NOAH Owner Best Practices

Take a long term view.

While NOAH deals may have higher up front, out of pocket costs than deals financed with traditional capital subsidy, over time, they appreciate and can be refinanced.

Focus on location and potential for appreciation when identifying potential properties.

Plan your acquisition financing

Compete with private market acquisition speed by streamlining your first mortgage process: build your banking relationships in advance so you are application-ready when you want to acquire a building.

Find equity sources to augment first mortgage debt

CIC’s Opportunity Investment Fund is a low cost source that can help Chicago area developers meet half of their equity requirement; similar funds exist nationwide.

Check out agency debt

Agency debt including Fannie, Freddie, or FHA typically is non-recourse with long amortizations, and works well for larger deals. If application processes move quickly enough, these sources can also provide acquisition financing.

Consider third party property management

NOAH properties with only a portion of units serving low income households are less high touch than 100% affordable properties.

Even with management fees, third party property management is cost efficient if market rate tenants comprise a large proportion of the building.

For market rate owners lacking experience with government rental subsidy and low income households, a third party manager with experience in these areas may also be helpful. Contact The Preservation Compact for more information.

Mix incomes at the property and portfolio levels

Prioritizing a mix of market rate and low income tenants across your properties and/or portfolios allows for income averaging, may reduce property management needs, and allows you to respond more flexibly to changes in the market.

With an appropriately balanced portfolio, cash flow from highly performing buildings can help balance lower performing buildings.

Develop a tenant marketing plan

NOAH deals that include both market rate and low income tenants must compete with other similar private market properties for tenants.
This requires a different marketing plan than a typical high demand LIHTC property.

Generate market rents while serving low income households

Rental subsidies such as Housing Choice Vouchers or Project-Based Vouchers can help ensure that properties serve low income households while also generating sufficient cash flow to cover debt service and expenses.

Focus on properties with modest rehabilitation needs

Fewer rehab needs means more occupancy. Owners can rehab units as they turn over.

Properties that do not require capital subsidy are not subject to wage requirements.

Recognize the cost savings from reduced compliance burden

Avoiding capital subsidy eliminates substantial staff time related to tenant income compliance.