The Coronavirus Aid Relief, and Economic Security Act or CARES ACT 2020 aims to provide financial aid to the American citizens during these tough times and aims to sustain and strengthen the economy amidst the aforementioned pandemic. Real estate investors, on the other hand, did not receive nor benefit from this. However, they were given the option by the Small Business Administration (SBA) that allowed them to process business loans to fill the need.
With that being said, how does the CARES ACT affect real estate investors and developers? The quick answer is that although their business will remain afloat given the financial assistance and loan options they are provided the said funding can only support so much.
Let’s walk you through the benefits of the CARES ACT in the real estate industry.
Net Operating Losses (NOL) can be used as an advantage
As a business owner paying taxes can become a burden, the real estate industry has taken a huge relief, thanks to the CARES Act. After the release, tax wages were lightened and provided a specific time table for repayment.
NOLs arising in the beginning of 2018, 2019, or 2020 will be carried back five years. As far as the tax year 2013, a year in which the corporate tax rate was 35%. The CARES Act temporarily removes the taxable income limitation, allowing an NOL to fully offset corporate-level income for the aforementioned years.
This allows taxpayers to carry back previously disallowed excess business losses. The pandemic has already taken a toll on the recession of our economic growth and business are struggling to remain afloat, therefore it is beneficial for the industry to take advantage of this privilege.
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Consumer Right to Request Forbearance
The CARES Act allows borrowers of federally backed mortgage loans to request for forbearance. They may request a forbearance on their loan for up to 360 days. This is in line with the idea that since there is a rise in unemployment and the economy was frozen for months on end.
The act released shall allow borrowers to submit the request for forbearance until the end of the coronavirus national emergency or December 31, 2020, as forecasted.
No fees, added penalties, and interest beyond what would accrue are applicable if paid within the given and agreed upon schedule during the forbearance. The borrower is only required to attest to financial hardship and would no longer need to provide further proof of the ongoing matter.
Cash Flow Support for Tenants
The CARES Act brings forth tax and non-tax provisions that will provide immediate liquidity to individuals and small businesses, leaning towards facilitating rent payments. For them to easily adapt to the situation broth forth by the pandemic.
The cash flow provided becomes beneficial for the real estate industry since the Paycheck Protection Program set within the CARES Act authorizes the US Department of Treasury to provide small businesses with as much as $350,000 billion in federal loans.
The loan provided by the government will effectively function as a grant for companies and the real estate industry. Allowing them to manage and keep employees on payroll and pay crucial bills which includes and is not limited to, their rent and utilities leading to the sustainability of their real estate properties.
The US government CARES about the real estate industry. Not only are they providing loans that are accessible to small businesses, but they are also ensuring the consumers, buyers, and investors are given ample opportunities to settle their debts. Improve their businesses and sustain the industry that defines their career growth,
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Disclaimer: The blog articles are intended for educational and informational purposes only. Nothing in the content is intended as legal or financial advice.