PPP for investment property mortgage interest

5 Replies

Hello everyone I'm having a hard time finding out online (and here) if I can forgive part of my PPP loan for a few SFR investment rental properties mortgage interest? They are still under hard money lending, acquired before Feb. 15th, in the process of a cash out refi. Received the PPP loan after June 5th and using the 24 week period.

I asked my CPA and she said the same thing I'm finding online for "business mortgage interest payments" during the covered period.  Which in my case started June 9th.  

Covered Mortgage Obligations. The amount of business mortgage interest payments during the Covered Period for any business mortgage obligation on real or personal property incurred before February 15, 2020. The guidance defines “business mortgage interest payments” as payments of interest (not including any prepayment or payment of principal) on any business mortgage obligation on real or personal property that was incurred before February 15, 2020.

I'm having a hard time seeing how investment rentals are considered "business mortgage obligation" unless the business operates under that roof.


@Nicholas Marinos

The reason you don't have responses is the lack of clarity on this issue. It has been extensively debated among professionals ever since the PPP started, and to my knowledge there is no consensus.

Here's my 2 cents on this highly debatable topic. The concept of PPP is to allow a business to stay afloat as is, as opposed to expanding. The business mortgage obligation provision was clearly intended for mortgages on the existing properties that the business uses for generating income. My personal interpretation:

  • mortgages on the building you use as your own office or your own warehouse - 100% to qualify
  • mortgages on the rental properties that you had leased out prior to Feb 15 - 80% chance to qualify
  • mortgages on the properties not yet placed in service by Feb 15 (as in HML case) - 20% chance to qualify

I would not advise my clients to take this chance if they have an alternative way to qualify for forgiveness. If there's no consensus between lawyers and accountants, imagine how clear the banks are. Remember: forgiveness is at the discretion of your lender. I'm not sure that there's a mechanism to appeal a denial of forgiveness. Why risk it?

@Greg O'Brien under an S-Corp

@Michael Plaks Thanks for your response I'll take that 80% chance to qualify, worst case I just return that portion if not forgiven. You stated on the 20% "not yet placed in service" (as in HML case). Why does that matter if bought with HML, cash, conventional, etc. As long as they were closed on prior to Feb. 15th and can be proven utilized as rental properties via income and lease agreements the lender should not care how they were acquired. Or am I missing something?