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....... :-)
@David H. Good info. I already applied for that one last weekend. Thats the one I'm hoping to get.
Was wondering what you had seen for the guidelines for that loan in the sba conferences for us landlords. I had seen the 6 times gross profit as their guideline for the loan amount. Any thoughts on that guidelines? Have you heard that at all?
@David Hulit You mentioned they may not be available for rental property owners (thought I read that above), I have a couple short term vacation rental properties and all guests have cancelled. So, operating expenses are piling up. Would this scenario be considered for a loan?
Hi Russell,
EIDL Disaster Loans are eligible for rental property owners and STR's.
The new SBA 7a Paycheck Protection Program (PPP) Loans coming from the new CARES Act are not eligible for Rental Propery owners, and are unlikey to be for STR's. They may, but I doubt it for the following reasons.
The PPP Loan program loan amounts are calculated based off of payroll information, such as the IRS Form 941. Unless you have a large staff as a part of your STR business I doubt that the PPP loan would be better suited even it STR's were eligible.
The EIDL loan allows for you to account for lost rent due to the disaster, the PPP loan will not use that.
Also the "forgivable" portion of the PPP loan is a marginal. Its for an 8-week period after the loan is issued only, and it must be documented and only applies to mortgage interest / rent payments (not rent income), utilities, payroll, paid sick medical leave, and insurance premiums. This forgivable loan amount is unlikely to benefit rental property owners with little to no staff.
@David H. Good info. I already applied for that one last weekend. Thats the one I'm hoping to get.
Was wondering what you had seen for the guidelines for that loan in the sba conferences for us landlords. I had seen the 6 times gross profit as their guideline for the loan amount. Any thoughts on that guidelines? Have you heard that at all?
Thanks Mike,
You are correct, the general calculation is Gross Profit for the year prior / 2 .. i.e. 6 months of gross profit = total loan amount.
The grumblings I have heard are that you can demonstrate through projections and the schedule of liabilities the need for more of a loan. As Rental owners we often try to make the gross profit as close to zero as possible so this 6 month standard method is unattractive.
One big win from the CARES Act is that EIDL loans under $200,000 no longer require a personal guarantee.
Also, if you have already applied for the EIDL, you can still go back and apply for the $10,000 advance grant, which I highly suggest, as it is a grant so it does not need to be paid, and it must be distributed to you in 3 days, regardless of approval. They expect to have this feature live this week. The first 1 million businesses can access this... I expect many more than 1 million will apply so I'd go for this as soon as its live.
I'm a retail center investor who has commercial mortgages on all my properties. While the EIDL does look like it could be an attractive option to consider, I have a question/concern: since any EIDL over $25,000 requires collateral--and the SBA specifically says it takes real estate as collateral when it is available--wouldn't that be a problem for the existing lenders? I would think the first mortgage holders would not want other lenders (especially not the federal government!) to have a claim on the same collateral.
Would greatly appreciate it if anyone might be able to share their thoughts/experiences on this question!
Hi Tom,
The SBA would go in second, third / behind whatever mortgages or liens you already have in place. Most lenders would not have a problem with this as it does not impact their lien position. I can't speak for all lenders, but I have personally never seen someone coming in second after the loan is already been done be an issue.
Hi Everyone,
Please see the following link for a list of SBA webinars on applying for EIDL loans from the Richmond, VA office.
https://www.eventbrite.com/e/w...
Similar webinars are being hosted every business day in every state in the country. These are great to attend, free and at the end you can ask the moderator questions. I suggest any and all to utilize this.
Best of luck!
When filing out the form for EIDL for multiple properties, do you do a complete form for each property or just a certain section or what do you suggest?
Thanks Mike,
You are correct, the general calculation is Gross Profit for the year prior / 2 .. i.e. 6 months of gross profit = total loan amount.
The grumblings I have heard are that you can demonstrate through projections and the schedule of liabilities the need for more of a loan. As Rental owners we often try to make the gross profit as close to zero as possible so this 6 month standard method is unattractive.
One big win from the CARES Act is that EIDL loans under $200,000 no longer require a personal guarantee.
Also, if you have already applied for the EIDL, you can still go back and apply for the $10,000 advance grant, which I highly suggest, as it is a grant so it does not need to be paid, and it must be distributed to you in 3 days, regardless of approval. They expect to have this feature live this week. The first 1 million businesses can access this... I expect many more than 1 million will apply so I'd go for this as soon as its live.
Can you get in line for the 10k advance grant right now, or is it better to wait until that goes live to apply? In other words, will people who apply after it goes live be first in line, or people who applied for the EIDL a week or two ago?
Greetings,
My tenants have not (yet) missed any rent, but I'd like to get the process started, particularly since the lease ends 5/31, and would imagine if their situation changes they will just not renew. Current situation could make it difficult to find qualified tenants.
As the sole owner of my Colorado LLC that holds one SFH, I am not technically an employee, and I take a draw, rather than a "paycheck"... I use a property management company, so they are not employees. Formed the LLC at the end of 2018, but property was not rented until early 2019, and I have not yet filed 2019 taxes. Property is mortgaged and produces very small monthly cashflow - net loss last year after replacing furnace & A/C.
TIA,
-dan
Greetings,
My tenants have not (yet) missed any rent, but I'd like to get the process started, particularly since the lease ends 5/31, and would imagine if their situation changes they will just not renew. Current situation could make it difficult to find qualified tenants.
As the sole owner of my Colorado LLC that holds one SFH, I am not technically an employee, and I take a draw, rather than a "paycheck"... I use a property management company, so they are not employees. Formed the LLC at the end of 2018, but property was not rented until early 2019, and I have not yet filed 2019 taxes. Property is mortgaged and produces very small monthly cashflow - net loss last year after replacing furnace & A/C.
TIA,
-dan
Hi Dan,
1. Yes you can apply before they miss rent, you are allowed to make reasonable projections.
2. You do not need to have any employees to get an EIDL, so 0
3. The EIDL grant is not live yet, should be this week. You should not be documenting payroll for this, the PPP loan is for payroll specifically and the forgivable portion is a complicated process that does not apply for the EIDL loan or EIDL grant. The Grant is given simply upon making application for the grant and requesting the advance, it is disbursed in 3 days. You do not need to be approved for the Grant, you can get it even if you are denied the loan.
4. I would estimate your loss based on projections if it were me. I would submit a set of porjections with detailed assumptions. Something like "My tenants lease ends on 5.31.2020 and my state is under lockdown. I can't show my apartment due to social distancing. I expect for this to minimally go on for xxx months and maximum go on for xxx months. Also I highly suggest filling out the schedule of liabilities to demonstrate how much your bills are as this may impact loan amounts.
When filing out the form for EIDL for multiple properties, do you do a complete form for each property or just a certain section or what do you suggest?
I suggest filling out the form for a single LLC or "business entity". There should be a section to add affiliate data but I could be wrong.
Also, please visit: https://www.eventbrite.com/e/webinar-applying-for-sba-disaster-loans-economic-injury-disaster-loans-tickets-101237229278?utm_medium=email&utm_source=govdelivery
These webinars are hosted by the SBA for free. There should be webinars in all 50 states everyday by now. At the end of the webinars you are able to ask questions. It would be the fastest best way to get answers to questions that are more nuanced.
Is the grant $10k per person/ss #, or per business?
Can you get in line for the 10k advance grant right now, or is it better to wait until that goes live to apply? In other words, will people who apply after it goes live be first in line, or people who applied for the EIDL a week or two ago?
Hi Taylor,
There is no way to be certain about this. My advice would be to wait to apply until its live sometime this week. That being said, the website clearly indicates now that even if you have already applied you can go back and make a request for the $10,000 grant advance.
They have stated that the advances must be distributed in 3 days from application for advance. So it shouldn't matter what place in line you are for this grant. This could change with volume, but lets hope they stick to it.
Is the grant $10k per person/ss #, or per business?
@David H. Great info! Where can we go to find out when the 10k advance goes live? I guess news outlets might post it if the SBA gives advance notice. But if there isn't advance notice, I'm guessing the SBA site / webinars would be the best place to look?
SBA just says in the next few days. I'm thinking it is going to be one of those deals that you keep watching like a hawk, because when it goes live it will be swamped.
Should we submit one application per property rented?
Thank you!
It might help if people knew what the 10k grant is called and what is needed in order to quality for it.
Wonder how this works hypothetically speaking -
1. Mom and pop landlord has a mortgage at 75% LTV and they hold title under their own name.
2. Mortgage balance is in fact $75K and the property is worth $100k.
***Are we saying the SBA will directly lend $25K, since that is the equity position they can collateralize, at 30 years fixed for "working capital" purposes?
****If yes, does working capital qualify as money the landlord can use for further property acquisition or could only be used to continue to cover rent loses on collateralized property as part of the loan (to to pay taxes and insurance and the mortgage or something)?
Trying to get a read on how this works....thanks!!
Interesting topic.
Wonder how this works hypothetically speaking -
1. Mom and pop landlord has a mortgage at 75% LTV and they hold title under their own name.
2. Mortgage balance is in fact $75K and the property is worth $100k.
***Are we saying the SBA will directly lend $25K, since that is the equity position they can collateralize, at 30 years fixed for "working capital" purposes?
****If yes, does working capital qualify as money the landlord can use for further property acquisition or could only be used to continue to cover rent loses on collateralized property as part of the loan (to to pay taxes and insurance and the mortgage or something)?
Trying to get a read on how this works....thanks!!
Interesting topic.
Wonder how this works hypothetically speaking -
1. Mom and pop landlord has a mortgage at 75% LTV and they hold title under their own name.
2. Mortgage balance is in fact $75K and the property is worth $100k.
***Are we saying the SBA will directly lend $25K, since that is the equity position they can collateralize, at 30 years fixed for "working capital" purposes?
****If yes, does working capital qualify as money the landlord can use for further property acquisition or could only be used to continue to cover rent loses on collateralized property as part of the loan (to to pay taxes and insurance and the mortgage or something)?
Trying to get a read on how this works....thanks!!
Interesting topic.
Hi Travis,
I don't believe they will be calculating the
loan amount based on equity position for landlords. I believe they will
be calculating loan amount in one of two ways:
First (for the majority of Small Business): 2018/2019 Gross Revenues - COGS = Gross Profit / 2 = Loan Amount
Second (likely for Landlords): Actual or Projected rental loss due to disaster + any liabilities such as mortgage + fixed debt payments etc.
This is my expectation.
You cannot use the funds for business expansion. Only for working capital such as paying fixed debt
Should we submit one application per property rented?
Thank you!
I'm not an expert, but I'm pretty sure you should submit just one application, no matter how many properties you own.
It might help if people knew what the 10k grant is called and what is needed in order to quality for it.
Hi Calvin,
The grant is called the "Emergency EIDL Grant". To get the grant you only need to be eligible for the EIDL Loan and to have made application for the EIDL loan.
The grant is referred to as an "advance" that must be requested at time of application. It is currently not live, as it was just put into law on Friday night. They expect to have it live on the website this week.
Essentially, to qualify you must have a business that has been affected by the disaster, which at this point is everyone.
@David H. Great info! Where can we go to find out when the 10k advance goes live? I guess news outlets might post it if the SBA gives advance notice. But if there isn't advance notice, I'm guessing the SBA site / webinars would be the best place to look?
I would keep checking back into the SBA EIDL website daily at this point. It will unlikely be announced on the news.