The Math

TOTAL COST
Total Cost is the price the investor pays for the home, closing costs, make ready and repairs/maintenance costs. Total Cost is used to determine the resident’s Right to Purchase prices. A sample is highlighted below:

Purchase Price  – $239,500
Closing Costs* – $3,500
Make Ready & Repairs/Maintenance Costs – $7,000


Total Cost
$250,000

*Includes costs such as transfer taxes, attorneys’ fees, title insurance, other acquisition costs, etc. To be used as an example only, actual costs and figures vary based on price and location.

MONTHLY RENT INCREASES
Each year, a resident’s Monthly Rent increases by no more than 3.75% over the previous year’s Monthly Rent.

For example, if the Monthly Rent for Year 1 is $2,000 per month, the increase for the next year is $75/month (i.e., $2,000 x 1.0375).**

Monthly Rent
Year 1 ……….$2,000
Year 2 ……….$2,075
Year 3 ……….$2,150
Year 4 ……….$2,230
Year 5 ……….$2,310

RIGHT TO PURCHASE PRICE INCREASES
Each year, the Right to Purchase Price increases by 3.5%

In the example, if the Total Cost of the home is $250,000 and if the Right to Purchase increases by 3.5% (i.e., Prior Year Purchase Right Price x 1.035)** then the Purchase Right Price for Years 1-5 is as follows:

Year 1 ………………..$258,800
Year 2 ………………..$267,900
Year 3 ………………..$277,300
Year 4 ………………..$287,000
Year 5 ………………..$297,000

There are additional costs that the resident will incur if they exercise their Right to Purchase, such as, closing costs, transfer taxes, attorneys’ fees, title insurance and the cost of a mortgage loan. As a result, actual total costs to exercise the Right to Purchase will vary.

**Rent will round to the nearest $10. Right to purchase price will round to the nearest $100.

%d bloggers like this: