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A key factor in deciding to rehabilitate and what to change in a structure is to look at the cost of a proposed renovation, compared to the income a property will generate. The next few paragraphs will help you to assemble information about your project in a format that can then be used to look at its feasibility.
PROJECT COST
Project Costs include the hard and soft costs generated from the renovation. Hard costs include actual construction charges for material, labor, and general contractor supervision and fees. Soft costs include architect fees, surveys, appraisal charges, title search, title insurance, recording fees and one time financing fees (as charged by the source of any non City funds.) Your project costs related on our forms will be used to estimate the project’s expenses over the term of renovation financing. The monthly amount of this debt service, combined with any existing loan payments supported by the property, and your estimated expenses of running the property, are compared to the project’s income.
INCOME
Rental from each unit should be estimated. The amount should be consistent with the approved amount under the federal program that helps to finance the renovation. For HOME Partnership Program funds, the monthly rents are: one bedroom - $921.00, two bedroom - $1,108.00, three bedroom - $1,271.00. Note, rents are reduced according to a HUD formula for any utilities paid by the tenant.
FEASIBILITY
A comparison of costs to estimated income is made on a monthly basis. Monthly income must exceed expenses by an amount acceptable to the City and any private lender involved.
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