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Sample Pro Forma Single Family Rentals <br />aoovetnemarKetvalue. lrlsagooopracuceroasKrneappralseroranornerenurytoprovtoe comparaote <br />rents" for the housing units in completed condition, based on a transmittal of the plans and specifications or <br />inspection of the unit(s) after the redevelopment is complete. The "rent comparables" should be used to <br />establish the rents in the operating pro forma. <br />. Property/casualty insurance should be obtained by the developer for the interim period before builder's <br />risk insurance comes into effect. lf the developer is also the general contractor, the developer should obtain <br />builder's risk insurance as insurance against casualty and liability risks during construction. Otherwise, <br />builder's risk insurance is typically obtained by the building contractor and will be included in the <br />construction contract amount, above. ln addition, grantees typically require developers to obtain <br />commercial general liability insurance, the cost of which is typically covered by the developer fee. <br />. NSP funds or other funds can be used to pre-fund a replacement reserve so long as the amount is <br />reasonable and as required by a lender or equity investor. <br />. Operating reserve - Pre-funding this reserve can cover the cost of operating the property while lease up is <br />occurring, or during periods when the property is not fully leased up. ln this example, the operating reserve <br />was calculated conservatively as two month's rent revenues. To be funded by NSP, HUD requires that this <br />amount be reasonable and as required by a lender or equity investor. <br />. Tenant relocation- For occupied properties requiring relocation of tenants, the developer agreement <br />should spell out whether the financial and management responsibilities of tenant relocation lie with the <br />grantee or developer. <br />. Rent-up marketing costs - This line item includes the estimated costs of rent-up, such as advertising. <br />Developers should make sure that the staffing costs of rent-up are covered either in the development <br />budget or in the operating budget for the first year, but not in both pro formas. <br />. Soft cost contingency - This is a contingency amount that may be used if one or more soft costs are higher <br />than anticipated. <br />. Developer fee - This is the fee a developer charges to the project for their time and risk. Developer fees as <br />a percent of total development costs generally fall between t0% and 15%. lf funded by NSP, HUD requires <br />that the fee be reasonable and customary in the market for this type of development project. Developer <br />fees should be calculated based on the estimated time, effort and risk required of the developer. ln general, <br />higher developer fees are allowed if the developer is not being reimbursed by any funding source for <br />construction financing costs and holding costs and/or has equity at risk in the project. Fees are typically <br />lower if NSP or other sources are funding all holding costs and the developer has little or no equity in the <br />project. ln general, fees should also be lower for "easy" projects -- such as acquiring and selling homes in <br />good condition that require little or no rehabilitation. Sometimes fees are established as a specific dollar <br />amount per dwelling unit; this may be appropriate in projects where the per-unit development costs are <br />relatively low. For example, 15% of a 540,000 total development cost may not be sufficient incentive for a <br />developer to participate. Finally, it is generally not a good practice to both pay a fee and also reimburse the <br />developer for staffing and other internal costs; this raises the possiblity of "double dipping." <br />B. OPERATING PRO FORMA <br />The Operating Proforma worksheet is designed to summarize a rental project's bedroom distribution, <br />income targets, operating income and expenses, net operating income (NOl) before debt service, estimated <br />debt service (from the Operating page) and the NSP gap financing needed. This example shows only a single <br />rental unit and should be adapted as needed by the individual project. <br />. First enter the Project Name, Developer Name and Address of property. <br />o Enter the number of dwelling units of each type. A proforma could be used for several scattered-site units <br />in one project, but with single-family rentals, the pro forma will typically be for a single dwelling unit, though