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LLC/LEGAL OVERVIEW & 2020 COVID19 STIMULUS
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Today we’re going to be briefly talking about LLCs. But mostly we’re going to be going over the cares Act, the stimulus plan from the COVID-19, pandemic quince with Anderson advisors.
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This is going to be the thing he will try to rent them out. And then he became one real investor me.
0:23
Thanks for joining us. Today we’re going to be briefly talking about LLC. We’ve had a lot of new people join the group, but mostly we’re going to be going over the cares Act, the stimulus plan from the COVID-19 pandemic. But I wanted to introduce Clint Coons, who last time we we saw each other was October in Maui. Yeah, it was a long ago, huh?
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Yeah, better times. Right.
0:46
Right. Right, how quickly time is can change and I, I’m pretty optimistic that we’ll come kind of come right out of this. It’ll take a while but it’ll be life as normal.
0:58
Again, one of the first places we’re heading to it. Big Island. I was talking to my wife about it soon as this calms down, we get on a plane, we’re out of Washington for good prices.
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Oh, oh, for those you guys don’t know, Anderson does a mastermind in Maui. I don’t know where it’s gonna be this year, but I went to the one in Maui last year had a great time. I’m one of the big takeaways. I think you said this cleanse? You I think you said this not totally. But you guys took a hard stance and you know, protecting clients and you know, a lot of people in the room, they work hard to build this net worth. Right. And, you know, we’ll be damned if somebody like takes it from us. So maybe we can kind of lead off a little bit with some of the basics and LCS and then, you know, get into the kind of the what people kind of showed up today for for the careers as
1:52
well, you know, I mean, it really goes hand in hand with what we’re talking about when you think about asset protection because the way I look at it right now if you’re a real estate State investor, you’ve got some serious concerns that you need to be protecting your assets from. We can all appreciate, you know, if we have tenants in our property that they slip and fall, things like that, that they can sue us for, for the injuries they sustained. But now we have a new dynamic. Now it’s this virus. And if you have someone go out to your property, let’s say to fix something because the tenant is telling you, hey, the toilets not working, it’s clogged up or the sinks, no longer draining, and you send someone out there and they can track cobit you could potentially be sued by that individual or vice versa. Maybe it’s an elderly couple, that is your tenant and you send out someone who is you know who has it but doesn’t show any symptoms, so they have no idea and then they pass that on to that individual, your tenant or you have a multifamily property and it’s runs rampant your multifamily like it does in a nursing home just because it’s everywhere. in there, and you’re not doing a, they say, a diligent job to disinfect the building. So you have what is referred to as a sick building, you can just extrapolate all this out. And, you know, my mind can extrapolate out every single way in which you could go after somebody for this because I just don’t think that way, I’m not one of those types of attorneys. But there’s enough of them out there that will find these little threads and make these ridiculous arguments to shake people down. And as a result of it, you know, you’re gonna be left holding the bag here, and you’re gonna have to defend yourself. And if your properties and your assets aren’t protected, then it’s gonna hit you individually. And the thing about it, people think, well, I have insurance insurance doesn’t cover it. I mean, they’ve already come out insurers, they’ve been interviewed on the news and they say, yeah, this is a this pandemic, this virus, it’s not covered under the policies. So now you have to fight it. And in fact, the first case that while there’s been a couple cases one cruise line, Carnival Cruise Lines been sued class action against them. Then they sued the country of China. We’ll see where that goes. And now they’ve actually I just saw a lawsuit was being brought against Walmart. And, you know, Boeing where I’m from Washington State, they’re talking about suing Boeing because people have contracted it while working at Boeing. They’re saying Boeing didn’t do enough to provide a safe environment. So unless caught while state houses legislature step in and stop this, and do not allow people to bring a cause of action for contracting COVID. It’s going to run rampant that attorneys are going to take it and use it to shake people down. So what I tell people is you should be taking your assets and making sure that they’re protected before the harm occurs in the separate limited liability companies that limit your liability exposure. So oftentimes, we’ll set up structures where we use an LLC in Wyoming that provides anonymity because the thing is, you don’t want people to know what you have. An attorney finds out you have six different properties, you know, it’s going to embolden that attorney to go after you that much Harder, whereas the individual that doesn’t appear to own anything, well, then you got to ask yourself is it worth my time because there’s no insurance there to collect on, the only thing I can collect on are hard assets. They have no hard assets that I can discover other than this one property and it’s pretty much fully encumbered. Now, it’s probably not worth the effort. So we started with a Wyoming LLC, and then we create special purpose limited liability companies in Hawaii, if that’s where your property is located, or, you know, maybe it’s in Tennessee or Indy, wherever, wherever it’s located. And then in those special purpose, LLC, all that hold the property all flow back into the Wyoming LLC. And so this provides anonymity and a nice layer of asset protection from personal creditors. I can tell you a story one of my clients. She sent me an email about a year and a half ago now. And she was really frustrated because she had this $2.2 million dollar judgment against two Hawaiian real estate developers. And in her email, she said, Clint, I don’t get it. I’ve been pursuing them for over a A year and a half, you know, they’re living in plain sight and luxury condominiums in my neighborhood and they’re driving Tesla’s and Mercedes. What do I do? And I said, Well, do you have a copy of their structure, you know how they’re set up, and she sent it over. And first thing I do is make sure that wasn’t my client. So I saw these LLCs on the page started going, Oh, this could be someone we structure they weren’t. But it just goes to show the frustration that someone can face. You know, when they’re in that situation, they look at a structure and they can’t grasp on anything, they can’t collect on anything. And this is where we’re telling people that you should be placing your assets so that you could be not the Hawaii real estate developer that possibly took my clients money, but you could be protected from frivolous claims. And so we can appreciate the fact that we can have issues with tenants but here’s another angle here. So in 2008 2009, we had a lot of real estate clients that gave back their properties because they banks were coming after him because of values were inflated the mortgages they had in the properties and versus the rents they were collecting. They just couldn’t meet the mortgage payment. So they wanted to walk away. And those that followed our device and put together the proper structures, they did, okay. Those that did not, and didn’t see the need, because they were so focused just on the liability that comes from the entities themselves. I mean, think about that, you know, you as I talked about, you can understand there’s property liability. But on the flip side of that, there’s your personal liability that you yourself, create liability for your assets. And so what I’m about to tell you here is that how that comes back in can bite you if you’re not thinking about it, you’re not thinking about this as a business and looking at all the various angles where someone can sue you. So these individuals, they put themselves in the situation where they didn’t recognize that their savings account should be protected, their brokerage account should be protected. Their secondary residence should be protected and they kept them off. In their own name, because that’s what people do. That’s what CPAs tell you to do. Well, when the lenders came back after him for deficiency judgments on these properties, guess what they had all these assets were exposed, and it took many people down as a result of that. So how does that apply? Now let’s fast forward. Can you imagine what this might be like, if this goes on for another six or seven months, and you don’t have tenants that are paying you, then you’re trying to seek an abatement on your mortgage from your lender, and they’re not willing to do it, or they are, but they’re only looking at a three month abatement. I’ve been working with several of our clients just on the abatement side, and the lenders are going out three months, six months, haven’t got a six month abatement on there. And they they’re very specific that at the end of the three months, all the payments need to start up again. So if you find you’re in a situation where you the payments need to be paid right away in three months, and if you don’t, it automatically throws you into default, because that’s what they’ve been writing into these agreements. Then you’re in the situation you have No rent coming in, you have money that needs to go out. What do you do? Well, we’re going to show you some things that you can look at here in just a moment. But it could put you in a position where you have now personal you have judgments from lenders that are looking to seek your assets. So what steps have you taken now to ensure that that’s not going to happen that they get a judgment against you and it’s not the judgment, they will be just like my client, they’ll be looking at you and saying, I don’t understand. This person I have a judgment against is living in a luxury condo and they’re driving a Tesla, but I can’t get paid. So that’s what we’re, we’re focusing on with asset protection is creating that type of structure with that makes you you know, I’m not gonna say impervious because we can’t ever use that term because you never know what a judge might do, but it’s gonna make it extremely difficult. The idea is to make them go away. Are
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So the LLC using structures like that land trusts are things that we utilize corporations in your business as well. You know, one of the basic tenets that I teach people that you think of asset protection for real or planning for real estate investors is a three legged stool. You have asset protection, tax planning and business planning. And a lot of people love asset protection. They want to make sure that no one can take anything from him. I get it when I started out, that’s what I did focused on. And then you learn about taxation like wow, Real Estate’s awesome, I can reduce my taxes and I can do this and that and then you get focused on that you try to reduce your taxes down to zero if possible. I used to do that. And then you understand that when it comes to business that is growing your real estate portfolio, that although those two legs on the stool are admirable and you need to focus on those, that business planning leg can be just as important if not more critical. And a real estate investor can miss that in their planning. If the person that they’re working with does not understand this, they can put themselves in a situation by creating entities that actually hurt rather than help grow their real estate investing portfolio, because lenders look at them, and they don’t like what they see on their tax return. They don’t like the way the assets are structured. And as a result of that, it makes it difficult to qualify for loans and you go through multiple extensions. And finally, the seller just gives up on you takes your earnest money and walks away. So this can be a problem for investors if they don’t look at using all three legs of the stool in harmony when they’re putting their plans together. And unfortunately, what has happened now, because of this pandemic, it has reared its head again for real estate investors because everybody just kind of you know, they get their structure set up and and it’s working for them they say because the properties in the LLC, and the The taxes and accounting, the bookkeeping, oh, you know, I’ll get to that at the end of the year. And then they’re not diligent about doing the things they should be doing throughout the year. Because they run it that way for seven or eight years, it’s never been a problem. And then something like this hits, right. And now you’re running around and thinking, alright, what do I do now? There’s programs out there, and I want to qualify for them. Great, I’m gonna throw my hat in the ring. But the problem is you throw your hat in the ring someone’s gonna throw back at you, because it doesn’t have the requisite information they need in order to allow that hat to stay in the ring and then all falls back on the fact that when you’re running your business, your real estate investing, actually, you weren’t treating as a business. You were you had the investor mindset. And so this planning that we go into is about taking you out of the investor mindset and building a business mindset around what you’re doing. So that when things like this Do come up, you have everything all your ducks in a row. When I start talking about this, the various details of the cares act that the I can apply to you. It’s something that I’ve been living every day for the last two weeks and working with clients and dealing with their documents and in their situations. And it’s so frustrating, not only for them, but also for myself because they want help. But we can’t necessarily deliver with that help, given the fact where they’ve already put themselves in. So it makes it a more challenging environment. And so you want to be ahead of this, and making sure you’re doing things the right way from the get from the outset, and not one of those that, you know, you’re thinking, I’ll just get to it later. That’s not that important. Right now, it’s not on my priority list. Listen, you don’t know what’s on your priority list. You don’t know when later is going to be today. And if you adopt that pro approach, you’re going to find that you’re going to take yourself out of certain situations that had you been properly prepared, you could have been ready to take action and that is key and that also goes with investing in general. I’m being interviewed tomorrow by Forbes for an article on real estate investing and When I was talking to the interviewer who set all this up, one of the things I brought up is that, you know, we’re real estate investors often miss this is that they don’t see the opportunities when they’re coming. And then when the opportunities are there, they’re not ready to take action because they didn’t see it. They didn’t take the steps that were necessary ahead of time to put themselves in the situation to take action. And this is just from my own investing experience having been there. I’ve seen it and just I just closed on a property last month, a multifamily property. I was in the position to close on that I’d been ready to do it and the seller would not take action, because he didn’t like the terms. That was in January. We sure did change his tune at the end of February because he panicked. And he said, Are you willing to buy my property? Can you close right away? And he’s like, yeah, nothing’s changed, but that’s going to be on my terms. And so I got this property on my terms. And I could go on I’ve many stories like that, that when you’re in a place To take action because you’ve structured yourself the right way, you’re going to be able to grow your business that much quicker. So with that, I think we can dump into the cares Act, or is there anything else you’d like me to cover Lane?
16:13
Yeah, just one, I think, you know, on the commercial side, we’re talking to our lenders. Mm hmm. But um, you know, you kind of brought up the word of Batman. I don’t know if everybody’s too familiar with that. But you know, if you guys are having trouble making your mortgage payments, you guys need to have your lawyer talk to your your mortgage or your loan servicer because they know how to talk to them. Obviously you don’t want to stick right. So that’s what he’s referring to there. And you know, this is this this hour that Clint graciously given us here is this is not intended to be a sales thing or anything like that. If you guys want to, you know get on the phone with these guys and talk, tax or legal or anything you guys got going on. There’s a link on my simple passive cash flow comm slash tax. We’ll also put the replay to this video later. Again, that’s simple passive cash flow. COMM slash tax. We’ll have it live right up here. But yeah, let’s unpack this carrier Zach and see what goodies there is in that $2 trillion for us. I just got my stimulus check yesterday, or your direct deposit. Yeah, huh?
17:20
What the EDL or the PvP
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just the 1200 bucks per person.
17:26
Oh, the 1200 bucks per person that
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you guys are helping me with the PPP stuff. Let’s see what we got there.
17:33
All right. Okay, well, um, I’ve given this presentation now probably
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15 times in the last two weeks. I gave it three times yesterday because people are so interested in this topic right now. Because there’s a lot of information floating around out there about the carrier Zach, my partner, Toby and I, we dug really deep into it. The day it was released and spent a couple days just poring through it. And going back and reading and then paying attention with the SBA guidances been coming out consistently as this drip. And that’s really I think, spurned a lot of the, the miscommunication or the confusion is a better word. In fact, I was in the New York Times two weeks ago, and then in another public news publication just this week, and the information that we were talking about in those articles, actually, some of that’s been changed and in I think they need updated because at that time, that was how the cares act was being interpreted for the for the information we’re discussing. And now because of SBA guidance, it’s changed so what I’m going to be covering is what the current guidance states not what was two weeks ago if you maybe you’ve caught one of my presentations and so there’s been some minor tweaks here
18:48
and this is why I just I’m just having you guys do this for me, is I’m I’m kind of a do it yourselfer. And I’m trying not to do that and I said screw it because this thing just changes To down lunch, and then like, I don’t have the time, my highest and best use is working on my business finding deals and
19:07
Yeah, exactly. I mean, it’s not only that it’s, you’ve got the SBA that’s changing, and then you have the lenders, you’re working with it or changing it.
19:16
You know, just as a high overview on what’s happened here is that these programs get released, and everybody’s like, Oh, great, this money is going to be available. And I’m going to be able to apply and I’m going to, I’m going to get this funding right away. But what happens is that you’re working through banks. And you know, the way it’s like when you go to a bank, depends on who you get, right, who’s going to help you out. And whether or not it’s in the bank’s interest to want to help you out. Because with some of these programs, with one of these programs, there’s a financial benefit to banks. And so that’s really been part of the problem with the rollout on this program for small businesses and so we’ll get into that, but but it’s been an eye opening experience for from my end and there I thought I’d go this deep into to working with seven eight lenders, like I have or deal with the SBA. And so it’s been been an interesting experience. And so, you know, collectively at Anderson, we have, if you don’t know about us, we have about 200 employees and we’re spread out over multiple states, Washington, Nevada, Wyoming, Utah, name a few. And we work primarily with small business owners and real estate investors. And so that I think that really makes us unique. And why we’re able to talk on this subject was, I would say, some authority is that we’ve spent so much time now dealing with this subject matter and helping clients out making these I think on the LDL side that we’ll be talking about, we’ve made over 700 at file over 700 applications for people. And so it’s a learning experience, but there’s a couple different components to this that we’re going to cover. I’m not going to get into the the personal side so much as far as the you know, we’re not going to cover the rebate checks that are coming out tax credit checks, because that is what It is what I’m going to focus on is the aspects of the plan that can be available to you. If you have if you’re an investor, if you have a business or you’re just an individual that you you have potentials to get funding right now, in the in the best one or the easiest one, the quickest one would be through retirement plans. So what they’ve done is they’ve modified the distribution rules. So that was one of the things that came out of the cares act. They changed the distribution rules for retirement plans, or IRAs. You’re familiar with this, that if you took money out of your IRA, Roth traditional, or 401 K, money’s going to be taxable to you. So if you went up and you wanted to pull out $60,000, tomorrow and you’re 38 years old, that’s a taxable distribution. And on top of that, you have to pay an extra 10% early withdrawal penalty. So people will pull money out of these retirement plans because they don’t want to get dinged with the 10% early withdrawal penalty and they want to pay income tax on that money. They don’t have to what Congress did The cares act is they eliminated the early withdrawal penalty. And they deferred the imposition of any tax until December 31 of 2023. If you pull money out of your plan, but they kept it, they said you can pull out up to $100,000 out of your IRA Roth combination their 401 k as a distribution and what it’s going to be treated as 60 day roll. So, if you were to, prior to all the cares act, if you were to go to your IRA pull out the entire amount, say $75,000. You wouldn’t be taxed on that money provided you placed it into a new IRA or qualified plan within 60 days. That’s called a 60 day rollover exemption, but with the cares act, they allow you to keep that money outside of your plan until for three years till December 31 23. You don’t have to pay interest on it. You’re not paying taxes on it as long as you pay that money. Back to yourself. plan by December 31 of 2023. That’s a tax free distribution to you for a limited period of time. And so this is for some individuals an instant source of cash that they can use to meet their short term expenses that are referred to or COVID related because that’s in the court and the Cures Act, it states that it needs to be because of the economic impact of COVID on your life, the pandemic, you need to have access to these funds. Alright, so how has your life been affected? This comes up a lot. You know, why would I need $100,000 out of my plan? What things cost more, right? What does toilet paper cost? Now? It’s gone up. You don’t want to go to the grocery store because you’re concerned so you hire someone to bring you your groceries. My parents told me this was nuts. They ordered some groceries, I forget what the website was called. The guys went to Safeway, picked out all their groceries brought it out to their house they bought, I think was about $85 worth of groceries, but their bill was 160 my mom I was just flipping out, because I can’t believe they charged me $18 I said, Well, you didn’t have to go in the store, you weren’t put at risk. So you know, you have other costs. Now, if you can’t pay your mortgage, because your tenants on your properties aren’t paying you or you know, you have other costs of carrying costs, because your contractors aren’t coming out to the property. So you’re not moving the property. If you’re trying to do a rehab. As long as you have something like that you can establish it, then you qualify for this distribution, and it’s per person, right? So each individual can can pull the monies out. Now another option you have in addition to the penalty free distribution is alone. So can we
24:38
go back there? So you know, like, you don’t have to be infected by the virus, you just have to be impacted. impacting people get freaked out a little bit. They’re like, Oh my god, what if the IRS comes back to me and like, asked me, How do I use my 100 grand for you know, like, maybe if you can talk a little about of substantiating the claim or is even the IRS even gonna bother with little I don’t think they’re even going to bother with you.
25:03
But if they did, so here’s here’s a classic example. Somebody asked me, he said, Now I’m gonna pull that money out, I’m gonna put it into real estate, said No, you’re not. I said what you’re going to do is take your other money that you have that you’re paying your everyday expenses for, and you’re going to put that into real estate. You’re going to use this money to cover your expenses. I mean, you have a stay at home order there in Hawaii. Yeah, non essential businesses. You’re not working.
25:30
Yeah, I didn’t. I didn’t ask the question. I don’t I don’t think twice about this stuff.
25:34
Yeah, you know, I’m saying that’s why I’m these are rhetorical questions. Hey, I can’t work. Governor told me I can’t work there. shut my state down. I’m unemployed. How do I pay my bills? Right. How do I, you know, I like to have a bottle of wine. Well, not every night but you try to stretch it out. I’m gonna
25:51
need to write you going crazy at home.
25:53
Exactly. How many of you livers are getting a workout right now across this country. So I’m in It’s fairly simple, I think to to establish that it’s COVID related, that you need this money and I don’t see the IRS coming in and checking things more one of those were just get the money paid back by December 31 of 2023. So, if you’re thinking about how to use like I’m saying take your other funds, use your other funds for investing live off of these funds right now. I’ve talked to some people strategized about IRAs say they have an interest in an IRA in a syndication. You know, what comes up in that situation is that if they don’t roll it into their own 401k plan, they haven’t set one of those up. The issue you have with syndications and IRAs is you have UDF I unrelated debt financed income so you can be taxed on you. Typically, it’s 70% on a liquidation of that that investment of the income that comes in unless you have enough depreciation to offset it. It hasn’t been used up. So if I have that interest Say hold $100,000 interest in a syndication with retirement plans, you don’t have to just take out cash, you can take out what is called an income distribution. So we’ve talked about this once you pull the syndication interest out, so you avoid the tax when it’s the prot when when there’s a liquidation event of that asset, because now it’s no longer held in your IRA. So you don’t have that UDF fi tax there. Yeah, you’ll pay tax and your your long term capital gains rate of 20%. Whereas if you left it in the IRA, you pay tax at 37%. And then whatever your income tax rate is when you pull it out, so that could be possibly, you know, it was 60% could be gone. Now, we’re going to lower that down to 20%. And then, with that interest, they asked you, why did you take that interest out? Well, I wanted the income that’s coming in off the asset so I can cover my living expenses because I’m not working. And then by 2023, you pay back cash, you don’t have to put the interest back in that came out as security. So that may sound a little complicated to you when you’re listening to this but I just want to say Once you understand that there are planning opportunities here for people if they only know where to look, and they get the assistance of someone that understands this. So think about it that you know, this, this is a great tool that’s been bestowed upon you. And you have until December 31 of this year to make the withdraw to the entire year. That answer your question.
28:24
And I think this is a no brainer. I mean, I talk to clients all day long, trying to get money out of your 401k retirement accounts and get it on the playing field invests. Yeah, I mean, it’s, it’s like one of those 10% off deals not 10% 10% early withdrawal penalty. Yeah, I mean,
28:42
well, you mean, you’re talking about getting on the playing field. So another option that I I’ve been telling people is take your IRAs to put that piece on the board so you can use it in a more effective manner. Set up your own solo 401k. Let’s roll the funds in the positive in there. If you’re married, take your spouse His funds and put them in there. And now you have this pool of cash, that when we talk about being ready for when opportunities come along, now you can deploy, you can you can be there to take action because maybe you don’t have the cash personally and it’s all inside your retirement plans. If you don’t take the money out, you want to leave in that tax deferred environment will lease you’re able to execute right away because you’re in control of your own solo 401k. You have checkbook control over it, and you don’t have the UDF issues that come along with invest in syndication. So I think that’s a better move.
29:34
I’m super excited about a new program I’m rolling out that’s going to reinvent scammy Real Estate education programs. So excited like Marie Kondo cleaning stuff up excited. Announcing my new mastermind program, which consists of a closed members site with 27 packed weeks of content, plus bi weekly group video conference calls to us whatever half of the calls will be centered around Growler investing tactics, and the other half will be holistic wealth building strategies that I have Learn from the wealthy. That’s 25 plus hours of group coaching and masterminding and the secret Facebook group too. I know what you’re thinking none another flippin Facebook group. Well, this one’s gonna be different, more intimate, exclusive, and no cheapskates or shady vendors in it. I’ve been coaching individual clients over the past couple years and they figured out what you guys need in a way to provide it in a cost effective way. Learn more go to simple passive cash flow.com backslash journey and join for the first cohort fills up and introductory pricing goes away. Yeah, we talked a lot about herpes and Anderson can make a cure for you guys, too. Yeah. Going back to the hundred grand thing is that person like you get in? So really 200 per couple then.
30:50
Oh yeah, you will use this next strategy you could actually have $400,000 for your family outside of your plans for investing.
31:00
A lot of money.
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And so the way you do that is if you have a QR P and it doesn’t have to be your own. We’ve done this for several individuals where they’ve taken their IRAs and rolled them in to a solo 401k. Because right now, they’ve increased the borrowing limits on your retirement plan. It used to be that the borrowing limit was 50% of your plan balance or $50,000, the lesser thereof. So if you had 60,000, in a retirement plan, the most you could borrow out is 30,000 bucks and you had to repay it within five years. Well, what they’ve done with the cares actives, they’ve changed the limitation, they’ve upped it to $100,000 or 100% of your bested bounds, the lesser thereof. So in my previous example, you could actually pull out the entire 60. Now instead of having to repay within five years, they give you a one year holiday, and then you have five years Just start making your repayments on those funds. So you have a year where you don’t have to pay anything back. Now, this particular provision, unlike the withdrawals, that goes until December 31, this provision only is effective until September 27 of 2020. So you have to pull the money out before September 27 to 2020 under the loan. So, you know, if you think about it, now, you’ve got two options here to hit two ways to hit your funds. You’ve got the distribution and the loan collectively, that’s 200,000 that is available to you. So I think this is another avenue we explore when we’re thinking about where do I get those proceeds that I need currently, rather than wait for the government for these loan programs. We’ll talk about two of the main loan programs. I can go right into my retirement plans and those funds are there. Sometimes Sometimes I’ve talked to people and they say, well, that’s just accessing my own money. It’s not free money from the government. I know. Definitely. It’s your home money, but it’s money that you didn’t have access to before. And now they’re giving you access to it penalty free. You have to look at it from that perspective. But now you can do things with those funds that ordinarily you might have been looking at going well, it’s locked up. It’s not benefiting me now. I have to wait till I have gray hair before I benefit from this Not anymore. Now you can benefit from it starting today. So I think it’s a another option you should consider under the cares act when you want to tap into funds. Okay. Next one here is the economic injury disaster loan. So this is another major piece of legislation that they modified with the cares act, and it’s designed to help out individuals that are on it in a declared disaster area, economic disaster area, all 50 states fall within this category now. So wherever you live wherever you own assets are all within disaster areas. And so the purpose of an ideal loan, that’s how it’s typically referred to as an idle loan, is that this SBA loan has been around forever for a long, long time. And it’s to help people that have been injured economically as a result of some disaster in their area, like a hurricane that comes through or massive flooding that comes through and wipes things out. And so then the federal government steps in and they issue out these, you know, pretty much lower interest rate loans to individuals that have been affected by this. So to help get them back on their feet, so that they get they can maintain some semblance of their life. Well, right now, what they’ve done is they’ve expanded this program for individuals so that you can apply for this and this is what I really typically refer to as the real estate investor. Loan. Because if you have rental real estate, yes, you’ve been affected. I’ve already been affected last month on a warehouse that I own tenant said listen And I’m not paying your rent for three months and maybe a little bit longer, but I can’t pay rent for three months. And if you force me into it, I’m just gonna file bankruptcy because I am completely shut down and said, You need to work with me. So I worked with him. The fact I worked with him, doesn’t relieve me unless I get an abatement from my lender have the obligation to pay $12,000 a month on that property. So you can see the ripple effect here that happens when somebody stops paying your rent, that falls back on you. You still have, you know, the utilities, the the taxes, the insurance on the property in the mortgage, who’s going to help you with that. Now, there are some government programs out there that are attempting to do that. But at the end of the day, it’s still your burden. And what you find with residential property that I think is extremely troubling is that in some states, you have governors that give people the impression that they don’t have to pay rent. Not that there’s been any mandate by the government or city He’s that state that there’s a rent holiday, so to speak, they just throw it out there that you shouldn’t be obligated to pay rent during this economic hardship time. And so what does that do it, it tells people, hey, I don’t need to pay rent, even if they have the money, they assume that it’s it’s free to them. And it’s not, because there’s a cost for everything. So what happens now is that if you’ve been damaged, or you think you’re going to be damaged by this, then you want to take advantage of what we call the ideal loan you can apply for through the SBA. And rental real estate is eligible for this loan. And so what it what they allow you to do is you can now borrow up to $2 million, and you have 30 years to repay it back at 3.75%. That is a great loan to get right now, when I say up to $2 million, it’s going to be based upon your economic needs. So you just don’t walk in and say I need 2 million bucks, give me the max, because it’s not going to happen. They’re going to you’re going to have to demonstrate what your need is and so The way we do that the way you qualify for this as you show them, you know what your rents are right now and what your costs are. And so what we’ve been doing with the cost is we say, all right, management fees, mortgage interest rents, I mean, our rents, excuse me, taxes, insurance, utilities, anything that you pay contractors that you’re bringing into work on, on your property. Those are all expenses that you have. Now, you look at your rental income, you say, here’s my income, I expect this income to lose 80% of it over the next couple months, because tenants can no longer pay their rent. So I need money to continue to pay these expenses that are going out. So when we’re looking at applying for this loan, we make the initial application and then it’s a typically a three to four week process before you hear back from the SBA, then we come back to them as our clients accumulate all this information together, and then we submit that to justify what are the amount of money we need. So where does that put us does it put us 2 million No, probably puts you somewhere between 50 to $200,000, which is the sweet spot for this new program or for this program, not new program for the changes they made under the changes the cares act, you don’t have to give a personal guarantee for a loan up to $200,000. So that’s basically you can get an unsecured loan for 200 grand, those are very difficult to come by. I’ve never received an unsecured loan for $200,000 before and an applicant you know, that applies. It’s only based upon your credit score right now. It’s all they can’t require your tax returns even better, because I was talking to an individual yesterday, and they were working with him. He goes, listen, I haven’t filed tax returns in four years. I got I can’t qualify like hey, you can qualify for an Ei DL. They can’t ask for the tax returns. They don’t qualify on it. They only qualified in your credit score. Your credit score is good. He goes yeah, I got great credit. Well, there you go. Then you qualify. So it’s amazing. Seeing how this program can work for you if you know how to set in the set up the application the right way to take advantage of it. So the ideal, it’s great for real estate investors, because it’s set up to cover your economic damages As a result, the pandemic. And what they also throw in the back end of this was this grant. And when we read the cares act, it states in there that when you apply for your ideal loan, you can also apply for an ideal grant of up to 10 grand. And within 72 hours, they will issue you the money right to your bank account. But Wow, that’s cool. That’s free money right there. So everybody wants to apply for the grant. Well, when we started making these applications a couple weeks ago, no one was receiving grant money within 72 hours. Now finally, you’re starting to see some grant money come out. But again, the SBA came out and they move the ball. They changed the rules of the game and they said It’s, in order to qualify for the grant, you actually act must have employees. I’m like, wait a minute, doesn’t say that in the cares act. Let’s see, the Congress gives SBA the right to interpret the cares act and to issue guidance on it. So they decided to qualify it and state that it’s only available to people that have employees, and they’ll give you $1,000 per employee. Well, it’s nice to know that now, I wish I would have known it, you know, two weeks ago. So this is what I’m referring to when things are changing. So now with the applications that we’re submitting, we’re making sure that people have employees, we’re writing them down on their I don’t care if they don’t get paid or not, we’re still putting them down that they have employees, because the payment portion is important for the next type of loan we’re going to discuss. So as a real estate investor, you’d want to make this application as well and go for the grant money if it could be awarded to you because it’s free money. You do not have to pay the grant. It’s not tied to the idea alone. So if you don’t get the idea alone, you still get To keep the grant money, and as I stated, We finally some, some clients are starting to receive these funds that are being distributed out to them, they go right into your bank account. But again, it’s just one of those processes where things are kind of always shifting and new guidance is coming out pretty much on a weekly basis on how these things are issued.
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