Attention!!!!
Landlords / rental property owners in affected areas of the Covid19 pandemic
The SBA Economic Injury Disaster Loans (EIDL) are available for rental property owners if your state has already made the application to the federal gov.
I know Connecticut, Massachusetts, Maine, New York all have. Expect all states to eventually apply.
- These loans are up to $2MM
- The loan terms are 30 years, 3.75% rate
- First 12 months of payments deferred 💥
- No prepayment penalty
- Funds are to be used for working capital needs
Apply for free at the following:
https://disasterloan.sba.gov/e... sure to select Economic Injury!
These loans will take a minimum of 3 weeks to get to you so start now! There will be a overload of applicants and this is first come first served. Be prepared and submit a complete package! Details outlined at the link above!
I just submitted my application. The website is struggling. It wouldn't let me upload the files for certain things they require because the upload feature wasn't working. I even tried on internet explorer (somehow that was their preferred brower). But this loan may be huge for landlords with a lot of properties. I have 82 houses. If 50 don't pay the rent, that would be a loss of roughly 70k a month. That'll eat thru my reserves awfully quick.
But I saw on the front page of the loan request app that they spefically state that landlords with rentals can get the loan and they even give us the direct instruction as to some selections we need to make (i.e. economic injury - just as David mentioned in his initial post).
To me, I look at it as though they should be able to make some projections as to losses. Maybe a worst case of 50% collections for a period of 6 to 9 months? And then offer a loan up to that amount. Again, how they come with their numbers will determine how useful the loan will be. A 10k loan is going to do nothing for me. A 100k loan might be the difference in keeping all my payments with the banks current and still having enough money for repairs and the like so I don't lose my houses.
Honestly, a worst case scenario of this going on for 9 months and say 50 percent collections and no option to sell the homes because we couldn't evict the tenants could cause me to lose everything. Its just not a scenario we can plan for. I've always said that there could come a time when there simply weren't enough renters because everyone was able to buy again. Well, that would mean house prices would be huge and i"d just jump on the bandwagon and sell and take my profits.
But how in the world do you account for something like this? Little to rents coming in. No ability to evict the tenants to sell the property as an exit? That just doesn't exist.
But thats why I really believe the sba is going to be super aggressive in these landlord loans. If I can get thru this with all my payments being kept up and the only hit to me is a new loan/debt of say 200k at 3.75%..... guess what, I'll be tickled pink. I can factor that in as the cost of doing business and then show these banks how I was able to survive in one of the worst debacles ever seen.
We'll find out....... :-)
Check this out.
@Scott Mac
Hi Scott, the maximum unsecured loan amount is $25k
All loans above $25k are secured by collateral if available, though the SBA will not decline a loan for lack of collateral.
Personal guarantees will be required of all owners with 20% or greater ownership
If you have more than one rental property do you apply for multiple loans or one loan for all properties?
@Carl LaRosa
Good question. I can’t say for certain how the SBA will approach this but I can do my best to guess.
They will issue up to $2mm for your business including all affiliates.
So for instance you have an llc for each of your 3 properties, you are eligible for a maximum of $2mm total.
They may UW the deal per property / LLC but they most likely will have you apply under one LLC and ask for your affiliates and come to a calculation that way.
I wish I could better answer this question, best bet is to just apply, it’s free and you don’t have to accept the loan.
For rentals in the current business environment caused by Coronavirus, the economic loss will be in the form of unpaid rents from tenants. How does one demonstrate non-payment rents to SBA to get these loans?
I just submitted my application. The website is struggling. It wouldn't let me upload the files for certain things they require because the upload feature wasn't working. I even tried on internet explorer (somehow that was their preferred brower). But this loan may be huge for landlords with a lot of properties. I have 82 houses. If 50 don't pay the rent, that would be a loss of roughly 70k a month. That'll eat thru my reserves awfully quick.
But I saw on the front page of the loan request app that they spefically state that landlords with rentals can get the loan and they even give us the direct instruction as to some selections we need to make (i.e. economic injury - just as David mentioned in his initial post).
To me, I look at it as though they should be able to make some projections as to losses. Maybe a worst case of 50% collections for a period of 6 to 9 months? And then offer a loan up to that amount. Again, how they come with their numbers will determine how useful the loan will be. A 10k loan is going to do nothing for me. A 100k loan might be the difference in keeping all my payments with the banks current and still having enough money for repairs and the like so I don't lose my houses.
Honestly, a worst case scenario of this going on for 9 months and say 50 percent collections and no option to sell the homes because we couldn't evict the tenants could cause me to lose everything. Its just not a scenario we can plan for. I've always said that there could come a time when there simply weren't enough renters because everyone was able to buy again. Well, that would mean house prices would be huge and i"d just jump on the bandwagon and sell and take my profits.
But how in the world do you account for something like this? Little to rents coming in. No ability to evict the tenants to sell the property as an exit? That just doesn't exist.
But thats why I really believe the sba is going to be super aggressive in these landlord loans. If I can get thru this with all my payments being kept up and the only hit to me is a new loan/debt of say 200k at 3.75%..... guess what, I'll be tickled pink. I can factor that in as the cost of doing business and then show these banks how I was able to survive in one of the worst debacles ever seen.
We'll find out....... :-)
@David Hulit thanks for info i just took a loan out for a cushion and to consolidate debt so i sould be good but may apply to see.
@Mike H.
Love the info and first hand experience! Sorry to hear about the technical difficulties with the website, I’ve been hearing this is an unfortunate common problem. The website was only designed for regional disasters. This will be an unprecedented undertaking.
I think you are 100% correct that the SBA will be very aggressive in making these loans.
I’d be very interested to hear how this all pans out for you. Best of luck!!!
@Dinesh Yernool
Hi Dinesh,
From my understanding you have the ability to submit projections to demonstrate the projected lost income from rents.
I believe as do others that the SBA will be very aggressive with these loans.
Best of luck!!
@Chad C.
Yea, definitely aggressive in lending and approving these loans. They have indicated numerous times they are trying to work with borrowers here.
I’d suggest these loans to any small business owner, it’s worth a shot, it’s free to apply and you don’t have to accept the terms if you don’t like them.
Key thing to note is these are eligible for landlords but ineligible for real estate developers.
Good luck!!!
@David Hulit I just read about SBA 7a loans, I guess this is a normal SBA loan, and they will be up to 10 mm and and originated by local banks, and money within days. This can be used as a bridge to a disaster loan. Article said they are waiting on the bailout package to know the lending details. Do you have any insight on the difference? Can most loan originators also do SBA loans?
@Chad C.
Hi Chad, the loan I shared about is not a normal SBA loan. EIDL Disaster Loans are originated by only the government and they have wider eligibility and different credit standards.
Standard SBA 7a loans for instance are not eligible for rental property owners.
Also, not every lender can do standard SBA 7a.
There are PLP (preferred lenders) which have delegate authority to do 7a loans without the government involved. There are other degrees as well, like CLP I believe and GLP. And depending on the structure of the loan it may have to go to the government anyways (refinancing same institution SBA debt)
The proposal you read about is very interesting however I don’t expect it to pass in that form. It would be a separate loan from EIDL and it would be a breed of SBA 7a because if bends the existing rules so much. It likely will have a much higher interest rate as standard 7a is typically Prime + 2.75
My goal is to make some generous assumptions and go from there.
Basically, I have 82 rentals. I believe that it would be reasonable to think that of the 82, 50 or so might not pay - at least here in illinois where we're in complete lockdown. i'm also going to say this could last 6 to 9 months. Thats my starting point. And that I'd like to be able to cover those rents for that period.
If they approve that, it might be a 450k loan. And I'm going to ask for the longest period of time they'll amortize over (i.e. 30). I'm guessing it will be between 20 and 30.
But again, worst case scenario is maybe I get by using only 100k to 200k of that money. I can prepay the loan off with no penalty. Or I can keep the money and maybe pay down some higher interest loans to save the difference.
i.e. If it ends up really bad and I use 200k or 250k even. At 3.75 amortized over 25, thats $1,275 payment that I'll end up getting stuck with because of the crash. I can live with that pretty easy. But then lets say we make it thru and I do end up with another 200k left, I could turn around and use that to pay down some existing mortgages and maybe save 200 bucks apiece (i.e. 100k mortg at 5.75 amort over 20 that i have several of has a payout of $700/mo.). That would save me 400 bucks a month.
So now instead of being out 1,275/mo, I could make it thru the pandemic with a bill of $875 a month and an equity hit of 250k? That would be a monumental win. Not only that but think of what that would mean in terms of showing these other banks what a reliable lender I was. To be able to make all the payments during this crisis and come out in such good shape is beyond anyone's expectations.
But its all going to come down to how they're going to base these loan amounts for landlords. I heard something about 6 months of gross profits. That doesn't seem to be anywhere near enough. They should make these loans so that we can keep making our payments assuming we could show that we could afford to make the loan payments once things come thru. For me, my net/net profit is roughly 18k/mo when normal and when not reinvesting into more houses. So I could stop buying and the 1,275/mo wouldn't be that onerous at all.
@David Hulit
Do the property's need to be in a LLC?
@Jeff Bousquet No you do not need LLC. You can select the sole proprietor option
I just submitted my application. The website is struggling. It wouldn't let me upload the files for certain things they require because the upload feature wasn't working. I even tried on internet explorer (somehow that was their preferred brower). But this loan may be huge for landlords with a lot of properties. I have 82 houses. If 50 don't pay the rent, that would be a loss of roughly 70k a month. That'll eat thru my reserves awfully quick.
But I saw on the front page of the loan request app that they spefically state that landlords with rentals can get the loan and they even give us the direct instruction as to some selections we need to make (i.e. economic injury - just as David mentioned in his initial post).
To me, I look at it as though they should be able to make some projections as to losses. Maybe a worst case of 50% collections for a period of 6 to 9 months? And then offer a loan up to that amount. Again, how they come with their numbers will determine how useful the loan will be. A 10k loan is going to do nothing for me. A 100k loan might be the difference in keeping all my payments with the banks current and still having enough money for repairs and the like so I don't lose my houses.
Honestly, a worst case scenario of this going on for 9 months and say 50 percent collections and no option to sell the homes because we couldn't evict the tenants could cause me to lose everything. Its just not a scenario we can plan for. I've always said that there could come a time when there simply weren't enough renters because everyone was able to buy again. Well, that would mean house prices would be huge and i"d just jump on the bandwagon and sell and take my profits.
But how in the world do you account for something like this? Little to rents coming in. No ability to evict the tenants to sell the property as an exit? That just doesn't exist.
But thats why I really believe the sba is going to be super aggressive in these landlord loans. If I can get thru this with all my payments being kept up and the only hit to me is a new loan/debt of say 200k at 3.75%..... guess what, I'll be tickled pink. I can factor that in as the cost of doing business and then show these banks how I was able to survive in one of the worst debacles ever seen.
We'll find out....... :-)
do i need an appraisal? how much for closing costs? $25k at 3.75 would be nice
thanks for sharing
@Kirk R.
Hi Kirk,
I can’t imagine the SBA will require an appraisal of you for these loans. As far as I understand there are no fees for applying and no guarantee/origination fees. I have not heard the specifics on that 100% but that was the impression I got from the calls I was on with the SBA.
@Mike
@Mike H. were you ever able to submit?
I've spent the last 4.5 hours filling everything in and now it won't let me connect. I hope I didn't lose all of the data.
I called the SBA Friday morning. It took 3 phone calls and several hours to get anyone on the phone that could actually hear me. Their phone lines were messed up. The rep. said the best way to apply was on-line and to attach tax returns and other documents. He said a loan officer would be assigned in a week to 10 days. Based on what I have seen, the SBA is offering loans to LLs but I would bet their focus will be retail and manufacturing businesses. It would surprise me that we will be anywhere near the front of the line. The system is already jammed up and there will be a massive backlog very soon. @micheala g.is proof that they are already overwhelmed. Don't count on the government to help. How many LLs did they help last time?
Unfortunately, now is when your (supposedly) friend, leverage, can turn into an alligator.
I called the SBA Friday morning. It took 3 phone calls and several hours to get anyone on the phone that could actually hear me. Their phone lines were messed up. The rep. said the best way to apply was on-line and to attach tax returns and other documents. He said a loan officer would be assigned in a week to 10 days. Based on what I have seen, the SBA is offering loans to LLs but I would bet their focus will be retail and manufacturing businesses. It would surprise me that we will be anywhere near the front of the line. The system is already jammed up and there will be a massive backlog very soon. @micheala g.is proof that they are already overwhelmed. Don't count on the government to help. How many LLs did they help last time?
Unfortunately, now is when your (supposedly) friend, leverage, can turn into an alligator.
Actually, I found out that their website doesn't like chrome as browser. I switched to IE and it worked.
@Michaela G.
Thank you for sharing Michaela!
This is a key point, for some bizarre reason the SBA application site works best on internet explorer. I heard that the other day as well.
Great to get that out there!
And yes, to the other gentlemen’s point, the SBA disaster loan, just like every business and government agency, was not built for a nationwide disaster like this. It’s not a magic bullet and it will take time. I expect a huge bottleneck will ensue in the coming weeks. It’s not ideal, but nothing really is in situations like this when there are hundreds of thousands of applicants.
I wish you the best Michaela and hope to hear your experience with the process!!