Can HUD 232 Loans Finance Continuum of Care Facilities?
In some cases, certain facilities, often known as continuum of care facilities, offer independent living, assisted living, and skilled nursing care, all in one location. In theory, an individual could first stay in an independent living unit , and then, as their needs changed over time, could be tr
Continuum of Care Facilities and HUD 232 Loans
According to HUD regulations, continuum of care facilities can be financed with HUD 232 and HUD 232/223(f) loans. In brief, to benefit from these HUD mortgage programs, the amount of independent living units must remain under 25%.
What is a Continuum of Care Facility?
The phrase ‘continuum of care’ actually refers to the services offered and not necessarily the facility itself. However, for seniors, continuum of care facilities usually offer independent living, assisted living, and skilled nursing care in one location. Because of this, a continuum of care facility functions like an adult daycare center crossed with a nursing home.
To become a resident at the facility, a person pays an up-front, buy-in fee. As they age and require more care, their monthly fees may increase. Throughout their time at the facility, care can be adjusted according to their changing needs.
If a resident contracts a short term health issue, they can often be treated on-site without needing to be hospitalized. After they recover, they return to their residential unit. These facilities are ideal for spouses — if one becomes ill, then the other can stay close as their partner receives care.
In theory, an individual could first stay in an independent living unit. Then, as their needs change over time, they can transfer to an assisted living unit. Finally, they could move to a skilled nursing care unit for their remaining time.
Related Questions
What are HUD 232 loans?
HUD 232 loans are mortgage loans insured by the U.S. Department of Housing and Urban Development (HUD). They are used to finance the construction and rehabilitation of facilities for elderly individuals requiring medical care or other long-term care, as well as purchasing and refinancing senior-focused healthcare properties. HUD 232 loans offer fixed interest rates, are fully assumable with FHA approval, and are non-recourse, which restricts liability for developers/investors.
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What types of facilities can be financed with HUD 232 loans?
HUD 232 loans can finance continuum of care facilities and independent living facilities, as long as the amount of independent living units remain under 25%. The properties must also be designed for individuals who need long-term care or attention, provide continuous care and at least 3 meals a day for residents, have at least 20 beds for residents, be licensed by the appropriate city or state authority, and cannot have commercial space exceeding 10% of the gross floor area of the project and 15% of the gross project income.
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What are the eligibility requirements for HUD 232 loans?
In order to be eligible for HUD 232 financing, properties need to meet a variety of eligibility requirements, including offering continuous care, being appropriately licensed, and having at least 20 patients. To take out a HUD 232 or HUD 232/223(f) loan, a borrower must typically have experience successfully operating one or more facilities of the same kind that they intend to build or purchase. In addition, a borrower must also be structured as a single asset, special purpose entity (SPE). Eligible borrowers may either be a for-profit or a non-profit entity.
For more information about FHA 232 loans, you can fill out the form on our website to speak to a HUD/FHA loan expert and get a free HUD/FHA multifamily loan quote.
What are the benefits of HUD 232 loans for continuum of care facilities?
HUD 232 loans offer a number of benefits for continuum of care facilities, including low, fixed interest rates, fully assumable loans (with FHA/HUD approval), and non-recourse loans that limit risks for developers. Continuum of care facilities can offer independent living, assisted living, and skilled nursing care in one location, allowing residents to adjust their care as their needs change over time.
For more information on HUD 232 loans, please visit this page.
What are the terms and conditions of HUD 232 loans?
HUD 232 loans have terms including:
- Loan Size: $2 million ($7.6 million average loan size)
- Loan Term: 40 years
- Leverage:
- New Construction:
- Skilled Nursing/Independent Living:
- For profit: 75% LTV
- Non-profit: 80% LTV
- Assisted Living:
- For profit: 75% LTV
- Non-profit: 80% LTV
- Skilled Nursing/Independent Living:
- Purchase:
- For profit: 75% LTV
- Non-profit: 80% LTV
- Substantial Rehabilitation*:
- For profit: 75% LTV
- Non-profit: 80% LTV
- Borrower owned properties: 100% of existing mortgage debt or 90% pre-rehab market value (95% for non-profits)
- Purchase/substantial rehabilitation properties: 85% of purchase price or 90% pre-rehab market value (95% for non-profits)
- New Construction:
- DSCR: 1.45x minimum DSCR
*For substantial rehabilitation, the hard cost of the rehabilitation needs to be more than 15% of the project's post-rehab value, or, alternatively, two or more major building systems (i.e. plumbing or roofing) must be replaced.
Additional terms and conditions for HUD Multifamily Loans include:
- Loan Term:
- 10-year minimum, full amortizing
- Up to 40-year fixed-rate term for new and rehabilitated properties
- Up to 35-year fixed-rate terms for non-rehab acquisitions that can be funded with Government National Mortgage Association (GNMA) Mortgage Backed Securities
- Loan Size: $2 million minimum (average loan size is $7.6 million)
- Leverage:
- Skilled Nursing Facilities/Independent Living Units: 80% LTV (for profit), 85% LTV (non-profit)
- Assisted Living Facilities:
- New Construction: 75% LTV (for profit), 80% (non-profit)