Tap to get financing
HUD Loans
HUD Loans
Loan Programs
FHA & HUD LoansHUD 221(d)(4)HUD 223(f)HUD 223(a)(7)HUD 241(a)HUD 232/223(f)
Calculators
Break-Even Ratio CalculatorCap Rate CalculatorCash-on-Cash Return CalculatorCommercial Mortgage CalculatorDebt Yield CalculatorDSCR CalculatorLoan Repayment CalculatorLTV CalculatorNOI Calculator
Resources
BlogLoan DocsHUD REAC InspectionsHUD Section 202 Supportive HousingHAP Contracts2021-2022 HUD Multifamily Basic Statutory LimitsFrequently Asked Questions
About
CompanyLeadershipTeamWe're Hiring
Contact Us
Get financing
Was This Article Helpful?
Newly Published
Oct 5 at HUD Loans
HUD’s New Surplus Cash Distribution Changes
Oct 3 at HUD Loans
What Are Replacement Reserves?
Sep 12 at HUD Loans
Is HUD Financing Available for Assisted Living Facilities?
Explore the Janover Network
Feb 2 at Multifamily Loans
Top 10 Fannie Mae Multifamily Lenders of 2023
Jan 31 at Commercial Real Estate Loans
Top 10 Commercial Property Management Companies of 2023
Jan 30 at Commercial Real Estate Loans
Top 5 Markets for Medical Office Investing in 2023
HUD Multifamily Loans Blog
Last updated on Dec 8, 2022
3 min read
by Content Team

The Opportunity Zones Program and HUD Multifamily Loans

Opportunity Zones offer a groundbreaking federal tax incentive to encourage development in some of the nation's most distressed areas, where HUD multifamily loans can be ideal for investors.

Get Quotes ← Apply for a loan in minutes and get multiple quotes today

In this article:
  1. FHA Multifamily Loans Are an Excellent Source of Funding for Opportunity Funds
  2. The Tax Benefits of Opportunity Zones
  3. Opportunity Zones and Affordable Housing
  4. Get Financing

FHA Multifamily Loans Are an Excellent Source of Funding for Opportunity Funds

The Opportunity Zones program offers a groundbreaking federal tax incentive designed to encourage development in some of the nation’s most economically distressed areas. Created as a result of the Tax Cuts and Jobs Act of 2017, the Opportunity Zones Program permits borrowers to defer paying capital gains taxes until 2027, provided that they invest in an Opportunity Fund, a special financial vehicle which must invest at least 90% of its assets in a Qualified Opportunity Zone, or QOZ. Qualified Opportunity Zones include 8,700 low-income census tracts specifically nominated by state and territorial governors and approved by the U.S. Department of the Treasury.

Opportunity Funds can invest either in real estate or eligible businesses. To invest in real estate, a fund needs to either construct a new building, or invest at least the current value of a building into rehabilitation/building improvements. With long terms, high leverage, and low interest rates, HUD multifamily loans are ideal for developing multifamily properties in Opportunity Zones.

The Tax Benefits of Opportunity Zones

While we mentioned that investing in an Opportunity Fund allows investors to defer paying capital gains taxes, that isn’t the only tax benefit they offer. In fact, investors who keep their investment for at least five years are eligible for a 10% discount on capital gains taxes, while investors who hold the investment for seven years can receive an additional 5% reduction — for a total discount of 15%. Finally, those investors who keep their investment in an Opportunity Fund for at least 10 years will not have to pay any capital gains taxes on any investment gains since it entered the Opportunity Fund.

It’s important to know that Opportunity Funds can self certify — they don’t actually need to receive approval from the Treasury or any other government agency. However, they will be subject to an asset test twice every year to ensure that 90% of assets are actually invested in a QOZ. Funds that do not meet the standard will be subject to a variable penalty, which is currently set at 6% per year. Investors may start their own Opportunity Fund (i.e., a captive fund), or, they may choose to invest in another Opportunity Fund.

Opportunity Zones and Affordable Housing

Opportunity Zones are often in need of quality affordable housing, and this is where HUD multifamily loans truly shine. HUD offers some of the highest leverages in the industry, with its HUD 221(d)(4) and HUD 223(f) loans allowing LTVs of 87% for affordable properties and LTVs of 90% for developments with 90% or more low-income units. Plus, affordable properties are allowed a lower DSCR (to a minimum of 1.15x) in comparison to the 1.20x required for market-rate properties.

In many cases, Opportunity Fund managers (and associated developers) may also wish to make use of the Low-Income Housing Tax Credit (LIHTC) program, a dollar-for-dollar tax credit which is awarded to developers of affordable properties and can be re-sold to investors to fund the development of a property. While the LIHTC program is competitive, it can be an excellent way to generate capital for projects. The credit comes in two variations: 4% credits, which subsidize 30% of a project’s cost, and 9% credits, which subsidize 70%.

In addition, HUD multifamily borrowers using the LIHTC program can also enjoy a reduced 0.45% mortgage insurance premium, in contrast to the 0.65% MIP generally mandated for other properties. When combining this program with the tax benefits of Opportunity Funds, investors can achieve truly remarkable yields.

In this article:
  1. FHA Multifamily Loans Are an Excellent Source of Funding for Opportunity Funds
  2. The Tax Benefits of Opportunity Zones
  3. Opportunity Zones and Affordable Housing
  4. Get Financing
Categories
  • HUD Multifamily Loans
  • FHA Multifamily Loans
  • Opportunity Zones
Tags
  • HUD Multifamily Loans
  • FHA Multifamily Loan Terms
  • Low Interest Multifamily Loans
  • Benefits of HUD Multifamily Construction Loans
  • HUD Multifamily Acquisition Loans
  • HUD 223(f)
  • HUD 223(f) Loans
  • FHA 223(f)
  • FHA 223(f) loans
  • LIHTC
  • Low-Income Housing Tax Credit
  • National Equity Fund
  • HUD 221(d)(4)
  • Opportunity Zone
  • Opportunity Fund
  • Qualified Opportunity Zones
  • Opportunity Zones California

Getting commercial property financing should be easy.⁠ Now it is.

Click below for a free, no obligation quote and to learn more about your loan options.

Get financing →
Janover logo

HUD Loans is a Janover company. Please visit some of our family of sites at: Multifamily Loans, Multifamily Today, Commercial Real Estate Loans, SBA7a Loans, CMBS Loans, Apartment Loans, HUD Loans, HUD 221d4 Loan, HUD 232 Loan, HUD 223f Loan, HUD 223a7 Loan, SBA Express Loans, SBA 504 Loans, and OpportunityZones Help.

Janover Inc.

6401 Congress Ave
Ste 250
Boca Raton FL 33487

hello@hud.loans

Site Information

Privacy Policy
Terms of Use

This website is owned by a private company that offers business advice, information and other services related to multifamily, commercial real estate, and business financing. We have no affiliation with any government agency and are not a lender. We are a technology company that uses software and experience to bring lenders and borrowers together. By using this website, you agree to our use of cookies, our Terms of Use and our Privacy Policy. We use cookies to provide you with a great experience and to help our website run effectively.

Freddie Mac® and Optigo® are registered trademarks of Freddie Mac. Fannie Mae® is a registered trademark of Fannie Mae. We are not affiliated with the Department of Housing and Urban Development (HUD), Federal Housing Administration (FHA), Freddie Mac or Fannie Mae.

Copyright © 2022 Janover Inc. All rights reserved.