When it comes to determining whether a commercial or multifamily real estate project is a good investment, there are a variety of methods you can use-- and one of the most effective is to use a project's gross rent multiplier, or GRM, in order to help calculate the value of the property. A gross rent multiplier is defined as the number of years a property would take to pay for itself in gross rent--i.e. not taking into account insurance, property taxes, utilities, and other expenses.)
In certain multifamily real estate projects, an owner/developer will give up some of their rights via a Land Use Restrictive Agreement, or LURA, in order to receive tax credits in the future. The LURA will specifically document the restrictions placed upon the property, and typically help guarantee that the project will receive a specific number of LIHTC credits over a specific time period.
Low Income Housing Tax Credits, or LIHTC credits, are federal tax credits designed to encourage private businesses to invest in affordable housing. In the last three decades, LIHTC has assisted in the financing of nearly 2.5 million affordable rental units across the U.S. While LIHTCs apply to multifamily apartment developments and not purely commercial real estate developments like office buildings or retail projects, many developers of mixed-use projects do use LIHTC credits.