What is Substantial Renovation?
Substantial Renovation and the HUD 223(f) Loan Program
When it comes to HUD multifamily loans, such as the HUD 223(f) loan, substantial renovation of a property occurs when either:
The required repairs and improvements of a HUD-assisted multifamily rental housing involve replacing two or more major building components, OR
Rehabilitation costs exceed the greater of:
15% of the property's replacement cost (fair market value - exclusive of soft costs) after completion of all required repairs, replacements, and improvements OR
$6,500 per dwelling unit (adjusted by HUD's authorized high cost percentage) OR
20% of the mortgage proceeds applied to rehabilitation expenses