1. Know How to Maximize Your BBRI
Budget Based Rental Increases (BBRI) allow owners to increase rent each year with HUD approval. Because RAD for PRAC conversion rents are based on contract rents prior to conversion, it is essential to properly time and submit a BBRI. Submissions should be completed and approved by HUD before the owner files the Conversion Plan. Since several steps go into completing a BBRI, it is best to start early in the conversion process.
2. Know Your Options
Several important decisions must be made at the beginning of a RAD for PRAC conversion. Owners should determine whether a financial or non-financial conversion is feasible, whether to operate under a PBRA or PBV program, and how to use rent bundling effectively. Each of these choices carries long-term implications for rehabilitation and capital needs, property management, and income potential.
3. Know Your Rent Boosts
In addition to BBRIs, RAD for PRAC conversions offer several rent boost opportunities that can raise contract rents to their allowable maximum. Maximizing rents is critical because it increases the debt that can be leveraged for rehabilitation and strengthens long-term cash flow during operations. Properties may qualify for rent boosts by:
- Implementing a well-rounded Supportive Services Program for residents
- Demonstrating reduced utility costs through rehabilitation with third-party verification
- Securing a Preservation Rent Increase when significant rehabilitation costs are involved and financed through debt or other funding
4. Know the Resident Rights and Protections
Resident protections are a cornerstone of RAD for PRAC conversions and are required under program regulations. These rights include:
- The right to return to the covered project
- The right to no rescreening upon return
- The right to organize
- The right to funding for resident participation
Resident engagement is also required at multiple stages of the conversion process. Owners must hold meetings at specific intervals, share required information, and seek resident feedback on the rehabilitation Scope of Work early in the process. Because compliance with these requirements is mandatory, failure to meet them can prevent HUD from approving the Conversion Plan.
5. Know Your Obligation
After submitting an interest notice, owners often begin financial feasibility analysis and pre-development due diligence. Sometimes, owners discover that the conversion is not feasible for financial or other reasons. Under RAD for PRAC program rules, owners are under no obligation and face no penalties if they choose not to continue with the conversion.
Ready to Get Started?
Are you exploring whether RAD for PRAC is a good fit for your organization’s goals, or ready to begin a BBRI to maximize rent potential? Reach out to us at D3G. As repositioning experts, we can help you evaluate whether the RAD for PRAC program is a viable and lucrative option for your property and start the process with the necessary CNA report to maximize your BBRI.
