just to clarify - i’m not saying that using land trusts are good or bad.
i’m just saying that someone new to purchasing real estate should avoid the subject because it tends to bombard the new person with an overload of information that will most likely deter them from progressing.
sometimes TOO MUCH information is not a good thing. i know that sounds ridiculous, but if you think about it, you might agree with it.
there are a number of obstacles to overcome when attempting to buy real estate using a land trust and i’m not talking about the basic understanding of it.
it’s the overall implementation of it - for one, finding a lawyer, finding a “nonforprofit”, a seller, etc. is…not easy - of course this also has alot to do with where you live too.
lastly, the noob really should focus on more BASIC things like the relationships between title and financing, appraisal and financing, appraisal and true market value, etc. just basic stuff.
then the noob has to take a hard look at WHO THEY ARE. their background and understanding of basic business and financial principles and personal work-ethics.
investing in real estate take WORK. it takes networking. going into business takes tough skin and a NON 40 HOUR WORK WEEK MENTALITY that most people just don’t have. it takes time to build this.
reading about land trusts (in the beginning) in MY OPINION, just bogs the average noob down with TOO MUCH INFO that ultimately damages drive to make things happen.
When did I say this? I agree. Transfers to a trust do not allow a lender to call the loan based on the DOSC. My answer changes if the agreement calls for a change in occupancy rights.
I understand now. That comment was in reference to holding title in a land trust and then changing the beneficial interest to an LLC. That will trigger the DOSC. Just transferring to the land trust will not.
[i]I understand now. That comment was in reference to holding title in a land trust and then changing the beneficial interest to an LLC. That will trigger the DOSC. Just transferring to the land trust will not[/i].
That’s incorrect, BLL. The transfer of title to my Trustee does not trigger the DOSC, period. You do a public records search and you’ll find my Trustee owns the property, NOT the land trust.
Once the Trustee takes title, I can own my interest in the trust any way I want. He owns the real property, I own the land trust that controls the real property. My land trust is considered PERSONAL PROPERTY. I can hold my interest in the trust as an LLC, an individual, etc. What triggers the DOSC is if I give up 100% of my beneficiary interest, which I don’t. As long as I retain 10% interest in the trust I am safe. As long as the trust agreement does not refer to a change of occupancy, there is no violation. I can assign beneficiary interests in the trust to as many co-beneficiaries as I want and they can be an individual, LLC, corporation, etc., and it is all legally unrecorded. I can lease the property for up to 3 years, and without an option to buy without violating the DOSC. Remember, this is private property and subject to the UCC.
Some people make the mistake of having the seller give up his full beneficiary interest in the trust. That is a DOSC violation because he has transferred his full interest.
Then don’t read it. We all know how disdainful you are of land trusts.
there are a number of obstacles to overcome when attempting to buy real estate using a land trust and i'm not talking about the basic understanding of it. it's the overall implementation of it - for one, finding a lawyer, finding a "nonforprofit", a seller, etc. is...not easy - of course this also has alot to do with where you live too.
You don’t need a lawyer, all the docs are prepared and reviewed by legal counsel. You don’t have to “find” a non-profit. There is an outstanding licensed and bonded non-profit that handles these trusts nationwide, and finding the sellers is very easy.
Others are enjoying this discussion and have found it informative. This is a big forum with plenty of threads. Read the ones that please you. Have a great day.
The way you describe is not the way most people do it and not the way taught in seminars. You and Bill Gatten are the only two people I know that use a trustee and co-beneficiary. Most people set up a land trust and then change 100% of the beneficial interest to the LLC. My comments were limited to that traditonal use LLC and land trusts.
I think I understand what you mean. Most people, myself included, when using a land trust on your own home, use a simple trust and hold their interest in the trust in their LLC. There is no co-beneficiary involved. This is not a DOSC violation, because title to the property is held by the Trustee. The beneficiary interest in the trust is personal property.
When not living in the home but holding it as investment property, and using a Resident Co-Beneficiary, it is ALWAYS necessary to retain a 10% interest in the trust to avoid the DOSC. Your beneficiary interest may be held in an LLC if you so choose.
I should note that the person involved, Bill Gatten is the original poster of this thread (mtnwizard). Apparantly the only trick this wizard knows is screwing people.
Politely, that is not correct. First, Bill Gatten is NOT mtnwizard. I know both of them personally and although they are friends, they are two entirely different people. Second, the crybaby who was fined deserved to be. He did not act in accordance with the terms of the trust.
"Between April 2003 and November 2004, Lorraine Edwards and her daughter Electa Dawn Lee resided in the property as the resident beneficiary. She was late on her monthly payment several times. In November 2004, Ms. Edwards and her
daughter each sent a check to cover the monthly payment – the check from her daughter bounced, making it impossible for Riverhaven to pay the mortgage payment on the property.
[b]IF HE FOLLOWED GATTEN'S PACTRUST, THE RENT IS COLLECTED AND MORTGAGE PAID BY THE TRUSTEE, EHC, NOT THE INVESTOR. [/b]
On November 17, 2004, [b]Riverhaven notified Mr. Worrellia and Ms. Edwards that it was exercising its right not to purchase the property[/b], and would relinquish its ownership of interest and responsibilities (per the signed trust agreements) to Mr. Worrellia.
[B] THIS IS NOT CORRECT. THE ONLY OPTION USED BY GATTEN IS A NON-EXCLUSIVE OPTION TO PURCHASE A BENEFICIARY INTEREST IN A TRUST CONTAINING THE REAL PROPERTY. THE RIGHT NOT TO EXERCISE THE OPTION EXPIRED ONCE A RESIDENT BENEFICIARY WAS PLACED IN THE TRUST. THIS GUY DID NOT HAVE THAT RIGHT TO NOT PURCHASE AT THE TIME HE WALKED AWAY AND IT WAS HIS RESPONSIBILITY TO EVICT THE TENANT AND KEEP THE PAYMENTS CURRENT.[/b]
We offered to assist Mr. Worrellia with eviction per the trust agreements of Ms. Edwards if necessary.
[b]NICE GUY. EVICTION IS THE SOLE RESPONSIBILITY OF THE INVESTOR, NOT THE SETTLOR (SELLER). NO WONDER THIS GUY GOT INTO TROUBLE. HE VIOLATED THE TERMS OF THE TRUST AGREEMENT[/b].
In March of 2005 my family and I moved to Seattle, Washington for an engineering job and to be closer to family in Washington.
[b]HE ABANDONED THE PROPERTY LEAVING THE SETTLOR HIGH AND DRY. IF I WAS THE SETTLOR, I'D SUE HIM TOO.
[/b]
Unbeknownst to us, Mr. Worrellia had also filed a complaint against us with the Ohio Real Estate Commission for engaging in unlicensed activity. This was the first time I realized that Mr. Gatten was probably incorrect in saying that the system did not require a license.
I[b]T DOESN'T.[/b]
Gatten’s Land Trust system has been used for almost 20 years without any problems. Unfortunately, occasionally people either mis-use it as the crooks did in NC, or don’t follow the procedures and get themselves in trouble. There are such people using every creative financing method there is. There are literally hundreds of testimonials that I have read or discussed with people who have used this system successfully, including myself over the past ten years.
THINK, people. Land trusts have been used for over 100 years. Of course they are legal. It’s just people who think they are smarter than the originator who get into trouble by not following the rules.
In reading this further, I noticed something else that indicates to me that this guy was clueless in Ohio.
At closing, the resident beneficiary paid the closing costs (part as cash, part in the form of a promissory note to Riverhaven Equities). The closing costs were made up of an initial investment and non-refundable closing and trust establishment fees. As per Mr. Gatten’s system, [b]all required documents were filed with the state of Ohio[/b] and North American Realty Services (NARS), and all fees for creation of the trust were paid to NARS.
This guy apparently filed his trust documents with the state of Ohio. This is a definite no-no. The ONLY document required to be recorded in any land trust deal is the Warranty Deed, transferring title from the Settlor to the Trustee. That is the ONLY one ever recorded and nothing is ever filed or recorded with NARS. This guy wasn’t paying attention to put it mildly.
Understand that Rich is a Moderator on this board and is basing his assessment of the situation by reading what the Regulators in the State of Ohio found when investigating the situation.
As Moderators we try to keep the board free from Board Hustlers and mis-information, so albeit new or senior investors are not taken in by what is posted here when it is brought to our attention especially when it comes from a State Regulatory Commission.
My advice would be to get a statement from the Ohio Commission that the person who was fined $39K did not follow the trust policy and procedures that you are claiming they did not.
I appreciate and understand your position. If I was Bill Gatten and this was MY system, I would follow up as I’m sure Gatten has or will, if he even knows of this. This is the first I had heard of it and I just read the summation. The mistakes this guy made are obvious and I just thought I would point them out.
For instance, the Non-Exclusive Option he used to secure the property ended when he placed his RB. He had no right to “not exercise” his option at the time he backed out because no option existed. There is no option in the land trust once it is established, only a first right of refusal to purchase at FMV at a specific time.
Another obvious mistake is he talks about collecting rents, something that is NOT done in Gatten’s system by the Investor or Settlor. Because the Trustee owns the property, HE is the one who carries the lease, collects the payments, pays the mtg., etc.
Finally, he abandoned the trust and walked away. There are always specific ways to withdraw or dismiss your interest and they are outlined in the trust docs. Walking away and leaving the Settlor hanging is not one of them.
“Title to the property is deeded to your Trustee.” Say what now? I thought 1) the land trust was a vehicle to hold title and 2) the primary if not whole point of creating the land trust was to hold title. :banghead
So the first thing you do is go and give title to the Trustee? :flush What am I missing?
You guys clearly know much more about it than I do, I’m one of those noobs who shouldn’t be learning this stuff. :argue
Perhaps this particular trust is for the accomplishment of a particular task, and there are different types of land trusts that are designed differently to accomplish other tasks?
For example, in my case I want to wholesale a pile of mortgage notes. Loans. What I was planning on doing was asking the seller to deed? the notes into the Trust. He would be the beneficiary, and pick his own trustee. Through escrow, an AFFIDAVIT OF TRUST is filed in the public record naming the Trustee of the Trust. At the same time, an assignment of beneficial interest is executed, wherein I (or my LLC) become the beneficiary. Then I change the Trustee. My exit buyer then walks into the closing room, and I re-assign my interest in the Trust to him and he pays the previously agreed upon price. The escrow agent divvies up the cash between the original seller and myself.
Everybody goes home. :beer
Does this make sense, or am I confused and/or missing important details?