Dynamics of the Land Trust

General Real Estate Investing
1

Hello to all that read this post, I hope that this question is pertinent to this forum…

I have read literature suggesting that you should never give a personal guarantee when you create a note with a seller. You should make a land trust assume the note.

My questions are:

  1. How does a land trust assume notes?
  2. Do you allow your corporate entity assume the note, then transfer it to a land trust?
  3. Who would be the beneficiary of the land trust in this scenario?
    The homeowner or your corporate entity

Any feedback would be gladly appreciated

2

Howdy Wealthinvestigator:

Trusts are pretty much just to help hide the true owner of the property. The little I have read suggests to have your corp or LLC be the beneficiary of the trust. The seller would never be the beneficiary unless you wanted to be partners perhaps.

In the scenario the trust would be creating a note and not actually assuming the note if you are buying the property and the seller is financing the purchase. It would be just like any other deal where the deed of trust is filled out with the trust as the Grantor and the seller would be the payee and beneficiary of the deed of trust but not your trust that owns the property.

With an assumption the trust would execute a deed of trust to secure assumption which is basically a new deed of trust where the trust pledges the property to the trustee to secure payment of the underlying note.

I have never been involved in a state where deeds of trust were not used but I imagine a mortgage state would have the same sort of documents for assumptions and notes securing the trust financing the purchase.

You may want to hire an attorney or let a title company handle the documents.

3

Than for your reply Tedjr, I need to personally read and investigate further about land trust. In addition, my second inquiry is from your personal experience, have you utilized a land trust in conjuction with the LLC to maximize your liability protection and privacy?

4

Howdy Wealthinvestigator:

I did use a living family trust in the past and will probably set up another. I am using a C-corp at present.

5

thanks for the response Tedjr, have a great day!!!

6

In addition to what Ted said, you might want to read this article that I found on the internet.
It’s a pretty good explanation of land trusts, and it helps to understand some of the principles involved with them.

John Schaub has an Internet Reprint of one of his newsletters on the subject at:

http://www.johnschaub.com/newsletters/9511.htm

7

Thanks Valgolas, for the article and the response.

8

also check out www.foreclosureforum.com

lots of discussion of land trust over there

9

thanks for the link to the site aak5454. Continue success in your business endeavors