Apartment Rehabilitation Loans From $200,000 To $1 Million Available To Los Angeles Investors

By George Vine

The California Community Reinvestment Corporation (CCRC) provides innovative acquisition/rehabilitation loans to finance apartment properties located in Los Angeles County, including properties cited for building code violations.

CCRC is a statewide non-profit consortium of 40 banks formed in 1989 to provide financing for affordable housing projects.  Since then it has approved over $200 million of loan commitments on over 100 affordable housing projects across California.

CCRC's acquisition/rehabilitation loan program targets apartment projects ranging in size from 5-40 or more units that need at least $5,000 per unit in rehabilitation costs.  The program offers an all-in-one construction loan converting to a fixed-rate 10-year (25-year amortization) permanent loan.  The current 10-year fixed rate is 8.24%.  During the construction period the interest rate is prime plus 2%.

As long as the property's rents are below $730 for a single, $781 for a 1-bedroom, $938 for a 2-bedroom and $1,083 for a 3-bedroom unit, no rent restriction agreement is required.

CCRC lends up to 75% of the apartment's after-rehabilitation value and requires a 1.2 debt service coverage ratio based on the apartment's after-rehabilitation cash flow.  The borrower must have at least 20% cash equity in the deal, and for properties owned longer than three years, appraisal equity can be considered.

Investors in small apartment properties needing renovation often must acquire them with expensive "hard money" financing, then pay for the property improvements out-of-pocket, then refinance them to recover some of their equity. 

By providing all in one acquisition/rehabilitation/permanent financing, CCRC's program eliminates the costs of one round of financing, and reduces the investor's cash requirements to 20% of total development costs.

CCRC has funded nine loans under this program for projects ranging in size from 6-25 units requiring rehabilitation ranging from $5,000 to $27,000 per unit.  Six of these loans involved property acquisition, the others were refinances.

CCRC is located at 225 W. Broadway, Suite 120, Glendale, California 91204.  Interested apartment investors should contact Mark Niles at 818-550-9808.

Vine established his consulting practice, Vine & Associates, in 1996 to provide financial restructuring and analysis services to affordable housing investors and lenders, after a 12-year career in commercial real estate banking.  He has worked with CCRC since then providing real estate credit and problem asset advisory services.  Vine can be reached at 818-957-0534 or e-mail gvine@VineAssociates.com.