Market Studies for HUD 221(d)(4) Loans
If you're serious about applying for a HUD 221(d)(4) loan, you'll need more than just a HUD multifamily appraisal for your project. You'll also need to hire a third-party contractor to complete a full market study. A market study, sometimes referred to as a valuation and market study, will examine a variety of the financial elements surrounding a potential FHA multifamily construction loan project to determine its economic viability.
HUD Valuation Analysis
The valuation analysis part of a HUD-approved market study examines factors including:
Analyzing property as "collateral and security for a long-term mortgage"
Estimation of market value
Examines market need
Residential and commercial rents
Calculates projected expenses and estimated income
Other Valuation Inquiries
In addition to examining these general valuation factors, a HUD-approved market study will also ask:
What is the duration of the project's earning capacity? (i.e. will it improve or decline over time?)
Can rents pay:
Market Condition Analysis
In addition to looking generally at the project itself, a market study examine the surrounding area to put the project in the proper economic and geographic context.
Market Condition Study Variables
Specifically, a market study will look at factors including:
Geographic boundaries of the market area
General characteristics of the market area
Specific market conditions
Supply and demand estimate
Estimated absorption time
In general, market studies must have an effective date of within 120 days of submitting a pre-application.