Government Tax Breaks - How It Works?
Hi group,
I was wondering what are some of the ways to find out about tax-breaks or subsidies that the government might give out on certain types of development projects.
For example, I recently heard about a project where the governement gave the owner tax-benefits, that the owner later passed on to the bank in exchange for the approval on the loan. The owner also had obtained subsidized rent for his senior citizen rental property (100 units).
I'd really appreciate it if someone could comment on how this is done.
Thanks,
Angel
Sounds like you are talking about Tax Credits. Federal Money is given to states, which award credits through a competitive (VERY) application process. Once a project is awarded credits, a limited partnership is formed, a bank syndicate is admitted as limited partner, and the bank pays the developer $.72-.78 per dollar of credits, over a period of years. The units are then subject to very strict low income guidlines. Section 8 vouchers can be used in conjunction, but the credits provide leverage to offset reduced rental income.
We've successfully built 3 elderly-only apartment complexes. A $4Million project carries only $500k in debt. But rents are <$200, and the developer defers compensation for many years.