How to Identify Opportunities for Affordable Single-Family Property Development (Copy)

Affordable housing is getting tougher and tougher to find in the United States. Part of that is because of how much the median home price has gone up. 

Currently, the median home price is nearly $437,000. To put that in perspective, it has increased by about $100,000 in just three years. 

Some people may argue that there are good opportunities for investing in affordable housing because of this. 

What makes somewhere a good investment for an affordable housing development? What about investing in single-family properties? 

This guide will answer those questions and more. 

How Does Affordable Housing Work? 

Before we can go over good opportunities for an investor, it is important to understand how affordable housing works.

Essentially, this is a government program that incentivizes real estate investors like yourself to provide low-income housing for those who need it. In return, you can get tax credits by dedicating a certain portion of your apartments or homes for this purpose. 

So, how does someone qualify for affordable housing? It depends on that person's individual situation as well as their household situation. 

One aspect that comes into play is their gross annual income. This program will compare that income to the federal poverty line. If they are close enough to this, that person can qualify for affordable housing. 

However, there are aspects of your household that can make the poverty line fluctuate for you. The main aspect is how many dependents you have. Someone with two children can qualify with a higher gross annual income than someone who is single. 

The other big factor with this is if the person has any special circumstances that can allow them to qualify outside of household income. Things like the person being a military veteran or having a physical disability could get them to qualify here. 

Identifying Your Target Market 

Now that you have an idea of how people qualify for affordable housing, you have to see if there is a market for it in your area. 

How can you figure this out? Look at how people qualify for these homes above. You have people with disabilities, military veterans, and people with low incomes. 

What you need to do is figure out how many people in your area are in those situations. When it comes to income, you simply need to research your area's median income and if it is low enough, you should have a market for it. 

For disabilities, this link has stats on the disabled population of every state. That means that you can narrow it down to that area and if that is not enough for you, some cities and towns even have data on this. 

The point of this is for you to figure out if there is a large market for this type of housing in your area. If there is a large enough market for this, then you can take the next step forward. 

Consider Operating Costs 

If you are trying to buy an existing building for affordable housing, you need to know how much it costs to keep that building running. Examples can be the maintenance fees that occur each year, the average monthly utility costs, staffing costs, and more. 

Because you are likely not going to make as much money off of rent with low-income housing, you need to make sure that your expenses reflect this because you have less room for error. So, even if you have good intentions with this investment, you still need to make sure that it is profitable to run it properly. 

Consider Building Expenses 

Another idea you may have is to try to build the property on your own. In other words, you may want to build housing from scratch and hire a construction crew to do it. 

If you go this route, there are other factors that you have to consider, such as how much the land costs, what quotes the construction crew gives you, how long it is going to take to build housing and the price of equipment such as lumber. 

As described above, it is still important that you keep your investment profitable. This means going over the numbers carefully before you jump into this. 

Take Advantage of Deals 

Finally, if you are not having much luck finding a building or development with minimal costs, you may need to consider going in a different direction. 

One thing that you can do is find deals for housing. This may mean finding sellers in a vulnerable position, such as ones that are in foreclosure or have been threatened with foreclosure. 

Another example can be buying a property as-is that needs a lot of maintenance. If you have a reliable maintenance crew with you, you may be able to turn that property into a very profitable investment. 

The point is that there are still hidden gems in the real estate market, even if they seem to be getting more difficult to find. Look hard to see if you can buy a house or an apartment building at a discount. 

Invest in Affordable Housing 

These are some factors that you need to consider before you invest in affordable housing. First, make sure that you have enough people that qualify for this in your market. 

Then, go over the numbers to see if building operating costs or property development expenses make sense. If neither works out for you, try to take advantage of property deals that may be out there. 

Are you ready to invest? Message us here to see how we can help you.