Affordable properties are typically intended for seniors, low-income people, disabled individuals, or other disadvantaged groups. To determine the exact rent rates a developer/owner needs to offer to qualify for affordable housing benefits, developers can visit the HUD income limits guide. Affordable properties using the HUD Section 8 program are sometimes operated by non-profit groups, including some 501(c)(3) organizations.

Investing in affordable properties can offer many benefits, such as consistent returns, multiple renters, and a steady cash flow. According to HUD Loans, the Department of Housing and Urban Development agrees to cover any difference between a contracted, subsidized rental rate and what a resident can pay through the use of HAP contracts. This means that, even should a resident become unemployed, the government will pick up the tab in ensuring rent is paid.

According to Multifamily Loans, opting for lower-cost multifamily properties can help in many ways. First, the properties are often affordable, and they can house multiple renters, which means more income for you, which can be used to pay down the property faster. Multifamily affordable housing is considered to be a safe investment for investors, as these types of properties are often in high demand. When you have a multifamily property in an area that is in high demand, and when the rents are predictable, you can more easily predict how much you are going to be earning.

Investing in affordable housing properties can be seen as a riskier option due to the potential for historical deferred maintenance issues and perceptions of higher rental arrears. Additionally, there is the risk of tenants not being able to pay rent due to unemployment, which could lead to a decrease in income for the landlord. However, this risk is mitigated by the Department of Housing and Urban Development's HAP contracts, which cover any difference between a contracted, subsidized rental rate and what a resident can pay. Source

Investors or developers may be able to take advantage of HUD’s Low-Income Housing Tax Credit (LIHTC) program. This program offers tax incentives in two separate ways, covering either 30% or 70% of a rehabilitation or development project’s costs. Additionally, investors or developers may also be in a strong position to utilize additional credits if a property or development is located within an Opportunity Zone.

For investing in affordable properties, one of the best financing options is a loan backed by the Department of Housing and Urban Development (HUD). HUD loans offer 35-year fixed rate terms, full amortization, and leverage of up to 87%. These loans have few restrictions on borrower experience, and their liquidity and net worth borrower requirements are far more flexible compared to even agency loans. The biggest downside is that it takes more time to get the financing, but for many, it’s well worth the wait. For more information, see HUD Multifamily Loans.

The best strategies for finding affordable properties depend on your budget and the type of property you're looking for. It's important to know what type of class and size of property you want, and to understand what you don't want. Maps can be helpful, but it's also important to look at submarkets within the markets you're interested in. Additionally, you may want to consider taking advantage of Fannie Mae Multifamily Small Loans, which can be remarkably competitive.