Guide for Landlords With Pandemic Related Economic Injury (EIDL)

Guide for Landlords With Pandemic Related Economic Injury (EIDL)

The entire world has been impacted by the current COVID-19 crisis, but in New Jersey it’s hit us especially hard. This crisis has forced us to adapt our daily life and how we conduct business. For many businesses the implications of COVID-19 have been fairly black and white: work from home, switch to take-out, offer virtual classes vs. in person, but what if your business is real estate? If you’re a real estate investor or a landlord, you may be faced with more questions than a simple Google search can answer. That’s why we’ve put together this guide to help you navigate the coronavirus crisis and the support that’s available to you during this time.

Relief Options

As a residential property owner, you have several options for financial relief as a result of this crisis including mortgage relief and the delayed tax deadline. 

Mortgage Relief & Forbearance Program

As a landlord, your biggest expense is most likely your mortgage. That’s why the 90-day grace period for mortgage payments will be most impactful during this time of hardship. This program went into effect on March 28, 2020, but to take advantage of it the first thing you have to do is contact your financial institution. 

If you’re impacted by COVID-19 and your financial institution is participating in the program, you’ll have the opportunity to receive relief from fees and charges (including mortgage-related late fees) for 90 days and no new foreclosures for 60 days. You’ll also have the option to extend your forbearance agreement past the allotted 90 days if you continue to experience hardship as a result of COVID-19. The specifics of your agreement will depend on your mortgage provider.

While missed payments typically negatively impact your credit, in this instance you don’t have to worry. As part of the program, your credit score won’t be impacted and missed payments will not be shared with credit reporting agencies. 

For a full list of financial institutions offering mortgage forbearance and financial protections, visit New Jersey’s Department of Banking & Insurance. They’re consistently updating the list so you can see if your financial institution is included.

If you haven’t heard back from your financial institution, be patient. They’re being inundated with requests. However, if they’re not being cooperative, you can file a complaint with the Department of Banking and Insurance online or by calling (609) 292-7272 or 1-800-446-7467.

Delayed Tax Deadline: April 15 to July 15

Another form of relief for during this time is the tax deadline extension. The deadline to file and pay 2019 taxes has been extended to July 15 for both federal and New Jersey state taxes. For landlords that owe taxes, this extension makes it possible to cover other expenses during this time without any penalties or fees. Taxpayers don’t have to file for an extension for either, it will happen automatically and applies to all taxpayers including individuals, trusts and estates, corporations and other non-corporate tax filers as well as those who pay self-employment tax.

If you are owed a refund, the IRS highly recommends that you do so as soon as possible. Most refunds are still being issued within 21 days of filing.

Inspections Costs and Mortgage Fees
Photo by Helloquence on Unsplash

Small Business Administration (SBA) Loans

In addition to the relief options listed above, taking out a SBA loan through the CARES Act is another option for landlords to cover crucial business expenses. While most of the media coverage has focused on the Paycheck Protection Program (PPP), this particular program doesn’t do much to help out landlords unless you have employees on payroll. However, there are several other programs that are more applicable to landlords operating as an LLC or sole proprietors.

Economic Injury Disaster Loan Emergency Advance (EIDL)

The most common loss of revenue for landlords during this time are missed rent payments, terminated leases, or simply the inability to rent property. If you’ve lost revenue, you can apply for the SBA’s Economic Injury Disaster Loan which offers an advance up to $10,000. This program is specifically designed for any small business (less than 500 employees) and includes sole proprietorships, independent contractors and self-employed persons — categories most landlords will fall into. Most notably, the EIDL does not have to be repaid.

 

To find out if you’re eligible and start your application, click here.

 

SBA Express Bridge Loans

If you already have an SBA loan with an express lender and have an urgent need for cash, this might be your best option to access funds quickly. These bridge loans of up to $25,000 are intended to keep you financially afloat while you wait for the EIDL. The turnaround is expected to be faster and will be repaid in full or part by proceeds of the EIDL. 

 

SBA Debt Relief

Another option for financial relief is through the SBA Debt Relief program. This program provides immediate relief to small businesses with non-disaster SBA loans, in particular 7(a), 504 and microloans. To provide immediate assistance, all loan payments will be covered — including principal, interest and fees for six months.

Economic Injury Disaster Loan Emergency Advance (EIDL)

The most common loss of revenue for landlords during this time are missed rent payments, terminated leases, or simply the inability to rent property. If you’ve lost revenue, you can apply for the SBA’s Economic Injury Disaster Loan which offers an advance up to $10,000. This program is specifically designed for any small business (less than 500 employees) and includes sole proprietorships, independent contractors and self-employed persons — categories most landlords will fall into. Most notably, the EIDL does not have to be repaid.

To find out if you’re eligible and start your application, click here.

Negotiate, Negotiate, Negotiate
Negotiate, Negotiate, Negotiate

Collecting Rent & Getting Creative

As a landlord, your income relies on rent payments and having your properties rented out. With unemployment numbers soaring, finances have suddenly tightened for everyone across the nation and under Executive Order No. 106, issued last month, evictions are prohibited in New Jersey through the duration of the crisis. If you have tenants that have lost their jobs and are unable to make rent or vacant properties / units, you need to know what your options are.

Be Proactive

Determine what your approach to collecting rent will be and communicate that with tenants. The best approach is likely to be a case-by-case one as the crisis has impacted people differently — some may still be employed and able to pay their rent in full and on time, others may have lost their jobs or have hours cut. In those cases, you may want to offer extensions or partial payment. Whatever you decide, make sure it’s clear and communicated efficiently. Be sure to ask for verification of employment changes before reducing payment as well. While it’s important to practice empathy, you don’t want to be taken advantage of!

Some Rent is Better than No Rent

Work with your tenants to set up payment plans or reduced / delayed payments during this crisis. Additionally, if you have vacant units or property, consider a short-term rental at a reduced price. Many frontline workers are turning to Airbnb to quarantine from their families and stay close to patients. You can offer your property at full price, a discount, or as a donation and in turn, Airbnb is waiving their fees.

 

Go Virtual

For property owners with vacant units or homes, consider using technology to up your rental game. Create a virtual tour or Facetime with potential tenants to give them a tour of the property. To further incentivize potential tenants and catch their attention, drop your security deposit, throw in free parking, or add a promotion like two-weeks free. Highlight your promotion front and center in your digital marketing to capture more attention.

Know that we’re here to support you during this crisis. If you have any questions about how to take advantage of government assistance or collect rent on your property, we’re just a phone call away. Stay safe and stay healthy.

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