Quick Review. There is approximately a $1,060,000 loan to BankNorth, $650,000 of various grants for owner-occupancy invested, 3 units sold and 9 units remaining.
We all know the current real estate market is soft. A private developer might consider renting the remaining 9 units, until the market turns. This is not an option here since the grants were for owner occupancy!! If these units are rented then the $650,000 has to be paid back by the PJ (presiding jurisdiction which means whoever gave the grants), since it violates the terms of the grants for owner-occupancy.
Bottom line these units not only have to be sold, but they need to be sold to a person of low- mod income, another requirement of the grants. In other words, we need to find 9 people of low-mod income to buy these units for owner-occupancy at average price of approximately $118,000 per unit to pay off the 1st bank loan to BankNorth.
Problem is that I only see these units appraising out no more then $75,000 per unit and that is with an extremely aggressive appraiser. What next? Answer: Try to get more grants to lower the price on the remaining units.
Lets say we were able to get another $225,000 in grants ($25,000 per unit times nine units) then we could lower the price to $93,000 per unit (118,000 break-even less the new subsidy of $25,000). I still not sure these units would sell even at $93,000, maybe 2 or 3 but not 9, since the credit markets for low-mod income (sub prime) is not good.
If something like this were to happen, then the new total of our tax monies (you and my money) invested in this project would be $975,000 ($650,000 plus the new $225,000 in extra subsidies).
Part 3 tomorrow--final thoughts on Cambridge/Hacker Street.