Several individuals want to get involved in real estate investing but are reluctant to take the leap. These people are ready to leave their nine-to-five job to pursue a life of financial freedom. Still, they are unaware of the sources to finance a real estate business. Many assume if they don’t have capital of their own, it is impossible to get started. However, this rationale is false.

There are a variety of ways to finance a real estate business without using your own money. Not only are there real estate development loans, but there are plenty of private lenders out there willing to take a risk on your business. If you desperately desire to leave your day job so that you can prosper as an entrepreneur, consider property development loans.

What Are Real Estate Development Loans?

Real estate development loans are capital advancements issued to borrowers who need funds to break ground on a project, build, and hold the finished product through the leasing stage. Investors typically rely on real estate development financing to do one of two things: buy raw land to eventually build on or tear down an existing building, only to build a new one.

4 Types Of Real Estate Development Loans

The most popular types of real estate development loans include, but are not limited to:

1. Acquisition Loans
2. Development Loans
3. Acquisition And Development Loans
4. Construction Loans

Acquisition Loans

As their names suggest, acquisition loans are specifically used to finance the purchase of undeveloped land. Acquisition loans will often be used to buy land with no intentions of developing on it. While common, acquisition loans provide little room for action and must typically be accompanied by subsequent loans to develop the land further. Of the real estate development loans made available to investors, this offers the least amount of freedom.

Development Loans

If borrowers want to develop the land they recently acquired, they may need a loan to move forward with any plans. Development loans are traditionally borrowed to do just that. Borrowers will take out development loans to make improvements on the land. Leveling, building roads, and running water lines may all be accomplished by taking out a development loan. On top of that, development loans are necessary to turn raw land into a building site.

Acquisition And Development Loans

Sometimes borrowers want to both acquire raw land and develop it at the same time. Fortunately, there’s a loan for that: acquisition and development loans. As their names suggest, these loans enable borrowers to buy raw land and turn it into a building site. OF the real estate development loans made available, this one is the most versatile.

Construction Loans

Construction loans — not surprisingly — are used to finance the building or renovation of a respective real estate project. According to Links Financial, “it differs from other loans in that the developer receives the money in monthly draws as development progresses rather than in one lump sum at the beginning of the project. Monthly loan payments increase as you draw out more money.”

What Is The Capital Stack?

The capital stack is the various layers of financing used to make up a project. In the real estate industry, it’s common, if not expected, to rely on more than one source of funding when acquiring a deal. Each loan makes up the resulting capital stack, with high priority funding sources on top and more senior debt on the bottom. In financing, the capital stack is made up of senior debt, mezzanine debt, preferred equity, and common equity. 

The bottom of the capital stack, or senior debt, is typically the highest priority but lowest risk debt. These are typically loans that are secured by the property. At the top, is common equity which is considered the lowest priority or highest risk debt. These loans are only repaid when the rest of the capital stack has been repaid. Essentially, this concept is used to prioritize the different financing methods that go into a real estate deal. 

11 Real Estate Funding Sources

There are several sources to finance a real estate business, but the most popular of them all are listed below:

1. Traditional Loans: Traditional loans are those you would receive from a bank or an institutionalized lender. Their interest rates are relatively low in an attempt to remain competitive. However, their lengths are typically long, and their underwriting is extensive. Most traditional loans last anywhere from 15 years to 30 or more and come with an interest rate somewhere in the neighborhood of four percent.
2. Private Lenders: Private lenders can be anyone with access to capital and a willingness to invest it. In other words, private lenders can be anyone from a close friend to someone you met at a networking event. As their names suggest, private lenders are not institutionalized or licensed to lend money but rather do so to make their money back with interest. Private lender terms are typically easier to meet, and the duration in which they are willing to lend will be much shorter, but at the cost of an interest rate around 12 to 15 percent.
3. Venture Capitalists: Venture capitalists are high-net-worth individuals or corporations who tend to invest in startups that have shown potential. Venture capitalists are often willing to lend far more than a traditional small-business loan, but their selective nature can be harder to receive approval.
4. Angel investors: Angel investors are usually well-off individuals who provide funding for new business ventures, typically in exchange for convertible debt or ownership equity. Angel investors have developed a reputation for taking more risk, but it’s important to note the money from an angel investor isn’t technically a loan. The money represents the acquisition of part of the business.
5. Small business administration loans: Small business administration loans are issued by the government in a variety of packages. Small business loans offer many options, but they can be tedious to apply for and are not quick to receive.
6. Real estate crowdfunding: Real estate crowdfunding is a process that involves pooling together funds from multiple sources and people. Crowdsourcing can offer recipients flexible terms and is growing in popularity.
7. Microloans: Microloans offer small business owners to $50,000, though most people tend to take much less than that. Due to their size, small business loans are typically easier to obtain than a traditional loan, but there’s a chance the loan doesn’t cover all of your needs.
8. Hard money lenders: Hard money lenders are not institutionalized, but they may be licensed to lend money. Their loan terms are typically short and leveraged with the asset in question. Hard money loans come with a high interest rate, often around 12 percent, but they can give borrowers access to capital fast.
9. Home equity loans and lines of credit: Home equity loans and lines of credit, or HELOCs as they are known, represent a type of revolving credit—not unlike a credit card. Home equity loans, however, use the equity in your home as collateral.
10. Money partners: Money partners are just that: individuals who you may partner up with because of their access to funding. If you don’t have access to capital, it may be in your best interest to partner with someone who does; they would be known as a money partner.
11. Commercial loans: Commercial loans allow investors to purchase commercial properties. Not unlike traditional loans, commercial loans carry long durations. To minimize the risk of default, commercial loans tend to offer low interest rates. As a result, it may be harder to receive approval for a commercial loan.

Getting started in real estate investing is not as hard as you may think. If you’ve chosen your focus – i.e., single-family homes, apartments, commercial real estate, etc. – and your preferred exit strategy – i.e., flipping, buy and hold, or wholesaling – all that is left is finding the capital to fund your first deal.  The importance of understanding real estate financing should not be overlooked because financing is what can help you turn your strategies into realities. Several lending sources are made available to those who are willing to put in the work, which is why “I don’t know how to finance a real estate business” is no longer an excuse to avoid investing.

Alternatives For Small Business

Small businesses looking for financing methods have more than a few options to choose from. If you own a growing company and need to keep reinvesting returns, check out the following alternatives: 

• Private Placement: A private placement is essentially a real estate syndication, but the business would take the role of project sponsor. In this arrangement, an unregistered securities offering is made directly to investors. The goal is to bring more equity to the current project.
• Build-to-Suit: Build-to-suit is exactly what it sounds like. A commercial project is designed and built for the end user, it is then managed by an investor who manages the financing. In return, the operating business agrees to sign a long-term lease. While the business does not officially own the property in a build-to-suit arrangement, they do get long-term access to a custom build space.
• Sale-Leaseback: A third option to consider is a sale-leaseback. In this arrangement, a property is sold to an investor and the business leases it back. Similar to a build-to-suit arrangement, the business will not own the property in the end. However, the money earned from the sale can then be funneled into a new development project.

6 Tips For Getting Property Development Loans

Acquiring money for property development may prove difficult for first-timers. Because the crash rate for property development is high, only experienced developers obtain loans easily. Follow these suggestions to help you overcome to difficulties of gaining real estate development loans:

1. Acquire Credibility: You should try to gain the experience needed to be trusted with a real estate development loan. This can be done by working for an established property developer, and in turn, they can give you this credibility.
2. Find A Partner: Partners can be useful if you already have some of the funds to begin with. If you find a developer to partner with, they will be able to co-finance with you.
3. Develop An Attractive Plan: Acquiring property development financing can be gained easier by creating an attractive project plan. Developers who are just starting usually look into small residential projects consisting of one or two homes. Property development loans can take up to months to obtain. In some cases, the property you want may be off the market by the time you receive a loan. Try to identify several different properties you may be interested in. Zoning limitations, access easements, utility easements, and other special conditions are all things you should research when developing a plan.
4. Do Your Research: Potential lenders will be more likely to offer you a real estate development loan when you provide an extensive amount of information about your project. Research the local property market to establish accurate sales prices and prepare any building cost estimates, including materials, labor, overhead, and profit.
5. Practice Your Pitch: Finally after all your planning is complete, begin rehearsing your pitch. Take all the information you’ve gathered and express it confidently, concisely, and convincingly. Be prepared to answer any questions about costs and the property itself. The more information you can provide them on the spot, the more your lenders will be willing to give you a property development loan.
6. Keep Costs Low: When it comes to property development loans, you want to keep all costs for the project low. The lower your costs, the higher your profits. If you can keep your development costs low, you benefit both yourself and any potential equity investors. You will also want to keep costs low if you are getting a property development loan from a bank. It is proven easier to secure funding for lower costs projects. When banks provide debt, they reference two numbers: the percentage of your total projected cost and the percentage of total projected value once the project is completed. As the repayment of this debt is very difficult during the development process, you will want to keep initial costs low. If anything goes wrong, banks will be unforgiving.

Best Real Estate Development Loans

When looking for the right real estate funding sources, it is important to weigh the costs, qualification requirements, speed of approval, and more. Aspiring investors should be careful to examine any variables involved in receiving real estate development loans to ensure they choose the best financing option for the situation at hand. The following list of real estate development loans is a great place to start:

• US Bank: Loans provided through US Bank are a great option as they can allow investors to borrow up to 80 percent of the property value. Their loans can come with variable or fixed interest rates, and repayment terms can be up to 25 years.
• Wells Fargo: Wells Fargo is one of the biggest real estate funding sources in the country. Investors may find they can be granted funds as quickly as four to six weeks when working with Wells Fargo. Additionally, they are less focused on borrowers’ credit when compared to other financing sources.
• JP Morgan Chase: JP Morgan Chase provides real estate loans to several real estate investors each year, focusing on property types ranging from multi-family to mixed-use. One of the biggest benefits of working with this loan provider is the streamlined application and qualification process.
• Liberty SBF: This lender is a great option for investors looking to borrow up to 90 percent of the property value. Their flexible loans will typically be made up of three portions, coming from a mix of traditional lenders, development companies, and your own down payment.
• SmartBiz: SmartBiz works to match investors and loan providers based on the borrowers specific needs. Their loans are most attractive for investors seeking financing quickly, though the qualifications can be higher when compared to other loan providers.

4 Stages Of Real Estate Development

There are 4 stages of real estate development when looking at a standard development process. The first stage is choosing the right site and purchasing the land that you will be using for your development. The next step is to start planning your development as well as securing the permits and licenses required to build on the land. The third step is to start the development and construction of the project. The final step is to finish construction and start operating the development as you had planned. 

Funding For Real Estate Investing: Which Will You Choose?

To find financing for real estate development, you must start by reviewing your strengths.  The above options are almost always available, but you must understand what you’re getting yourself into before pursuing a particular strategy.

Regardless of what financing option or development loan you go after, all lenders will want to hear certain things. Be straightforward as you lay down the numbers and tell them what they can expect. Lenders will want to know your timeline, your expected profit, the loan amount required, when they can expect to see a return, and how involved you want them to be.

While it is important to appear confident in any meeting with a potential lender, it is most important to be transparent and gracious. Remember, the lender is helping you. Of course, they will benefit so long as the deal pans out the way you hope it to, but they are still taking a risk. Be ready to share your portfolio and answer any question a lender throws your way.

Summary

Financing a real estate deal is a very involved process. In fact, there are several real estate development loans designed to help buyers in every situation. If, for nothing else, everyone’s needs are different, and the loan options made available to borrowers suggest as much. As a result, borrowers need to shop around and confirm they are borrowing the right loan.

Real estate investing has gained popularity in recent years — perhaps because the asset is a well-known hedge against inflation. But according to Moody’s Analytics, it’s not all sunshine and rainbows.

Data from Moody’s Analytics reported by Bloomberg revealed that commercial real estate prices in the U.S. fell in the first quarter of 2023, marking the first decline since 2011.

Courthouse records of transactions analyzed by Moody’s showed a drop of less than 1% in the commercial real estate market during the quarter. Multifamily residences and office buildings were the key sectors driving this decline, according to the report.

And this could be just the beginning. Moody’s Analytics Chief Economist Mark Zandi warned that “lots more price declines are coming.”

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Delinquencies And Defaults

Zandi explained the reasoning behind his bearish outlook on Twitter.

The economist pointed out that demand for commercial real estate is weak because of more people working remotely and shopping online. A substantial number of multifamily units are under construction. Meanwhile, it’s challenging to obtain credit for refinancing and purchasing properties.

As a result, Zandi said commercial real estate prices are “expected to be off 10% peak-to-trough by mid-decade.”

And borrowers will likely face difficulties in meeting payment obligations.

“CRE loan delinquencies and defaults are sure to increase, causing agita for the banking system,” Zandi said in a tweet.

Zandi also mentioned that rising delinquencies and defaults “shouldn’t be the catalyst for a revival of the banking crisis” because property owners have built up “ample equity” as a result of the substantial price gains during the pandemic.

Office Vs. Housing

Zandi isn’t the only expert to sound the alarm.

During an interview with former Fox News personality Tucker Carlson, Tesla Inc. CEO Elon Musk issued a bleak warning regarding commercial real estate.

“We really haven’t seen the commercial real estate shoe drop. That’s more like an anvil, not a shoe,” Musk said. “So the stuff we’ve seen thus far actually hasn’t even — it’s only slightly real estate portfolio degradation. But that will become a very serious thing later this year, in my view.”

He argued that the work-from-home trend has substantially reduced the use of office buildings around the world. And that does not bode well for the segment.

“Almost all cities at this point have record vacancies of commercial real estate,” Musk said.

Billionaire investor Stanley Druckenmiller also highlighted the challenges facing office buildings at the 2023 Sohn Investment Conference.

When discussing how the median regional bank has 43% of its loans in commercial real estate, Druckenmiller pointed out that “around 40% of that is in office.”

And because of the Great Resignation and more people working from home, he said, “We have a higher vacancy rate than we had in 2008.”

But it’s a different story for housing.

“Housing has obviously gone down dramatically given the 500 basis-point increase in interest rates,” Druckenmiller said.

“But unlike [2007 and 2008], we actually have a structural shortage in single-family homes going into this. So if things got bad enough, I could actually see housing — which is about the last thing you would think of intuitively — could be a big beneficiary on the way out.”

The reality is, elevated home prices and high mortgage rates mean owning a home is less feasible. And when people can’t afford to buy a home, renting becomes the only option. This creates a stable rental income stream for landlords.

The best part? It’s easy for retail investors to invest in housing — and you don’t actually need to buy a house to do it. There are publicly traded real estate investment trusts that own income-producing properties and pay dividends to shareholders. And if you don’t like the stock market’s volatility, there are crowdfunding platforms that allow retail investors to invest directly in residential real estate with as little as $100 through the private market.

Read next:

• While REITs Are Struggling, Private Market Real Estate Pulls In Huge Returns
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Don’t miss real-time alerts on your stocks – join Benzinga Profor free! Try the tool that will help you invest smarter, faster, and better.

This article ‘Lots More Price Declines Are Coming’: Moody’s Chief Economist Sounds Alarm On Commercial Real Estate, Warns That Loan Defaults Are ‘Sure To Increase’ originally appeared on Benzinga.com

Spring’s Housing Market Is About To Reach a Peak With ‘Outsized Impact’ Buyers Really Need Right Now

As strange as the housing market has gotten lately, certain seasonal rhythms still prevail. And despite being somewhat dampened by stubbornly high home prices, roller-coaster mortgage rates, and an unpredictable economy, the spring homebuying season is about to reach an apex that’s well worth taking advantage of.

“We’re moving into the period of the year when the number of newly listed homes tends to peak—usually in May or June,” notes Danielle Hale, chief economist for Realtor.com®, in her weekly analysis.

Granted, this seasonal pinnacle might not seem all that noticeable, since the number of new sellers listings their homes is still lower than it was at this time last year. For the week ending May 6, 16% fewer new homeowners listed their homes for sale. Still, this annual decline has been steadily shrinking week by week.

Even though there is still a gap, it’s smaller than what was typical in most of March and April,” explains Hale.

And although new listings are down from last year, total inventory (of both new and old listings) is up 31% for the week ending May 6. In other words, there are plenty of homes for sale, although buyers might need to give stale listings a second look. This portends a potential boost to the overall housing market and offers hope to both buyers and sellers.

In short, the housing inventory is “evolving,” according to Hale. “While further moderation is needed, this is a welcome improvement that comes as new listings near their seasonal high point. Improvement now could have an outsized impact.”

We’ll break down what this all means for both homebuyers and sellers in our latest installment of “How’s the Housing Market This Week?”

The latest mortgage rates and home prices

What’s not so rosy? High mortgage rates are generally holding steady. The interest rate on a 30-year fixed-rate mortgage averaged 6.35% in the week ending May 11, according to Freddie Mac. That’s a bit lower than last week’s 6.39%, but still high enough to make many buyers uncomfortable.

Further compounding buyers’ problems is that housing prices are still inching upward.

The national median list price came in at $430,000 in April, up from $424,000 in March. But for the week ending May 6, home prices grew at a rate of just 2.4% compared with last year. That’s its slowest growth rate since May 2020, when the COVID-19 pandemic was raging across the country.

While tapering home prices is a glimmer of positivity for homebuyers, it’s not enough to really temper their bottom lines quite yet.

“For potential first-time homebuyers, this means that affordability will continue to be a top concern,” explains Hale. “For potential sellers, this means equity is still relatively high.”

What the spring market’s peak means for home sellers

While sellers are understandably thrilled by higher home values, they might have to drop prices soon, since many homes have been sluggishly stuck on the market with no takers.

Home sales have slowed for the past 40 weeks, with homes spending an average of 16 days longer on the market for the week ending May 6 compared with the same week one year ago.

And home sellers might struggle as more properties hit the market in the coming weeks.

“As market competitiveness wanes, sellers may become more flexible,” says Hale. However, the “degree of slowing observed depends on your local market. For example, homes are spending a little over a week longer on the market compared to a year ago in the Midwest and Northeast, where we know housing markets have fared better as affordability keeps demand high.”

Yet in the South and West, homes spent two more weeks on the market for the week ending May 6 compared with a year ago.

The key takeaway here is that while it’s important to understand national context, what really matters are the trends in your local market,” says Hale.

Spring’s Housing Market Is About To Reach a Peak With ‘Outsized Impact’ Buyers Really Need Right Now

Real estate investing has become increasingly popular in recent years. One of the reasons for this is the ability to generate passive income. Passive income streams are a great way to create long-term wealth with minimum effort and involvement.

As someone who has invested in real estate for passive income, I can attest to the benefits of this investment strategy. I remember purchasing my first rental property and feeling both excited and nervous about the prospect of being a landlord. However, as time went on, I found that the passive income generated from my rental property allowed me to achieve financial stability and freedom. I was able to use the rental income to pay off the mortgage on the property and generate a steady stream of passive income each month. It was a great feeling to see my investment grow over time and know that I was securing my financial future.

In this article, we’ll explore how you can build passive income streams as a real estate investor.

Understanding Passive Income

Before we dive into the different ways you can generate passive income as a real estate investor, it’s important to understand what passive income is. Passive income is money that you earn without actively working for it. In other words, it’s income that you earn passively with minimal effort and involvement.

Strategies To Generate Passive Income

1. Rental Properties

Rental properties can provide a steady stream of passive income through rent payments from tenants. To generate passive income from rental properties, investors should aim to purchase properties with positive cash flow, meaning the rent income exceeds the expenses associated with the property. Additionally, investors can hire a property manager to handle day-to-day operations, freeing up their time and allowing for truly passive income.

2. Real Estate Investment Trusts (REITs)

REITs are a passive investment option that allows investors to purchase shares in a company that owns and manages a portfolio of income-producing real estate properties. The income generated from these properties is then distributed to shareholders in the form of dividends. To earn passive income through REITs, investors can purchase shares through a broker or online investment platform.

3. Crowdfunding

Crowdfunding platforms allow investors to pool their money with others to invest in real estate projects, typically with lower investment minimums than traditional real estate investments. Investors can earn passive income through crowdfunding by receiving a portion of the income generated by the property, such as rental income or profits from a property sale.

4. House Hacking

House hacking involves living in a property and renting out a portion of it to generate passive income. This strategy can be particularly effective for those looking to purchase their own home, as the rental income can offset the cost of the mortgage. To earn passive income through house hacking, investors should ensure the rental income exceeds the expenses associated with the property.

5. Short-Term Rentals

Short-term rentals such as Airbnb can be a lucrative way to generate passive income, particularly for those with properties in desirable locations. To earn passive income through short-term rentals, investors should ensure their rental rates are competitive, provide excellent customer service, and maintain a well-appointed and well-maintained property.

6. Flipping Houses

Flipping houses involves buying a property, fixing it up, and selling it for a profit. While flipping houses requires more work than some other strategies, it can still generate passive income if investors hire a team to handle the renovations and sale. To earn passive income through flipping houses, investors should aim to purchase properties with high potential resale value and minimize their time spent on the renovation and sale process.

7. Commercial Real Estate

Commercial real estate investments can provide passive income through leasing the property to tenants. To earn passive income through commercial real estate, investors should aim to purchase properties with desirable locations and solid tenant bases and hire a property management company to handle day-to-day operations.

8. Private Lending

Private lending involves lending money to other real estate investors for their projects. To earn passive income through private lending, investors should ensure the borrower has a solid track record, and the loan is secured by the property, and agree on a competitive interest rate and repayment terms.

9. Real Estate Notes

Real estate notes involve purchasing the debt on a property and earning passive income through interest payments. To earn passive income through real estate notes, investors should ensure the borrower has a solid track record, the property has a desirable location, and agree on a competitive interest rate and repayment terms.

How to Choose the Right Passive Income Stream

Now that you have an understanding of the different ways you can generate passive income as a real estate investor, it’s important to choose the right passive income stream for you. Here are a few factors to consider:

1. Time Commitment

When choosing a passive income stream in real estate, it’s essential to consider the amount of time you’re willing to commit to it. Rental properties and flipping houses require a significant amount of time commitment, as they involve managing tenants, maintenance, and renovations. On the other hand, REITs and real estate notes require very little time commitment, as they involve investing in a company or debt instrument. Consider your lifestyle and how much time you have available to devote to your passive income stream.

2. Upfront Investment 

Another factor to consider when choosing a passive income stream in real estate is the upfront investment required. Rental properties and flipping houses require a significant upfront investment in the form of a down payment and renovations. On the other hand, REITs and crowdfunding require a much smaller upfront investment. Consider your financial situation and how much money you’re willing to invest upfront.

3. Risk Tolerance 

It’s important to consider your risk tolerance when choosing a passive income stream in real estate. Rental properties and flipping houses come with a higher level of risk as they are directly tied to the real estate market and require a significant amount of investment. REITs and real estate notes, on the other hand, come with a lower level of risk as they offer a more diversified portfolio. Consider your risk tolerance and willingness to take on more significant risks for potentially higher returns.

4. Personal Goals

Finally, consider your personal goals when choosing a passive income stream in real estate. Do you want to generate a lot of passive income quickly, or are you willing to take a slower approach? Do you want to be hands-on with your passive income stream, or would you prefer a more hands-off approach? Consider your goals and how your chosen passive income stream can help you achieve them. For example, if you’re looking to generate a lot of passive income (relatively) quickly, flipping houses may be a better option than REITs, which offer more stable returns over time.

Summary

Building passive income streams as a real estate investor can be a great way to create long-term wealth. Whether you choose to invest in rental properties, REITs, crowdfunding, house hacking, short-term rentals, flipping houses, commercial real estate, private lending, or real estate notes, there are many ways to generate passive income as a real estate investor. Consider your personal goals, risk tolerance, and time commitment when choosing a passive income stream, and remember to educate yourself, diversify your portfolio, build a strong team, and be patient.

As I experienced, and while risky, building up passive income streams can be exceptionally rewarding in the long run allowing you to enhance your lifestyle and provide you with financial freedom and flexibility. 

If you find yourself ready to invest in your passive income dreams, you’ll likely need some funding to turn those dreams into a reality. Well, the good news is you are already in the right place! Our team at REI News specializes in finding the most trusted and affordable lenders for real estate investors. Discover your financing optionsby speaking to us today!

The Covid-19 pandemic is wreaking havoc on the U.S. rental market. Approximately 9 million households have so far failed to pay their May rent, according to industry data. Last month, 1.4 million fewer households paid their rent compared with this time last year.

The country’s 44 million rental households are uniquely vulnerable amid the current public health and economic crises. Renters often lack financial security and legal protections, not to mention bargaining power vis-a-vis their landlords. Worse, many are now being hit by the worst economic downturn since the Great Depression. Low-income renters, especially, work in industries crippled by Covid-related job loss: retail, hospitality and leisure, restaurants, and construction. Data suggests that 16.5 million renter households have already lost income because of the economic shutdown.

Faced with the specter of massive housing loss, policymakers have taken some steps to keep tenants in their homes, not only to help the renters but also as a critical public health measure — after all, it’s hard to comply with a “stay at home” order if you don’t have a home, or to socially distance if you’re forced to move into tight quarters with family or friends. The CARES Act has temporarily protected many renters by providing billions of dollars for emergency housing assistance, significantly expanded unemployment benefits and halted some evictions through July. Dozens of states and cities have also temporarily halted evictions, and citiessuch as Los Angeles, Chicago and Philadelphia are providing emergency funding for tenants.

It appears these stopgaps are working, at least for now: We have not seen as severe a spike in nonpayment of rent as might otherwise be expected, and early rent payment figures from May look a bit more encouraging than April’s numbers.

But these remedies focus on the short term. Because of the scale of this downturn, many if not most unemployed renters will not have new jobs by the end of July. The federal government needs a long-term plan to prevent millions of unemployed renters from losing their homes when eviction moratoriums and unemployment sweeteners run out.

More shutdowns coming

Indeed, public health experts are predicting that the Covid-19 crisis will last well beyond the summer, and some government officials are bracing for waves of shutdowns that could continue for 12 to 18 months. It’s also likely that the U.S. will get hit with another, perhaps more deadly, wave of the virus next winter. When the economy does reopen, it will be in the throes of a deep recession during which millions of middle-income tenants will likely be unemployed and require housing assistance for the first time. Without smart, proactive policies to help millions of unemployed renters, we will be facing billions of dollars in rental debt, chaos at the eviction courts and overcrowded shelters primed for another outbreak.

Renters were struggling before the Covid-19 outbreak amid a well-documented affordable housing crunch. Nearly 40 percent of renter households are rent-burdened — meaning that they spend more than a third of their salary on rent — and two-thirds of renter households can’t afford an unexpected $400 expense.

On top of that, renters have few of the legal and financial protections offered to homeowners. Many states forbid renters from withholding rent even if their unit is in disrepair, most renters have no right to legal counsel during eviction proceedings, and once eviction judgments are handed down, renters can be evicted in a matter of days. And, partly as a result of the subprime mortgage crisis of 2008, federal housing policy heavily favors homeowners over renters. Congress spends approximately three times as much on mortgage-interest reduction as it spends on rental housing vouchers each year. Whereas mortgage holders are protected by the provisions of the Dodd-Frank Act, notably through creation of the Consumer Financial Protection Bureau, no analogue exists for renters.

For the moment, these renters are being kept afloat through a combination of short-term emergency cash, unemployment benefits and eviction bans. But it won’t last past the summer. On top of the one-time $1,200 stimulus check, the extra $600 per week added to unemployment insurance checks expires in July. Unemployment doesn’t cover everyone, notably our 10 million to 12 million taxpaying undocumented immigrants — many of whom are renters — and those working in the informal economy providing child care, cleaning and other services. Another 8 million to 12 million unemployed Americans haven’t even bothered to apply, due to a well-documented backlog of claims and the difficult application process.

It’s not clear what appetite Congress has for extending the current short-term stimulus measures. Lawmakers might choose to extend the $600 per week unemployment sweetener past July. An extra $2,400 per month is more than enough to cover rent for most Americans, and once unemployment offices dig out from the initial crush of claims, delivering this assistance would be an efficient and direct way to keep more people in their homes. Yet Republicans are concerned that these expanded benefits are discouraging people from returning to work, and any such proposal would have to survive tough negotiations.

Meanwhile, the $300 billion recently provided in the most recent stimulus package to keep small business workers on payroll is likely already gone. Temporary rental assistance remains underfunded by tens of billions of dollars, and need is only growing as layoffs continue.

Mom-and-pop landlords

While landlords should be encouraged to reduce payments or implement repayment plans, canceling rent isn’t a viable option for many of them. The prototypical rental unit might be inside a high-rise apartment building owned by a real estate giant, but in fact the overwhelming majority of rental properties in this country are single-unit homes owned by mom-and-pop landlords. These property owners rely on rent to pay their own mortgages, to finance repairs and upkeep of rental properties, and to pay property taxes.

So, protecting tens of millions of renters in the midst of a deep recession won’t be easy. But Congress needs to recognize the importance of keeping rent checks flowing. Delinquent rents could easily spiral into foreclosed units and a consolidation of rental stock similar to Wall Street buy-ups after the Great Recession. That means an increase in substandard housing, worse property management and more marginalized Americans. What’s more, evictions cost U.S. cities hundreds of million of dollars per year. That money should be helping to prop up a struggling economy instead.

But while difficult, it’s not impossible to prevent a rental-housing crisis. Congress needs to expand direct rental assistance. That means cash for rent, sent either directly to landlords or renters.

The National Low Income Housing Coalition estimates that $100 billion in rental assistance would support 15.5 million low-income households over the next year. The Urban Institute’s estimate is about twice that, and accounts for renters of all incomes. That line item’s a drop in the bucket compared to the total stimulus funding Congress anticipates pushing through this year, and will stabilize millions of Americans’ largest household expenditure.

Several mechanisms

There are several mechanisms Congress could chose for this. Cash could be directly provided for rent through the Department of Housing and Urban Development’s existing Emergency Solutions Grant network, in which local services providers administer funds to those at risk of homelessness, or through temporary expansion of the department’s Housing Choice Voucher program, through which local housing agencies pay landlords a portion of low-income tenants’ rent. While some housing agencies might face a flurry of new applications, most unemployed American renter households with zero income would easily qualify.

Alternatively, Congress could attempt to funnel money more directly to landlords. The benefit of this approach is that there are fewer landlords than tenants, and they’re easier to track down. The drawback is that this approach would involve creating an entirely new program. If Congress goes this route, it could model a program on the Treasury Department’s Home Affordable Modification Program (HAMP), focused on landlords’ non-owner occupied homes, or expand the Federal Reserve’s Main Street Lending program to allow lending to the rental industry.

The bottom line is that Congress needs to find a way to inject funding into the rental ecosystem — whether through unemployment insurance, rental assistance or direct payment to landlords. Protecting our renters won’t be cheap, and it won’t be easy. But ignoring the coming crisis will cost billions more down the line in the form of rental debt and landlord foreclosures, and could keep millions of Americans from safely sheltering in place. That’s something we truly can’t afford.

https://www.yahoo.com/news/rental-crisis-coming-avoid-163959843.html

Economic Injury Disaster Loan (EIDL) Existing Program 

• Click Here To Apply
  Loan Amounts up to $2,000,000
• 3.75% Interest rate for For-Profit Businesses
• 2.75% Interest rate for Non-For-Profit Businesses
• Loan Terms will not exceed 30 Years 
• Collateral required is only when the loan is over $25,000
• Credit History: Must be acceptable to SBA and show the ability to repay.
• Only available in states with SBA approved declarations of disaster.  Check to see if your area is on the list, click here.
• If you receive the EIDL, you will not be eligible for the SBA 7(a) Relief Loan

*Our sources indicate that there are currently over 25,000 applications submitted so far, with at least 3-weeks  for approvals to be processed. It can be assumed that approval times will only increase as more applicants apply

Get a $10,000 Emergency Advance 

You can get up to a $10,000 grant from the SBA for your small business while you wait for your larger CARES Act Paycheck Protection Program (PPP) Loan or SBA Economic Injury Disaster Loan (EIDL) Follow the below steps:

• Go to https://covid19relief.sba.gov/#/
• Fill out the application
• On the page titled “Additional Information”, make sure to click on “I would like to be considered for an advance of up to $10,000”
• Complete application

*This grant provides an emergency advance of up to $10,000 to small businesses and private non-profits harmed by COVID-19 within three days of applying for an SBA Economic Injury Disaster Loan (EIDL).  

**If you’ve applied for CARES Act PPP financing with us, your place is safe in our queue. Although your application is on-hold pending SBA guidance, we are working diligently to complete your file for an assignment, underwriting, and funding as soon as possible.

SBA 7(a) Relief Loan (Paycheck Protection Program) New Program – CARES Act 

• Click Here To Apply
  Loan amounts up to $10,000,000**
• .5% Interest rate for For-Profit and Non-For-Profit businesses
• 2 year full payout loan, and payments may be deferred for 6 months
• Unsecured and no personal guarantee
• No minimum credit score requirements
• Eligible for loan forgiveness***
• Can only be used for payroll support including medical leave, costs related to health benefits, employee salaries, mortgage payments, rent, utilities, insurance, and any other debt payments incurred before 2/15/2020
• No prepayment penalties
• SBA guarantee fees and lender fees are waived

*A borrower with a current EIDL loan can only also receive the SBA 7(a) Relief loan if the EIDL loan is unrelated to COVID-19

**The maximum loan amount is the lesser of $10,000,000 or the product obtained by multiplying average total monthly payments for payroll costs during the 1-year period before the loan is made by 2.5. So if the loan was made on April 1, 2020, and average monthly payroll costs for the period April 1, 2019, to April 1, 2020, were $1,500,000, the maximum loan amount would be $3,750,000. Payroll amounts over $100,000 per person, will be excluded from the calculation

***Small businesses that take out these loans can get some or all of their loans forgiven. As long as employers continue paying employees at normal levels during the eight weeks following the origination of the loan, then the amount they spent on payroll costs (excluding costs for any compensation above $100,000 annually), mortgage interest, rent payments and utility payments can be combined and that portion of the loan will be forgiven. Any loan amounts not forgiven at the end of one year are carried forward as an ongoing loan with terms of a max of 10 years at 4% interest. The 100% loan guarantee remains intact.

The Federal Reserve announced Tuesday that it will open a commercial paper funding facility to support the financing needs of companies facing stress amid the coronavirus outbreak.

The facility will support rollovers of commercial paper, a commonly used form of unsecured, short-term debt issued to raise funds. 

With businesses forced to close and with consumer activity capped by quarantines around the country, concern has built up over previous weeks that companies will not be able to find funding to survive the public health crisis.

The commercial paper funding facility will establish a special purpose vehicle (SPV) that will purchase unsecured and asset-backed commercial paper from eligible companies as long as the paper is rated A1/P1 as of March 17. The facility would be available to companies of various industries, not just banks.

“An improved commercial paper market will enhance the ability of businesses to maintain employment and investment as the nation deals with the coronavirus outbreak,” the Fed said in a statement.

The facility was opened in coordination with the U.S. Treasury, which will provide $10 billion of credit production via its Exchange Stabilization Fund.

https://finance.yahoo.com/news/fed-unleashes-commercial-paper-funding-to-support-nonbank-companies-144710054.html