Archives for April 2020

Your Guide to PUA Benefits

April 28, 2020 by CARNM

States are working overtime to get Pandemic Unemployment Assistance benefits to the newly eligible. Here’s how you can apply.

Millions of independent contractors and other self-employed individuals, including a large share of the nation’s 1.4 million REALTORS®, may now be eligible for unemployment benefits under the recently passed CARES Act. Through the Pandemic Unemployment Assistance program, you may now qualify for unemployment benefits for up to 39 weeks if you’ve suffered a loss of income, either completely or partially, due to the COVID-19 pandemic.
The federal legislation is brand-new, requiring participating states to expand their existing unemployment programs and resulting in challenges to getting benefits to applicants. Many states have had to build entirely new systems to administer the funds, and all participating states have had to wait for guidance from the federal government in order to disburse the money properly. But now that that the information has been issued, real estate professionals like Carrie Ammons, an agent with RE/MAX Right Choice in Clio, Mich., have successfully navigated the application process. She applied for benefits on April 13, the first day self-employed people were permitted to start applying in her state, and she was accepted on April 22. “I received my first payment on the 23rd,” Ammons said.
Ammons is grateful for the financial lifeline. She’s been unable to pursue much business lately, as real estate is not considered an essential service in Michigan. (Federal guidelines, which include real estate services as essential businesses, do not overrule state orders classifying the industry as nonessential.) And she was well aware of the frustrations many applicants have experienced while seeking benefits. “Since I knew others were also having difficulties, I tried to be patient, but I still checked to see if the status changed a few times a day,” Ammons says. “Once I saw a change in the status go to pending, it gave me hope that things were processing correctly.”
With a combination of good documentation and patience, applicants can improve their chances for a successful outcome. Read on for general tips about the benefits process and how to apply. But check with your state’s website for details about requirements specific to where you live and work. This information is not a substitute for legal or professional financial planning advice applicable to your own circumstances.

How Much Am I Eligible for?

Most self-employed workers eligible under the PUA program will likely receive half the average unemployment benefit available in their state. In February 2020, the average weekly benefit across all states was $387 according to the Center on Budget and Policy Priorities, though this average ranges from a low of $215 in Mississippi to a high of $550 in Massachusetts.
On top of this benefit, eligible workers will receive an additional $600 per week from March 27 through July 31, known as Federal Pandemic Unemployment Compensation. After July 31, the FPUC will cease, and the eligible worker will continue to receive only the first state-administered benefit. For example, an eligible worker who became unemployed on March 27 and remained unemployed through the end of the year could be eligible for the following:
From March 27 to July 31: $193.50 (half the national average; depends on the state) plus $600 for a total of $793.50. From August 1 to December 25 (approximately 39 weeks): $193.50.
Ammons was able to qualify for both the state-administered benefit and the FPUC.

How do I apply for benefits?

First, assemble the documents you will need to apply. Having the right information will help your application to go more smoothly, says Nia Duggins, policy representative for business issues at the National Association of REALTORS®.
Most states recommend that you have basic information available when you begin your application including your Social Security number, state driver’s license or identification card, home address and mailing address (if different), telephone number, email address, bank name, address, account number and routing number for direct deposit, and the last date you worked.
Duggins cites several financial documents you may need for your application: “Some of the key documents that REALTORS® should have on hand when applying for unemployment benefits include prior tax returns, Schedule C, F, SE, or K with the Form 1040, Form 1099 MISC, bank statements, profit and loss statements, business licenses, and other business records that help verify income.”
Keep in mind that this is not an exhaustive list of all required documents when applying for unemployment benefits. Check with your state unemployment agencies for a complete list of what’s needed when applying for unemployment, says Duggins.
Second, go to your state’s unemployment website to begin the application process (see accompanying table for a list of state unemployment agencies). Most states will require you to create an account. If you have questions during the process, you should contact your state’s unemployment assistance office by phone or email. Call wait times to state unemployment offices may be longer than usual. Many states report that they can often offer faster assistance if you use their dedicated email address instead, and many websites feature virtual assistant chat boxes that respond to questions in real time, as well as step-by-step videos that will walk you through the process.

When will my first payment arrive?

States vary in their ability to disburse funds at the moment. As in Ammons’ case, some states are able to disburse funds within 2 weeks of the date of application. Other states can take from 3 to 6 weeks, and some, while they are accepting applications, are unable to say when they will be able to distribute funds. There are also states unable to accept applications at this time as they are still working to update their systems and processes.

If some states are not ready to accept applications yet, will I miss out on my benefits?

PUA applicants will be eligible for back payments of benefits once your application is approved, starting from the date they became unemployed. “Unemployment compensation benefits will be paid retroactively to independent contractors and the self-employed for weeks of unemployment due to the COVID-19 public health emergency for the coverage period of January 27, 2020, until December 31, 2020,” Duggins says.

Will the funds run out?

While states fund their own unemployment programs, they are reimbursed for the full funding of the PUA program. Each state that has entered into an agreement with the U.S. Department of Labor will receive full funding for the program to provide the expanded unemployment benefits to independent contractors and self-employed individuals. “It is recommended that you apply for PUA benefits as soon as you can in your state, as the number of applicants for these benefits are reaching new levels due to the pandemic,” Duggins says.

If I have been turned down for unemployment benefits, can I reapply?

Yes. Some applicants have been turned down simply because their states were not ready to administer funds yet. Under the PUA program, Duggins says, individuals who are denied unemployment benefits under the program must be given a written determination by the state unemployment agency and information regarding their rights to redetermination and potential appeal.

Will I have to pay taxes on my unemployment benefits?

Yes. Unemployment benefits are taxable income on both the state and federal level, and at the time you are applying you can choose to have a portion of your unemployment benefit withheld, or you can choose to receive the full amount and factor in the taxes on your 2020 return.

Can I apply for unemployment benefits if my state has designated real estate as an essential service?

Yes. As NAR’s Pandemic Unemployment Assistance FAQs state, “There is nothing in the CARES Act or federal guidance issued by the U.S. Department of Labor to date that states individuals from ‘essential’ industries would be ineligible to receive unemployment compensation benefits under the PUA program in accordance with a state order. Even if real estate related activities are deemed essential, it does not necessarily mean that an individual is working and receiving compensation.”

Should I apply for the PUA program or a Paycheck Protection Program loan? Can I apply for both?

The PPP offers forgivable loans from the Small Business Administration designed to help small business owners and independent contractors cover payroll for their workers and to provide income for themselves. Whether you should apply for the PUA or the PPP depends on your particular circumstances. It is likely that an independent contractor with no employees, earning $50,000 a year or less (after deducting business expenses), may find the PUA a better choice, while an independent contractor or business owner with multiple employees may find the PPP a better option. However, it is best to consult with a tax adviser or financial professional about the best approach for maximizing benefits.
On the topic of whether an independent contractor can apply for both, it is possible that you could apply for a PPP loan and use the benefits over its stipulated eight weeks and then apply for PUA funds after that benefit period ends. Again, discuss your options with a tax or financial professional.
Even with proper documentation and a good understanding of the process, applicants can still find themselves facing long wait times, payment delays, and application websites that haven’t opened for business yet. However, state unemployment agencies are working diligently to address these issues.
As Alabama Department of Labor Secretary Fitzgerald Washington announced on April 20 in a statement echoing the sentiments of many his counterparts across the country, “We know that there are many who have yet to be paid, and we are working to get those claims processed quickly.”
Pandemic Unemployment Assistance (PUA) By State – Click here
Source: “Your Guide to PUA Benefits”

Retail Bankruptcies Could Impact Industrial Supply and Rents

April 27, 2020 by CARNM

With stores like Neiman Marcus, JC Penney and Pier 1 struggling, there could be excess retail warehouse space later this year, particularly in the Inland Empire.

Industrial real estate has already been called a winner in this recession, and it isn’t hard to see why. The e-commerce business is booming (have you checked Amazon’s stock lately?) and industrial holders will be a direct beneficiary of that business, with some outlets already talking about the need for excess space. However, the industrial market isn’t invincible from the pandemic pain. Mandated retail closures will ultimately have an impact on industrial supply and rents, particularly in major markets like the Inland Empire.
“We are already seeing retailers filing for bankruptcy. Neiman Marcus is in the process of filing for bankruptcy, and Pier1 and JC Penney missed their bond payments and could be filing for bankruptcy. That will certainly impact the Inland Empire market,” Dave Burback, SVP and managing director at Kidder Mathews, tells GlobeSt.com. “JC Penney has 650,000 square feet in the Inland Empire. Where does that go? Rents are going to have to recess a bit.”
E-commerce could play a role in absorbing some of the excess space—which has already been a trend as shopping moves into the digital space. “I think a lot of this square footage will be taken by e-commerce companies,” adds Burback. “This has accelerated what was already happening in the retail commercial sector.” Even if the pandemic catalyzes future e-commerce growth, returned retail warehouse supply will put downward pressure on the market activity and rents, at least in the short term.
E-commerce is picking up new customers every day during shelter-in-place restrictions, but compared to the last few years, that growth rate will likely decline. “I think there will be growth,” says Burback. “The e-commerce piece of the industrial puzzle continues to drive Southern California, particularly the Inland Empire, but it is not bullet proof. Logistics and e-commerce is going to grow and move forward, but it won’t be as robust as it has been over the last three or four years.”
Restaurants will also have an impact on the industrial supply, particularly for cold storage space. Cold storage supply has struggled to keep up with boundless restaurant demand, but those businesses have shuttered, at least for the short-term. “I think the ripple effect is underestimated. If a restaurant closes, there is a ripple effect, starting with the people, unfortunately,” says Burback. “Beyond that, it reaches to food distributors, furniture suppliers and cold storage.”
Increased supply in some industrial segments will ultimately impact new construction as well, but not significantly. Burback expects price decreases to fall short of anything the market experienced in 2008. “I believe that land prices will be recalibrated. In the last major downturn, prices came down up to 50% in some cases,” he says. “I don’t see that here. I do not think there will be a 50% reduction in land prices, but there could be a 20% reduction in land prices moving forward.”
Source: “Retail Bankruptcies Could Impact Industrial Supply and Rents”

The Case for Opportunity Zone Investments in Rural Areas

April 27, 2020 by CARNM

The pandemic-induced, historic plummet of the stock market shows that diversification in long-term alternatives to equities is critical. That can occur in rural areas.

For investors, battered by the stock market, Opportunity Zones offer a win-win, according to Jim White, a man who wears many hats. He is chairman and CEO of Post Harvest Technologies and Growers Ice Co., founder and CEO of PHT Opportunity Fund and founder and president of JL White International.
Opportunity Zones allow investors to benefit from the initiative’s capital gains tax breaks, to make money, accomplish multi-generational long-term financial planning and diversify their portfolios away from equities.
“We are learning the hard way from the pandemic-induced, historic plummet of the stock market that diversification in long term alternatives to equities is critical,” White says. “Investors are scrambling to find new revenue streams and improved avenues of investment. One thing that hasn’t changed is the desire for high net worth individuals to look to generational wealth planning.”
White argues that the pandemic-fueled shutdown has given investors more time to consider Opportunity Zone investments. When doing that, he says they’ll will realize immediate benefits, such as saving 10% of any capital gains if they invested in a Qualified Opportunity Zone B (QOZB) before December 31, 2021, and they have until April 15, 2027, to pay any capital gains owed.
“Moreover, they can receive annual dividends, and any appreciation on the investment after ten years is tax-free, making it a solid investment strategy,” White says.
White says investors will also take satisfaction in knowing they are impacting low-income urban and rural communities and potentially the lives of millions of people by creating jobs and adding to the local economy through payroll and other taxes.
Overall, he thinks some investors are wary of rural areas.
“One of the issues they see is lack of a qualified workforce in many rural communities,” White says. “Another hurdle is the logistics of bringing a product or service to market. And surprisingly, yet another challenge in rural communities is lack of broadband, something the vast majority of Americans take for granted. With the simple infusion of broadband, entrepreneurs could make huge strides in their businesses.”
Still, the social issues, including unemployment, population decline, poverty, drugs, crime, failing infrastructure, make urban and rural Opportunity Zones, are similar. “In rural communities, those issues may be even more pronounced,” White says. “The coronavirus crisis, with its health and safety fears, compounds the existing stressors – rural communities might have fewer resources in place for urgent health care: fewer hospitals, fewer ambulances, fewer walk-in clinics and fewer health care workers. So, the need is there.”
Citing reporting from The Hill, White says rural residents create self-employment opportunities at a slightly higher rate than the national average.
“The challenge is access to capital as most of it is siphoned to small business investment on the coasts,” White says. “Many rural entrepreneurs don’t know about the opportunities for them via QOZs [Qualified Opportunity Zones] and QOFs [Qualified Opportunity Funds]. So, there is a huge upside if we can get the states and local communities to support QOZBs for rural communities. Still, investors may need the added incentives of local or state tax breaks in addition to those offered by investing through QOFs.”
Source: “The Case for Opportunity Zone Investments in Rural Areas”

These are the Conversations Landlords Should Have With Tenants

April 27, 2020 by CARNM

It’s a long list that ranges from virtual floor tours, the execution of documents, cleaning, deliveries and amenities.

If landlords aren’t having conversations with their tenants about reopening, it’s already too late, says Ross Forman, managing director of the business advisory firm BDO.
“They should be reaching out to every single tenant regardless of whether that tenant contacted them or not,” Forman says. “That [the tenant] is your greatest single asset. Right now, it’s not the bricks and mortar. That is meaningless without the tenants paying the rent.”
Forman urges landlords to ask what tenants need. Talk to them about how you’re handling things such as virtual floor tours, the execution of documents, cleaning, deliveries (including food) and amenities. Think about limiting amenities and reconfiguring elevators to restrict contact.
“Tell them about your plans,” he says.
Forman says it’s important to emphasize digital solutions requiring no human interaction that you will be offering. If cash management and capital expenditures are decentralized, Forman argues that now, when watching investments is paramount, is the time to unify them.
With the massive dislocation in the market, it’s just a matter of time until business shutter, and tenants leave. Landlords, especially in the B and C space, need to be prepared for that.
“Those owners have got to start looking at how where they are going to compete or if they need to diversify their portfolio,” Forman says. “The time to look at repositioning those buildings is now. You’re not going to be able to compete with these newer buildings or brand-new buildings for that matter.”
Workforce reentry, even if it is on a limited basis, should also be a focus for landlords.
If tenants are thinking about bringing workers back to the office, landlords should be sending out employee surveys, Forman says. “This is not the survey to say, ‘Hey, how are you doing?’” Those should have already been done. This survey says, ‘What do we need to do to make you comfortable to come back and work at your office?’”
The goal is identifying their concerns and what has and hasn’t worked in a remote environment. If it makes financial sense, landlords may want to think about offering transportation and childcare options, according to Forman. “Find out what PPE [personal protection equipment] they would need or expect you to be providing,” he says.
Forman says landlords and tenants should also be prepared for COVID-19 to come back later in the year. “They should make the assumptions there is going to be a rebound,” he says. “What are they going to do when that happens? They need to be ready for that in this planning process.”
Landlords can collaborate with their tenants on tools that foster collaboration in the event of a rebound. “Is there equipment that people may need for the short term or long term, such as large monitors, ergonomic chairs and sound isolation opportunities?” he says. “It’s important to take all that information and build a robust communication plan.”
Source: “These are the Conversations Landlords Should Have With Tenants”