ALTERNATIVE FUNDING FOR HOUSING – PART 1
Karl Dakin
I help you overcome challenges to raising capital. Take advantage of my Motivated Money Method to identify those investor candidates that are most likely to invest. Top expert in fundraising.
CONTENTS
?·?????? Quick Calendar
·?????? 200th Edition
·?????? Funding Point
·?????? RCI Community Funds
·?????? Simple Due Diligence Checklist for Impact Investors in Crowdfunding
·?????? Successful Funding
·?????? Don Cohen
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?QUICK CALENDAR
?June 24 – Don Cohen Show – 9 a.m., MDT – LinkedIn Live
?June 25 – Successful Funding – 8 a.m., MDT – LinkedIn Live, Facebook and YouTube - TBD
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200TH EDITION
?THURSDAY, I published the 200th edition of my daily version of this Instant Funding newsletter. Thank you to the 878 daily subscribers and the 494 weekly subscribers to my newsletter since I launched on December 1, 2023.
?During this time, I have met many new people and re-established relationships with people from my 45 years of working with small businesses and hundreds of capital campaigns. I look forward to sharing more information from my past, current, and future work toward more successful funding campaigns.
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FUNDING POINT – ?ALTERNATIVE FUNDING FOR HOUSING – PART 1
?I have made a number of attempts to innovate alternative funding for workforce housing. However, I have yet to get the opportunity to test my innovations due to common challenges of local government, strategic partners, and changing interest rates. In my work as a team member of the RCI Communities Fund (in formation), I will get another ‘at bat’ as we intend to include residential housing as one of the targets for investments in local communities.
?Despite all of the government programs and the work of many people and organizations, the shortage of workforce housing increases. The common response is to build apartments where landlords charge rental rates that increase faster than wages, and the workers have no opportunity to build wealth of their own. Nearly all government programs invest money into housing projects that, over the long term, result in a net export of wealth from the community as mortgage payments go to someone outside of the community.
?Key challenges:
·??????? Attracting investment into an underserved community which is viewed as high-risk
·??????? Unable to qualify for or participate in any government programs
·??????? Worker builds wealth in a home
·??????? Community builds wealth with mortgage payments staying in the community
?When considering the best place to make an investment bet in residential real estate, the default answer is high-priced housing. For the same or less work, a builder can build a higher-priced house with a larger profit margin. To achieve similar margins, a builder needs to build in volume, which explains the preference for multi-family housing over single-family housing projects. Like an angel investor seeking the highest possible return on investment without regard to community needs, preference is given to higher margin opportunities. This accounts for damaging gentrification when builders seeking low-cost land move into underserved communities and build homes for the wealthy who will relocate instead of building for local residents. This is a natural consequence of a profit-driven marketplace.
?Government programs attempt to address ‘affordable’ housing by subsidizing the price of money and thereby creating a higher profit margin on housing projects that would otherwise not attract common investors. Through the sale of low-income tax credits, investors gain both profits and offsets to their income, which in combination achieve the investor’s desired rate of return. This complex, bureaucratic approach incurs substantial additional costs, which reduces the number of housing projects that may qualify. In low-income communities, a person earning a minimum wage cannot qualify for subsidized housing because their wages exceed 80% of the Area Median Income (AMI), which is the threshold for qualification. Even if a community has a housing project that can successfully navigate these challenges, there is not enough money to build all needed housing. Obtaining funding from a government housing program, like any government infrastructure program, has a low probability of success.
?Most housing projects are rentals with no possibility of a worker building wealth. Every payment out of the pocket of a worker is money gone. In many states, like Colorado, the legislature has imposed so many restrictions and liabilities on builders that the condominium market has virtually disappeared. The emphasis on building rentals reduces the inventory of housing for purchase, resulting in higher home prices. There is no pathway for most workers to move from rental to home ownership other than to spend time putting aside money to come up with a down payment. As time passes, land, materials, and the cost of construction continue to increase, often outpacing any increase in wages.
?Although it should be obvious, if housing is built with money from outside the community, any earnings, whether interest or profits, go to the source of the funding outside of the community. Big box stores are criticized for shipping profits out of town. However, there is no difference when a renter or homeowner makes their monthly payment. From a macro perspective, local communities would be better off declining outside investment unless they can make the case that more housing will cause wealth-building by new local businesses.
?With these challenges in mind, I will be participating in the work of the RCI team to achieve optimal local economic impact that will give selected communities the opportunity to build wealth locally by investing in a dedicated community investment fund. To achieve this goal, the fund will seek to raise the largest percentage of money within the fund from community residents. Fundraising will be completed through Reg CF investment crowdfunding – the transformative law of the Jobs Act in 2012 that authorizes non-wealthy people to invest in their own backyard.
?A portion of the funding will be directed to residential housing. This housing must enable wealth building by the tenant or homeowner so that it will not contribute to the continuing economic distress of the community.
领英推荐
?There appear to be a number of ways to raise money into a community fund and to deploy that money to revitalize an underserved community. I will be presenting some of these ways that are currently under consideration. However, I strongly request readers of this Instant Funding newsletter who have an idea, or better yet, a successful housing project, that addresses these challenges to contact me. Karl Dakin [email protected]
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RCI COMMUNITY FUNDS
?In collaboration with a number of other experts, we are forming RCI Community Funds to provide funding to local communities that are facing economic distress. Through an adaptation of the Diversified Community Investment Fund model of the National Coalition for Community Capital, we plan to start and raise capital into a series of community funds for selected communities. We seek to revitalize, catalyze, and impact communities to achieve sufficient economic activity so that these communities can rebuild. We are seeking financial partners for seed funding, the establishment of our initial fund, strategic partners with programs that may serve as building blocks in a funded community, allies in our mission to promote our work, and communities that need revitalization. For more info, please contact me: [email protected]
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SIMPLE DUE DILIGENCE
?SuperCrowd created a simple due diligence checklist that can help an investor candidate collect and organize information on an investment opportunity.
?https://docs.google.com/forms/d/e/1FAIpQLSeRqXgm3ajXEyKXVvMYmP_MJFQ2rLNg8fk_-zAY_KFcGqmvbg/viewform
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?SUCCESSFUL FUNDING
On TUESDAY, JUNE 18, my guest on the Successful Funding show was Ron Yeager. Ron’s lengthy career as an entrepreneur, business scout, and business operator for venture capital funds provided a rich background in evaluation investment opportunities. Despite some early audio/visual challenges as Ron participated from the road, Ron provided insights on how different people use different approaches and criteria in considering investment opportunities. He emphasized that the people, be they investors or inventors, is a key in his selection process.
You can see a recording of this show at:
You can see all of my shows at the time of broadcast or recordings of past shows at my profile on LinkedIn.
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DON COHEN SHOW
NEXT MONDAY, I will be a guest on Don Cohen’s show on LinkedIn Live at 9 a.m. MDT. The topic of the show will be ‘crowdfunding.’ You are invited to join the show as a member of the audience to our conversation on one of the approaches to raising funding that has the greatest potential.
You can register to attend the show at:
Don is an expert on LinkedIn, particularly on the use of Live streaming to build brands and communities. We will discuss using LinkedIn as a social media platform for building communities that support raising funding.
All shows where I have been a guest can be viewed on Don Cohen's LinkedIn page under Posts.
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Karl Dakin, the Capital Coach
Dakin Capital LLC
I help you overcome challenges to raising capital. Take advantage of my Motivated Money Method to identify those investor candidates that are most likely to invest. Top expert in fundraising.
5 个月Do you have an alternative funding approach for workforce housing? If so, please contact me. [email protected]