There are plenty of different financing options to consider when you’re ready to invest in real estate.
You can leverage your own funds, for example, or receive loans from established organizations or private lenders. There are even options to partner up with someone with the funds to help you carry out your vision.
There is, of course, nothing quite like getting a check without having to worry about repaying it. And unlike real estate loans, which require payback with interest, grants are often given without the need to pay them back.
Good news: There are grants for real estate investors available. These grants are typically designed for specific purposes, but let’s discuss some of the most popular real estate investment grants available in 2024.
What to Know About Real Estate Investment Grants
Before we dive into the specific grants, it’s important to talk about the general options.
There are three different categories of real estate investment grants: federal, state, and third-party grants.
Federal grants are often doled out through state funding, so if you find a federal grant that fits your needs, you’ll likely need to apply through the state. These grants are typically focused on restoring, rebuilding, or improving real estate within communities that could benefit most.
Third-party grants may come from private organizations or nonprofits. A local nonprofit may provide grants for investors who develop environmentally friendly properties, for example, or create grants for people of certain demographics. If you are looking for funding for specific purposes, search for those and see what you can find.
Keep in mind that real estate investment grants may be highly competitive, partially thanks to the high dollar amount they can net. Don’t sleep on smaller grants designed for business owners in your community; if your real estate investments fall into business owner territory, there are an abundance of small business ownership grants you may be eligible for, too.
1. The HOME Investment Partnerships Program
The HOME Investment Partnerships Program (HOME) is a federal grant program that seeks to create affordable housing opportunities for low-income households. These funds can finance the development or repair of affordable housing units.
For-profit developers and nonprofit developers are both eligible for this grant, which is administered by the U.S. Department of Housing and Urban Development (HUD). In many cases, these funds may be distributed through nonprofits and local communities. You must also be in a participating location.
To apply, search for your state’s HOME program for more information.
2. Main Street Grants
Main Street Grants support the growth and rehabilitation of rural downtown areas with funds for real estate improvements and projects. The goal is often to improve the community’s social, environmental, and ideally economic conditions, and typically is meant for communities with populations of 50,000 or less.
Main Street Grant funding comes from the U.S. Department of Agriculture (USDA), though you’ll often work with a local nonprofit or stakeholders during the process.
While eligibility details vary depending on the local community, both for-profit and nonprofit developers are eligible when partnering with a local government, nonprofit government, or a cooperative. You also typically need to match at least 10% of the grant with funds from other sources.
If you’re interested in Main Street Grants, you can contact your local USDA Rural Development office to learn more about their eligibility requirements and application processes.
3. Affordable Housing Grants
Affordable Housing Grants (AHG) seek to subsidize the acquisition, rehabilitation, or construction of affordable housing units. These units are meant for low-income households, and the program is administered by the Federal Home Loan Bank (FHLB) system.
AHG-assisted housing units must benefit households with incomes at or below 80% of the location’s median income, and 20% of the rental units must benefit households with incomes at or below 50% of the location’s median income.
To learn more about applying, contact your local FHLB system office.
4. Hazard Mitigation Assistance Grants
There are multiple Hazard Mitigation Assistance Grants available through the Federal Emergency Management Agency (FEMA), which serve purposes ranging from rebuilding communities after natural disasters to building infrastructure that will better withstand expected disasters in the future.
Real estate investors cannot apply directly to FEMA for Hazard Mitigation Assistance Grants; only eligible states, territories, and tribal governments can apply to FEMA. Investors and developers can, however, participate as subapplicants.
To be eligible for these grants, your project proposal must have a FEMA-approved state or tribal Hazard Mitigation Plan (HMP) by the application deadline. The projects also must be cost-effective and designed to increase resilience to reduce the risk of injuries, death, and destruction or damage to property. Finally, the project must meet all Environmental and Historic Preservation (EHP) requirements.
5. FedEx Small Business Grant
Looking for a nonfederal real estate investment grant? If so, looking to general small business grants can be a good way to go—they often have less red tape, which means more freedom for how you use those funds.
The FedEx Small Business Grant is a great example. One winner receives $50,000, and nine other winners get $20,000 each. To apply, you need to share your story, including how FedEx has helped you run your business and serve customers.
To be eligible, you must have fewer than 99 employees, be based in the U.S., been in business for at least six months, and have had a FedEx account for a set length of time.
How to Win Real Estate Investment Grants
When you’ve found a real estate investment grant that you know is an outstanding fit, here are a few tips to help you win the funding:
- Only apply to grants relevant to your project: Don’t try to shoehorn your project into a grant that doesn’t exactly align with what you want to do, even if it might technically be a fit. It will likely end up causing headaches down the road, as there’s a lot of red tape with some of these projects and their requirements.
- Prepare detailed project proposals: These proposals should outline your project goals, timeline, expected budget, site selection, design, overall financing plans, impact reports, and management plans. When possible, include a market analysis and other relevant details.
- Do some research: Some organizations will feature projects or applicants that were recently awarded grants. Take a look at past grant winners to learn more about their projects, and see how you can leverage that information to create a winning application.
- Create proposals for each individual grant: You may apply for several grants for a single project—just make sure you tailor your proposal accordingly to each individual program.
What About Tax Credit Programs?
While grants are the ideal solution (potentially offering upfront and fast funding once approved), don’t forget to look at other cost-saving programs for real estate investors.
Tax credit programs are an outstanding way for investors to maximize profit. The New Markets Tax Credit Program, for example, is designed to attract real estate development in distressed communities. There are also federal and state-based Energy Efficiency programs that provide tax credits for creating or improving energy efficiency in real estate.
Final Thoughts
Real estate investment grants are the dream for many developers, especially if you’re interested in constructing or rehabilitating buildings or commercial real estate that may not have an immediate payoff like a new home sale would.
Before applying for grants, make sure you fully understand their intended use and any restrictions surrounding the grant. You can expect that government agencies shelling out money will follow up on their investment—and make sure that you’re following the rules.
Make sure you consider all of your creative financing options (and review the pros and cons of each)— a combination of diverse approaches may even benefit your bottom line. And if there is a grant you’re interested in, research it right away—once the deadlines pass, you’re out of luck until it opens up again.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
