
a)
b)
c)
d)
$480 x 4 x 12 = 23,040
$480 x 2 x 24 = 23,040
$480 x 52 = 24,960
$480 x 4.33 x 12 = $24,940.80
• Always use actual pay frequency to factor income.
Don’t convert weekly pay to monthly.
• Best Practice: Make sure pay frequency is
documented for all sources of income.
“HUD Income Definition”
• A divorced individual applies for an apartment. His
only income is a government pension in the amount
of $4,000 per month. According to the terms of his
divorce from his spouse, she receives 25% of this
pension. It is paid directly to her from the
government.
• The correct way to factor the pension is:
a)
b)
c)
d)
$4000 x 12 = 48,000
$1000 x 12 = 12,000
$3000 x 12 = 36,000
$0.00
“HUD Income Definition”
a)
b)
c)
d)
•
$4000 x 12 = 48,000
$1000 x 12 = 12,000
$3000 x 12 = 36,000
$0.00
As of June 2009 the HUD handbook was revised to
state:
•
Other state, local government, social security or private
pension funds paid directly to an applicant’s/tenant’s former
spouse pursuant to the terms of a court decree of divorce,
annulment, or legal separation are also not counted as annual
income and should be handled in the same manner as 4,
above. The decree and copies of statements should be
obtained in order to verify the net amount of the pension that
should be applied in order to determine eligibility and calculate
rent.*
“HUD Income Definition”
• An individual applies for an apartment. She is a PT
student, aged 25, with the following financial aid:
• $10,000 annual scholarship
• $5,000 annual grant
• $5,000 annual loan
• Tuition costs $7,000/year
• She has a Section 8 voucher.
• The correct amount of income is:
a) $8,000
b) $15,000
c) $20,000
d) $0.00
e) $13,000
“HUD Income Definition”
a)
b)
c)
d)
e)
•
•
•
•
$8,000
$15,000
$20,000
$0.00
$13,000
(b) Count financial in excess of tuition
(c) Loans never count towards income
(d) Since she has Section 8 you have to count this
(e) Loans do not count towards the formula
“HUD Income Definition”
• A self employed roofer applies for an
apartment. Each month he makes $2,000 but spends
$400 on roofing supplies; $100 on child support; and
$100 on expenses for his roofing truck. The correct
way to factor this income is:
a) $2,000 x 12 = $24,000
b) $1,600 x 12 = $19,200
c) $1,500 x 12 = $18,000
d) $1,400 x 12 = $16,800
e) None of the above
“HUD Income Definition”
•
a) $2,000 x 12 = $24,000
b) $1,600 x 12 = $19,200
c) $1,500 x 12 = $18,000
d) $1,400 x 12 = $16,800
e) None of the above
•
For self employed individuals you count NET
income after business expenses are deducted.
“HUD Income Definition”
• An individual applies for an apartment. His income
consists of a job paying $12/hour with 20-25
hours/week. There is no other pay from overtime,
shift, bonus, tips, etc. and no raise. This is an
AmeriCorps job. The correct way to factor the
income is:
a) $12 x 20 x 52 = $12,480
b) $0
c) $12 x 20 x 4 x 12 = $11,520
d) $12 x 20 x 4.33 x 12 = $12,470.40
e) $12 x 25 x 52 = $15,600
f) $12 x 22.5 x 52 = $14,040
“HUD Income Definition”
a) $12 x 20 x 52 = $12,480
b) $0
c) $12 x 20 x 4 x 12 = $11,520
d) $12 x 20 x 4.33 x 12 = $12,470.40
e) $12 x 25 x 52 = $15,600
f) $12 x 22.5 x 52 = $14,040
1. Some jobs are excluded. See HUD exhibit 5-1.
These include VISTA, AmeriCorps, Foster
Grandparents, Retired Senior, Senior Aides, Green
Thumb, and more.
“HUD Income Definition”
• An individual applies for an apartment. He says he
does not have any income whatsoever. He
completes a budget sheet which shows a local
Catholic orphanage paying his cell phone bill
($50/month), car payment ($350/month), giving him
$150/month in cash to buy food, and $250/month in
cash to pay for rent and utilities. You count the
following as income on the TIC:
a)
b)
c)
d)
e)
$0
$250/rent + $150/cash but nothing else
All of it
Everything except the cash for food
Everything except the cash for rent
“HUD Income Definition”
a)
b)
c)
d)
e)
$0
$250/rent + $150/cash but nothing else
All of it
Everything except the cash for food
Everything except the cash for rent
From HUD Handbook: Owners must count as income any regular
contributions and gifts from persons not living in the unit.
These sources may include rent and utility payments paid on
behalf of the family, and other cash or noncash contributions
provided on a regular basis.
Groceries and/or contributions paid directly to the childcare
provider by persons not living in the unit are excluded from
annual income.
Temporary, nonrecurring, or sporadic income (including gifts) is
not counted.
“HUD Income Definition”
• An individual applies for an apartment. His
household includes himself and a foster child. The
foster child is 17 years old; receives monthly SSDI
income, and works after school at a movie theatre.
The correct way to factor income for this HH member
is:
a)
b)
c)
d)
Count SSDI but not the job.
Count the job but not SSDI
All of it
None of it
• Use the 2 person income limit for this household:
a) True
b) False
“HUD Income Definition”
a)
b)
c)
d)
Count SSDI but not the job.
Count the job but not SSDI
All of it
None of it
•
Use the 2 person income limit for this household:
a) True
b) False
•
For foster children you do not count earned income but all
unearned income is counted.
Foster children do not count as household members.
•
“HUD Income Definition”
• An individual applies for an apartment. Her
household includes herself and a foster adult. The
foster adult is 25 years old; receives monthly SSDI
income, and works at a movie theatre. The correct
way to factor income for this HH member is:
a)
b)
c)
d)
Count SSDI but not the job.
Count the job but not SSDI
All of it
None of it
• Use the 2 person income limit for this household:
a) True
b) False
“HUD Income Definition”
a)
b)
c)
d)
Count SSDI but not the job.
Count the job but not SSDI
All of it
None of it
•
Use the 2 person income limit for this household:
a) True
b) False
•
•
For a foster adult you count both earned & unearned income.
Foster adults do not count as household members.
“HUD Income Definition”
• An individual applies for an apartment. 4 weeks ago
he started a new job as a ballpark announcer. The
first 2 weeks he had to work 40 hours/week to get
trained. After finishing training he started his normal
schedule of working only 10 hours per week. His
rate of pay is $10/hour and he is paid every week.
The employer says nothing will change in the next 12
months (no more training, raise, etc). YTD pay has
been verified as $1,000.
• The correct way to factor income for this HH member
is:
a)
b)
c)
d)
$10 x 10 x 52 = $5,200
$1,000 / 4 = $250; $250 x 52 = $13,000
$1,000 x 12 = $12,000
None of the above
“HUD Income Definition”
a)
b)
c)
d)
•
•
$10 x 10 x 52 = $5,200
$1,000 / 4 = $250; $250 x 52 = $13,000
$1,000 x 12 = $12,000
None of the above
You can disregard higher YTD income as long as you clearly
document the reasons YTD income is greater than projected
income.
Best Practice: Use Spectrum YTD Clarification Form
“HUD Income Definition”
• An individual applies for an apartment with a move
in date of January 1. He is unemployed and
collecting $500/month in UEB. His application lists a
seasonal job starting in April and going through
December as a landscaper. The job pays
$1,000/month.
• The correct way to factor income for this HH member
is:
a)
b)
c)
d)
$1,000 x 12 = $12,000
$500 x 3 = $1,500; and $1,000 x 9 = $9,000 = $10,500
$500 x 6 = $3,000; and $1,000 x 6 = $6,000 = $9,000
$500 x 12 = $6,000
“HUD Income Definition”
• The correct way to factor income for this HH member is:
a) $1,000 x 12 = $12,000
b) $500 x 3 = $1,500; and $1,000 x 9 = $9,000 = $10,500
c) $500 x 6 = $3,000; and $1,000 x 6 = $6,000 = $9,000
d) $500 x 12 = $6,000
SocialServe.Com
Crystal Kirby
Socialserve.com
Socialserve.com provides vital disaster housing
recovery services to communities, honed while
performing extensive, rapid housing response
for events such as Gulf coast hurricanes,
Southern California wildfires and Midwestern
tornadoes and floods.
Socialserve.com
See also www.nchousingsearch.com
www.schousingsearch.com
www.georgiahousingsearch.org
www.virginiahousingsearch.com
www.DChousingsearch.org
www.TNhousingsearch.org
www.MDhousingsearch.org
Taking Advantage of
Individual Immunity: Pros &
Cons of the Recertification
Exemption
Panel of Speakers
► Jill King, KHC,
► Brenda Hawkins, VHDA,
► Dennis Cokley, SCSHF&DA,Director Compliance Monitoring
& Inspections
► Susan Westbrook, NCHFA, Supervisor of Rental Compliance
Operations
► Tim Morgan, Evergreen Construction Co., Raleigh, NC
► Mitzi Ramsey, Winterwood Management Co., Louisville, KY
Recertification Exemptions: Yes or No?
On July 30, 2008, President Bush signed H.R. 3221
known as the Housing & Economic Recovery Act of
2008 (HERA). The bill included several revisions to the
Low Income Housing Credit regulations. The Act:
 Eliminates the annual income recertification
requirement for 100 percent qualified unit
developments, applicable for years ending after the
date of enactment.
Our Panelists will discuss how their respective Agency
developed a policy for implementing this change, and
the pro’s and con’s in determining whether to take
advantage of the exemption.
CAHEC’s Policy
On 100% LIHTC projects placed in service after July
30, 2008,
 CAHEC does allow the implementation of the annual
recertification exemption:
 as long as the applicable state allocating agency’s
policies are properly utilized and
 as long as all required forms are used to provide
continuous documentation to certify non-income
related eligibility status per household annually
thereafter.
“It’s a Tug of War”:
Determining the Financial
Integrity of a Rental Property:
Whose Responsibility Is It?
Jill Odom, CAHEC
Frankie Pendergraph, Pendergraph
Companies
Question - Who’s Responsible
for achieving and Maintaining
Financial Integrity?
Answer
…Anyone with a vested interest in the property.
This would include:
• The owner
• The management agent
• The syndicator/investor
• The lender(s)
• The State allocating agency
• Who else?
Financial Integrity cannot be achieved without a
coordinated team effort
Integrity
1.The state or quality of being entire or complete;
wholeness; entireness; unbroken state;
2. Moral soundness; honesty; freedom from corrupting
influence or motive; -- used especially with reference to
the fulfillment of contracts, the discharge of agencies,
trusts, and the like;
3. Unimpaired, unadulterated, or genuine state; entire
correspondence with an original condition; purity.
Syn: Honesty; truthfulness, veracity, reliability, honor.
What is Financial Integrity? –
From the Investor’s perspective
Financial Integrity
• Synonymous with Financial Stability, or Financial
Viability
• The ability of a property to achieve or exceed all of the
financial projections relating to its development and
operational phases
• Adhering to or exceeding expectations with regard to timing
and delivery of projected tax credits
• Maintaining property performance standards in accordance
with IRC regulations, Federal, State and local laws
• The ability to generate revenue and absorb costs with
minimal variances using a realistic and achievable budget.
Tools for determining Financial Integrity
• AHIC Watchlist Criteria
• Development Phase, including lease-up
• Construction Delays over 3 months
• Construction cost overruns exceeding 15% of contract or contingency
reserves spent
• Leasing delays over 3 months
• First mortgage closing delays over 3 months
• Mechanics Liens
• Revenue & Expense variances
• Any change in qualifying units
• Litigation
• Bankruptcy
Tools for determining Financial Integrity
• AHIC Watchlist Criteria
• Operational Phase
•
•
•
•
•
•
•
•
•
•
•
•
•
High Receivables/High Vacancies
Debt Coverage
Unpaid real estate taxes
Insurance coverage
Mortgage or guarantee delinquency or default
Deferred Maintenance or extraordinary repairs not budgeted
Physical Inspection/Physical Deterioration
Significant life-safety issues
Unauthorized debt
Required Deposits and inadequate funding of reserves
GP Removal/replacement
GP/management agent failure to perform
Litigation or Bankruptcy
Tools for determining Financial Integrity
• Industry Best Practices – Risk Rating Policies
• Development Phase
•
•
•
•
•
•
•
•
Construction/Lease-Up Schedules
Financial (sources and uses)
Construction Loan status
Permanent Loan status
Program Compliance
General Contractor
GP/Sponsor/Management
Recapture risk
Tools for determining Financial Integrity
• Industry Best Practices – Risk Ratings
• Stabilized Phase
•
•
•
•
•
•
•
•
•
•
Debt Service Coverage
Occupancy
Benefits (tax credit and losses)
Reserves
Physical issues
GP/Sponsor/Management
Program Compliance
Insurance/Taxes
Reporting
Recapture/Foreclosure risk
Tools for determining Financial Integrity
• LIHTC Program regulations
• Contracts
•
•
•
•
•
LIHTC Application and Awards letters
Partnership Agreements
Management Agreements
Guarantee Agreements
Loan Documents
• IRS 8823 Audit Guide
Tips to Attain Financial Integrity
• To the Owner
• Be aware of the terms and conditions of your agreements
and contracts – insuring that they are reasonable and
achievable
• Timing is EVERYTHING!
• Use realistic and achievable revenue and expense
assumptions – Voodoo math can cripple a project
• Communication is CRITICAL – share the important details
with your entire team, especially your property management
agent
Tips to Maintain Financial Integrity
• To the Management Agent
The success or failure of the first year of operations almost
always determines the long-term viability of the project
• Hold a “kick off” meeting with your owners (and syndicator)
– to confirm all the specifics of a new property
•
•
•
•
•
•
•
Set-asides
Rent/utility schedules
Tax Credit delivery/lease-up schedule
Review marketing plan
Reserves: Funding amounts and timing
Review budget
Review all promises made in the TC application and pertinent terms of
the partnership agreement (ie: reporting requirements)
Tips to Maintain Financial Integrity
• To the Management Agent
• Use a “By the Book” methodology of management
• Know which housing program handbooks are applicable and which
regulations to follow for determining initial and continued compliance
•
•
•
•
•
•
•
HUD 4350.3 Handbook
8823 Audit Guide
State Allocating Agency guidelines and requirements
Landlord/Tenant laws
Fair Housing Laws
Local Codes
ADA/Accessibility & design requirements
• Know your market and advertise creatively and pro-actively
• Focus on lease enforcement and resident retention
• Recruit experienced site staff: provide on-going training,
support and motivation!
Financial Integrity of a
Rental Property
Whose Responsibility?
2011 CAHEC Conference
June 8, 2011
Frankie W. Pendergraph, The Pendergraph Companies
What is Financial Integrity?
Each of the following people have a different
perspective:
•
•
•
•
•
•
Contractor
Fee Developer
Developer/Owner
Investor
Lender
Management Company
Financial Integrity
to the Contractor
•
•
•
•
•
Getting paid pursuant to the contract
Getting paid for change orders
Minimizing cost overruns
Wants plans he can build by
Wants the Notice to Proceed at an appropriate time
of the year
• Wants a responsive Owner
• Wants a municipality he can work with
Consequences
of Construction
•
•
•
•
•
•
•
•
•
Is the contractor knowledgeable of the programs?
Is the Construction Budget realistic?
Bonding and obtaining a Letter of Credit
How to pay for change orders and cost overruns
Timing Penalties – Lease-up Adjusters
Untimely Notice to Proceed, Time of Year
3rd Party Professionals – Architect, Engineer etc.
Delays caused by indecisions of Owner
Difficulties dealing with municipalities and State permitting
agencies
• Affiliated Contractor vs Non-Affiliated Contractor
Financial Integrity
to the Fee Developer
•
•
•
•
•
Maximizing tax credit pricing
Receiving 100% of the development fee
Receiving timely equity installments
Completing the development on time
And get out
Financial Integrity
to the Developer/Owner
•
•
•
•
•
•
•
•
All items under Fee Developer PLUS
Putting together the right team
Obtaining loans – new underwriting standards
Maximizing cash flow
Maintaining the property physically and for compliance
Satisfying all governmental compliance
Meeting occupancy and debt service requirements
Per unit operating costs
Consequences
related to the
Developer and Owner
• Is the Developer/Owner knowledgeable of the programs?
• It might work on paper, but does not in reality
• Building a project not right for the market
• Unit mix, location, site issues, unrealistic rent structures
• Not having a realistic budget - development and operations
• Point chasing
• Accepting the units before they are truly ready
• Promising an unrealistic lease-up schedule and rent structure
• Signing documents without reading them or understanding
them
• Not communicating with management regarding equity and
agency requirements
• Debarment issues, Recapture, Adjusters, Guarantees
Consequences
related to the Investor
•
•
•
•
•
Is the Investor knowledgeable of the programs?
Not contributing equity in a timely manner costs the deal
Equity documents not matching up with loan documents
First year compliance – who is looking
Forcing the developer to agree to unrealistic lease-up to
get the necessary yield
• Originators vs. Asset Managers
• Expectations vary
• “One more thing…”
Financial Integrity
to the Lender
• Is the borrower/guarantor financially sound?
• Is the deal financially sound?
• Can the property operate within the proposed
budget?
• Are the takeouts in place?
• Is management company capable of maintaining
compliance?
Consequences
related to the Lender
•
•
•
•
•
Is the Lender knowledgeable of the programs?
Reserve requirements
Reporting
Dealing with different divisions within a single bank
Permanent Lender requirements may delay the closing of
the permanent loan
• Equity timing also may delay closing of the permanent
loan
Financial Integrity
to the Management Company
•
•
•
•
•
•
•
Can I get my management fee?
Can I pay the bills?
Cash Flow / Return to Owner
Taxes and Insurance, Reserves
Physical Condition
Cash Calls from Owners
Compliance, Keeping the Gov’t happy
Consequences
related to Management
• Is the management agent knowledgeable of the
programs?
• Not meeting the lease up schedule
• Vacancies and Delinquencies
• Not meeting debt service requirements
• Unable to pay bills and transfers to T&I and Reserves
• Out of compliance – agencies, loan and equity
documents, program rules
• Poor physical condition, deferred maintenance
• Can’t pay asset management fee, cash flow to owner
• 8823’s, 2530, black marks, can’t do business
• Poorly Developed Property = Poor Construction = Poor
Management = YOU WILL BE POOR!
• Bad Construction = Cost Overruns = More Debt = Less
Developer Fee = Less Cash Flow = More Deferred
Maintenance = Troubled Property
• Failed Marketing = Failed Leasing = Failed Cash Flow =
Troubled Property = Work-out Plan = Angry Owner who has
to put in money, has to answer to the lenders, investors and
government agencies, and their spouses!
• Just 4 vacant units at $400/month = $1,600/month =
$19,200/year
Knowledge
• Clueless = Emptiness
(empty units and empty wallet)
• If you do not know what you are doing, you should
not be in this business - or get someone who has the
knowledge to help you
Surviving on Limited Resources:
Money-Saving Tips from Our
Property Managers
Debbie Honeycutt, GEM Management, Inc.
Sherre Whitley, Evergreen Construction Co.
Emisha Reed, Pison Development Group
Tammy Murphy, Excel Management Co.
“It’s a Social Game”:
Successful Leasing
Strategies & Maximizing
Curb Appeal
Beverly Patrone, Millennia Housing
Management
Frankie Pendergraph, Pendergraph
Companies
“It’s a Social Game”
Successful Leasing Strategies
Beverly A. Patrone
Millennia Housing Management Ltd.
Affirmative Fair Housing Marketing Plan
Leasing up a community takes a lot of planning on
the management team’s part.
During the development of the community the
development team normally creates an Affirmative
Fair Housing Marketing Plan. These plans are good
for 3 or 5 years depending on the type of financing
that is on the community.
Affirmative Fair Housing Marketing Plan
This plan gives the staff the information needed to
market all of the demographic areas.
The plan also provides the required marketing
sources and community contacts that are to be
utilized in the plan.
Affirmative Fair Housing Marketing Plan
The marketing done to ensure compliance with the
plan should be kept in a binder for proof when an
auditor comes to the community.
Even though the plan is only required to be
updated every 3 or 5 years, it should still be
reviewed annually to insure it is still current.
Marketing Plan
In addition to the AFHMP, the community should
develop a marketing plan.
The marketing plan will describe all of the different
marketing ideas for the lease up of the property.
Marketing Plan
Examples of the types of marketing that can be
done:
• Advertisements
• Advertisements can be run in various types of mediums
such as.
• Local Newspapers
• Newspapers in the surrounding cities.
• Free Local Newspapers
Marketing Plan
•
•
•
•
Local Bulletin Board Newspapers
Church Bulletins
TV
Radio
• Internet Advertising/Social Networks
• Craigslist
• Facebook
• Twitter
Marketing Plan
• Community Outreach
• Use of Flyers, Brochures and Tear Off Flyers at:
• Churches
• Pizza Places
• Convenient Stores
• Laundromats
• Gas Stations
• Small Restaurants
• Community Outreach Locations (i.e. Department of
Job & Family Services, VA Office, & Section 8
Office)
Marketing Plan
• Get your name out there in unique ways…
•
•
•
•
•
Pharmacy bags
Back of grocery receipts
Small town restaurant place mats
Pizza boxes
Have the local Meals on Wheels pass your flyer out with
their deliveries.
Marketing Plan
• Hold events for your community.
• Open Houses
• Resident Party, BBQ, Holiday Gatherings
• Have the Neighborhood Watch meet in the community
room.
• Live radio spots
• Hold a Grand Opening
• Have a Wellness Clinic in the community room
• Hold a Craft Fair
• Have a booth at local fairs.
• Have a table in local events at malls.
Marketing Plans
• At your community
• Have realtor signs out front and leading to your
community.
• Have flags displayed outside of the office building
drawing attention.
• Place balloons along the road.
• Have the curbs cleaned and flowers planted.
• Make sure that the trash dumpster areas are clean.
• Make sure that the exterior looks great, no torn screens,
broken mini blinds or trash sitting outside.
Marketing
• Remember ……
• Be creative …..
• Be aggressive …..
• Be imaginative …..
Maximizing Curb Appeal
2011 CAHEC Partners Conference
June 9, 2011
Frankie W. Pendergraph, The Pendergraph Companies
How is this for curb appeal?
What about this?
What is Curb Appeal?
• Webster’s defines “curb appeal” as: the visual
attractiveness of a house as seen from the street.
• According to Wikipedia: Curb appeal is
attractiveness of the exterior of a residential or
commercial property. The term was extensively
used in the United States during the housing
boom and continues to be used as an indicator
of the initial appeal of a property to prospective
buyers.
Before – no curb appeal
After – curb appeal
Before
After
Before
After
Frankie’s Definition of Curb Appeal
• How you, your property and everything about
your property is perceived by anyone. It’s just
that simple.
• The desire to live, work or visit a particular
location.
• “Perception is reality!”
Curb Appeal = Perception = Reality
•
•
•
•
•
Tenant Selection
Financial Integrity
Occupancy
Safety
Compliance Issues
What makes up Curb Appeal
• Written Word and Phone/Answering Machine
•
•
•
•
•
Publications
Phone
Notices to Tenants
Newsletters
Office Hours
What makes up Curb Appeal
• Physical
•
•
•
•
•
•
55 Drive By
25 Drive By
Get out of the car
What you have heard
Internet Apartment Ratings
Current and ex-tenants do talk
What makes up Curb Appeal
• Staffing
• Friendliness
• Knowledge
• Attitude and Appearance
• Personnel and Physical Office
• Starts the moment you pick up the phone
• Tenants are like children
Curb Appeal
PERCEPTION
IS
REALITY
Soap, Water and Trash Disposal
•
•
•
•
Cheap
Just do it
Take your blinders off
Shop each other’s properties