All Forum Posts by: David H.

@Account Closed

Technically this is possible. As long as the operating company occupies at least 51% of the building then it may be done.

I have lent on these situations before and have friends with Mixed use properties financed with SBA 7a and 504 loans.

For instance I know a real estate firm in Maine who’s offices occupy the first floor of a multi family and they rent the other units in the building to both other businesses and as residential apartments.

The key is the operating company must be at least 51% ownership.

Good luck!

@Chanda Taylor

You are welcome Chanda!

As a Sole Proprietor you would still be eligible.

You could potentially make the argument that the basement or garage is used for commercial space to help hit the 51% occupancy threshold. It may depend on the finish of these spaces tho.

I have seen some make the case that the basement area serves as necessary storage space which was acceptable.

@Chanda Taylor

Good afternoon Chanda!

This sounds like a great opportunity to utilize the SBA loan programs, either 504 or SBA 7a.

As long as the commercial space your business will be occupying is => 51% of the square footage it would qualify for SBA.

Currently, new SBA 7a loans have the first 6 months of P&I payed for by the government! Not a deferral, literally payed for by the government.

Additionally, SBA loans allow for up to 90% LTV financing, sometimes greater (tho increasingly rare).

The 504 loan is a bit convoluted, but the rates are at historic lows. The SBA 7a program rates are also at historic lows as well.

It’s worth checking with your bank to see if they offer SBA back loans. Also, national lenders that specialize in SBA lending may be the best option as they are more flexible, quick and experienced in SBA lending.

Best of luck!

@Jack B.

Hi Jack,

Unfortunately the SBA announced yesterday that the advance grant portion of the EIDL is out of funds.

The $1,000-$10,000 grant no longer exists unless the government refunds this portion of the program.

Please see this article from Forbes for reference:

https://www.forbes.com/sites/allbusiness/2020/07/13/sba-eidl-program-favorable-loans-still-being-granted/

You may still apply for the EIDL loan, which has favorable terms, just no more grants for now sadly.

Best of luck!

@Adam Tafel

I love it!

I actually did a very similar thing when I was doing Air BNB, and I too stumbled into it. I was renovating my first floor unit of my duplex and my girlfriend told me about Airbnb.

I hopped on the site and saw that availability was near 4% in the city. This was in 216 before it blew up.

I played around with searches and saw that literally only one place allowed dogs and it was almost twice the price of other units. I can’t stress enough how doing a search to see how many units are available can help you capitalize on scarcity pricing.

I too would be getting the last minute bookings, but somehow someway I never missed a weekend.

The first year I did it I was averaging $350 a night, with highs of $400. I was doing 3 night minimums tho. I did the cleaning as I was in college living in the Reno downstairs.

I love your strategy of making it a medium term rental. Genius!

Also, I had such positive reviews over and over. The dog owners were typically just grateful to have a clean nice place.

Great share Adam!

Hey friends! I'm back!

I closed my account due to conflicts at work and the pressure of designing, implementing, and managing the PPP loan origination process.

I'm happy to see you all kept at it! What a wild ride it has been!

My personal update is I received a $1,000 advance grant about a month and a half ago. I received a $10,100 EIDL loan at 3.75 % over 30 years with the first year of payments deferred just a couple weeks ago. I had waited to take the loan but had tenant issues pop up and contractor issues and decided that the uncertainty was warranted. 

I'm grateful to see so many were able to receive some relief from this program. I know its not perfect and it has been incredibly frustrating. Hopefully this helped more than the headache it caused.

Hi Nghi, 

The language in the Interim Final Rule is contradictory when it comes to 1099 contractors. It most areas it says that 1099's cannot be counted towards loan amount and that the must apply as themselves. In one or two areas it appears it is allowed in the calculation. Unfortunately, it is my understanding, as it is implied more often than not in the rules released thus far, that if you only have 1099 employees they do not count.

IMPORTANT UPDATE ON EIDL MAXIMUM LOAN AMOUNTS

Good evening BP,

I have very unfortunate first hand knowledge from the SBA & Treasury:

The EIDL Max loan amount will be reduced for all EIDL loans to $15,000.

This is a terrible and unfortunate update to the program. 

I have official correspondence from the a District Director as well as a borrower who was literally informed by the SBA 2 days ago they were approved for $490k only to be informed today they will only be allowed to receive $15,000 because the loan program maximum has been reduced.

This has blindsided us all. It appears as though they quite clearly do not have enough funding for this program and are directing borrowers to the PPP loan, which I can guarantee will be out of funds in two-weeks. 

The only glimpse of hope for this program now is that hopefully more people will be eligible for the $10k grant advance with this amendment. I'm not holding my breathe at this point, the government has bungled these relief programs.

HI Andrey,

I am defining COGS because it is a question on the SBA EIDL application and it is the only formal guidance I've seen for how the SBA determines loan amount per the Disaster Loan SOP.

I agree that rental properties don't have COGS. Thats why I said: "Second (likely for Landlords): Actual or Projected rental loss due to disaster + any liabilities such as mortgage + fixed debt payments etc."

The fact is there is nothing I have seen in writing that explains how the loan amount will be determined by the SBA for rental property owners. This is because the EIDL loan program was designed for small businesses like restaurants, auto repair places, etc... Rental Properties are eligible, I just don't know the exact guidance, so I shared what I know and what was my expectation.

Hi Rajesh, 

I am not saying "none of these folks will qualify for this". What I am saying is I can't be certain as I don't work for the SBA.

The reason I started this thread was to provide a resource for rental property owners to utilize if the needed assistance during this tragic times.

The reality is the nature of this Economic and Health Disaster is so immense that the SBA program has had to undergo numerous updates and revisions.

Also, the SBA programs are not traditionally for rental property owners, so the guidelines are rather vague, however the SBA specifically stated in writing numerous times that "Rental Property Owners are eligible". Unfortunately, the SBA application does not make it clear to understand how to account for Schedule E income.

After having a call with the New Hampshire district two days ago they confirmed that Schedule E income for rental properties is eligible. I have yet to see this in writing though and even the SBA districts have been known to misspeak. So I do not feel comfortable telling 90% of rental property owners something that I can't say for certain. It looks good, but I suggest taking the time and researching yourself to confirm if concerned.