December 24, 2015

The Math

Total Cost Basis

Total Cost Basis is the price Home Partners pays for the home, closing costs,and make ready costs. Total Cost Basis is used to determine the resident’s Right to Purchase prices. A sample is highlighted below:

Purchase Price …………………………… $200,000
Closing Costs1 …………………………… $3,000
Make Ready ……………………………… $7,000
Total Cost Basis …………………………. $210,000

1 Includes costs such as transfer taxes, attorneys’ fees, title insurance, etc.

Monthly Rent Increases

Each year, a resident’s Monthly Rent increases by no more than 3.75%.

For example, if the Monthly Rent for Year 1 is $1,400 per month, the increase for the next year is $50/month (i.e., $1,400 x 1.0375)*.

Monthly Rent

Year 1 ………$1,400
Year 2 ………$1,450
Year 3 ………$1,500
Year 4 ………$1,560
Year 5 ………$1,620

Right to Purchase Price Increases

Each year, the Right to Purchase Price increases by 3-5% (depending on the region).

In the example, if the Total Cost Basis of the home is $210,000 and if the Right to Purchase increases by 5% (i.e., Prior Year Purchase Right Price x 1.05)* then the Purchase Right Price for Years 1-5 is as follows:

Year 1 ………………………………. $220,500
Year 2 ………………………………. $231,500
Year 3 ………………………………. $243,100
Year 4 ………………………………. $255,300
Year 5 ………………………………. $268,000

There are additional costs that the resident will incur if they exercise the Right to Purchase such as closing costs to purchase the home, including transfer taxes, attorneys’ fees, title insurance, and the cost of a mortgage loan. As a result, actual total costs to exercise the Right to Purchase will vary.

* Rent will round to the nearest $10. Right to Purchase Price will round to the nearest $100.