“World's Most Complete Neighborpedia”
Sponsor a Community — What is Localism? | Register or Sign In
Explore:   What's happening in your neck of the woods?
Home Lawrence Bland

Lawrence Bland

Blog_tag

My Economic Stimulus Community Reinvestment package

02-17-09
Lawrence Bland

My Economic Stimulus Community Reinvestment package

Unlike President Barack Obama's plan, the plan I propose is not nationwide (but can be implemented as such in certain markets). This is designed on a much smaller scale. This plan is based on; you guessed it, Real Estate and the creation of jobs. It's much more complicated than what I am typing here but I will simplify it as much as possible so that it is readily understood.

Let's start by acknowledging a few things. First, a great number of Counties throughout the country have cities within them that have 1000's of acres of land that are vacant and generating zero revenue. They have been such for years. Much of this land can be developed and put to use to produce positive income for its city on a long term and short term basis; all while causing the city to spend very little if any money at all. Many of you are asking yourself right now, what exactly is he proposing to do? No way do you get something for nothing. What I am proposing is this, the city allows for the development of that land to put up homes (1 - 4 family) preferably duplexes (I can elaborate on this at a later time as to why I chose Duplexes). I am going to use a basic model here, let's say the land is valued at 40K, the cost for building a house including the land is 150K total. Here is how the numbers break down.

150K - Purchase Price

117K - FHA 1st Mortgage (78 LTV - MIP Cancels at 78% LTV on FHA LOANS)

That leave a down payment needed of 33K + Closing Cost

The city provides a community second for 33K and for 6% seller concessions. The benefit to the city is a monthly income of $126.48 + the tax revenues generated from the sale of the property 2nd lien is at 3.5% for 30 yrs. The seller concessions pay for all but what would be the equivalent of one month rent for the buyer. The buyer would not have any MIP because of the 78% LTV first mortgage of $646.08 (30 Yrs, 5.25% Interest), a second Mortgage of $126.48 (Community 2nd). One benefit to the buyer is home ownership under very affordable terms. Most importantly for the buyer, little to no funds down or out of pocket. In most cases the buyer would not have to bring anything to the closing table because they would have already put earnest money down and paid for things like appraisals, inspections etc. Benefit to community is Jobs! Builders hiring workers, Realtors, Mortgage Professionals, Community Development, etc...

Multiply this by 100 or even 1000?

Let's sum it up like this:

•1. Buyer is able to afford house

•2. City has revenue coming from what was once producing nothing.

•3. Jobs are created

•4. Community is developed.

For a city doing 100 houses that's $151,770 per year in income plus $300,000.00 per year in tax revenues for a total of close to half a million revenue for a city that was getting nothing prior. The best part of this is, NO TAX PAYER FUNDS ARE EVER USED TO ACCOMPLISH THIS.

This is a very basic model, just one to get conversation going. I welcome any and all comments.

Thanks!

0 Comments