Rental Property Investor · Portland, ME · Member since 2019 · 160 posts · 231 votes
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 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!
Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes
6y
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.
Rental Property Investor · Portland, ME · Member since 2019 · 160 posts · 231 votes
6y
@Corey Demers
Hi Corey,
It is my understanding that rental properties / passive income businesses (except for self storage and hotels) are ineligible for PPP
The PPP loan is a 7a derivative, 7a loans historically do not permit rental businesses
Additionally, the PPP loan amount could factor in contractors and the like. The max loan amount calculation is essentially payroll for the prior 12 months X 2.5 or $10million, whichever is less.
The key thing to understand is the “loan forgiveness” only applies to an 8 week period starting from the date of loan origination, and only forgives eligible uses of proceeds.
If a small biz has $100,000 in prior year salary multiply by 2.5 they could get $250,000. The 8 week period will almost always be smaller, because of course it would, and the borrower would be left eight a larger loan on a shorter term than the EIDL.
Obvious benefits are no personal guarantee (technically if you use proceeds the wrong way there is recourse) and no collateral.
But again, I must stress, for the purpose of this forum, I am 99% sure the PPP loan is NOT eligible for rental properties. This could change, as many things have, but as of now, it’s doesn’t look like it.
My spouse and I own completely separate holding LLCs, which own different properties in subsidiary LLCs. For tax returns we are married file jointly. Anyone has any insights how many applications we should submit? I'm thinking to submit 2 applications: one for each holding LLC, but any comments are appreciated. Not sure if tax filing status matters.
Red Bay, AL · Member since 2018 · 6 posts · 2 votes
6y
@David Hulit
I’m in the site now, using IE, I’ve gone all the through the form, ready to submit, I don’t see anything about uploading any supporting documents. Am I doing it wrong?
For those asking whether you can submit multiple applications for EIDL. I read this on the Krost site just linked above.
Loans (EIDL or PPP) are limited to one per Taxpayer Identification Number. You can not accept both loans, but you can apply for both and decide later. PPP is not yet up and running I heard.
Ironton, OH · Member since 2015 · 104 posts · 31 votes
6y
@David Hulit are these loans being forgiven? I’ve heard serval times that there is a “loan” that basically turns into a grant. Is that this loan?
April 1st is tomorrow, so I’m not 100% sure what my economic vacancy rate will be. What should I put for loss of income?
Rental Property Investor · Portland, ME · Member since 2019 · 160 posts · 231 votes
6y
@Lauryn Meadows
Hi Lauryn,
These EIDL loans will not be forgiven. There is currently a $10k grant that can be applied for. See links above.
The loan forgiveness people are referring to is a component of the new Paycheck Protection Program loan. The PPP loan is likely NOT eligible for rental property owners.
Also, if it were, the PPP loan size is based off of payroll from the prior 12 months times 2.5. Most rental property owners have limited payroll, even if for independent contractors.
Also the forgiveness is only for an 8 week period after the loan origination and the funds must be used for specific purposes, such as payroll. It is incredibly important to understand the PPP loan is not a blanket forgivable loan, there are strict rules attached, and it is likely NOT eligible for rental properties.
Investor · Idaho Falls, ID · Member since 2016 · 935 posts · 629 votes
6y
Looking at the initial start page, it certainly looks like you have to apply for each entity separately. Or does it ask for other businesses further in the application? if it takes 3 hours for each application process, this will take a few days for me to get through for each individual LLC.
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.
Can I apply before tenant misses rent, or do I have to wait until they can't pay?
How best to answer Form 5 question 12 "Number of Employees"?
For EIDL $10k grant, how do I document continuing payroll / not laying off anyone, or is this only a requirement of PPP loans?
How best to answer Form 5 question 15 "Amount of Estimated Loss"?
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.
David where did you see that you can make "reasonable assumptions"? I am looking at the second page of this application and it says "Rents lost due to the disaster", can I make a projection here? Did the SBA say this was ok somewhere?
Rental Property Investor · Portland, ME · Member since 2019 · 160 posts · 231 votes
6y
@Jeff Sheraton
Hi Jeff,
That was my understanding from the conference calls I have been on. This program and application process has constantly been evolving, so it is impossible to say for sure.
These EIDL loans will not be forgiven. There is currently a $10k grant that can be applied for. See links above.
The loan forgiveness people are referring to is a component of the new Paycheck Protection Program loan. The PPP loan is likely NOT eligible for rental property owners.
Also, if it were, the PPP loan size is based off of payroll from the prior 12 months times 2.5. Most rental property owners have limited payroll, even if for independent contractors.
Also the forgiveness is only for an 8 week period after the loan origination and the funds must be used for specific purposes, such as payroll. It is incredibly important to understand the PPP loan is not a blanket forgivable loan, there are strict rules attached, and it is likely NOT eligible for rental properties.
Lender · Richardson, TX · Member since 2014 · 537 posts · 228 votes
6y
I have the same question. I have no idea what rents will and will not come in for April. The form says lying on it would be perjury. I certainly do not want to do that!
Financial Advisor · Duluth, MN · Member since 2012 · 157 posts · 194 votes
6y
Thanks for the heads up!
Pre-paid rents are coming in with a few warnings from residents about being late. I'm waiving late fees for anyone who sends even $25.00 since I have an online portal that makes it easy to send partial payments.
Hoping I won’t need this loan. However, I scraped through the “Big One” in 2007-2009 by making major cuts to expenditures since I had around 30 units at the time. Now that I have more than 100 units, things will get interesting.
I learned some valuable lessons from the last crisis. Mainly, keep your loan to value at 70% or less and only buy for cash flow. While I’m in much better shape now, it’s impossible to predict how this will play out. Especially when some of the fringe residents talking about rent strikes.
Back in 2007, as the housing market started to go south. I will never forget the conversation I had with a wealthy developer.
We were getting concerned about the banks tightening credit and he told me how he just tapped a line of credit for $1,000,000. I thought that was kinda odd since things didn’t seem too bad at the time and he was hardly scraping by.
Little did I know we were entering the worst financial crisis since the Great Depression.
Whether you need it or not, you might want to draw from credit lines just like the developer or take advantage of some of the disaster relief loans.
I wish they had this SBA loan during the last crisis. It would had made my life way better.
As the old saying goes. "A banker is someone who will loan you an umbrella on a sunny day."
I applied for the 10k under both my wife's and my Corporation, I felt that was cleanest as opposed to my rental properties and their various entities. It's strange that the 2MM loan went away and was replaced by 10k that if I'm reading correctly doesn't need to be paid back?!
The 2M loan did not go away. The 10K is an advance on whatever loan you get, up to a max of 2M. But you get to keep the 10K even if you are denied for the loan. With 30-50 million small businesses and contractors potentially applying, they probably won't be getting these loans out very quickly, so they added the advance to help people in the interim.
These EIDL loans will not be forgiven. There is currently a $10k grant that can be applied for. See links above.
The loan forgiveness people are referring to is a component of the new Paycheck Protection Program loan. The PPP loan is likely NOT eligible for rental property owners.
Also, if it were, the PPP loan size is based off of payroll from the prior 12 months times 2.5. Most rental property owners have limited payroll, even if for independent contractors.
Also the forgiveness is only for an 8 week period after the loan origination and the funds must be used for specific purposes, such as payroll. It is incredibly important to understand the PPP loan is not a blanket forgivable loan, there are strict rules attached, and it is likely NOT eligible for rental properties.
I believe the PPP loan size is 2.5 times the average MONTHLY payroll, not 2.5 times 12 months of payroll.
What if I still have reservations that will most likely cancel?
We just started this AirBnB in October, so would we have to file our taxes first to prove that we have a business?
The PPP requirement is that the business was in business on Feb 15, 2020. I believe the EIDL requirement was Jan 31, 2020 (going off memory). So you definitely don't need a tax return to apply.
With the streamlined EIDL app, you don't really need to provide any info about your AirBnB or any specific business activities, they're just collecting some basic info about the business and owner. So it would probably be wise to apply and "get in line", and then deal with the details when they get back to you for more info.