hi again i wanted to know how to form a land trust for a sub 2 deal i want any help is appreciated
I just remarked about this in another thread and I’m sure i’ll get heat for it.
you don’t ‘have to’ form a land trust to do a sub2 deal
Hi All , New to the site. Mainly just sitting back and trying to observer every little detail. One thing I haven’t seen mention, although I could have over looked it is; everyone ask about Sub2, but nothing “Buying Only Interest in the Land trust that Owns the Property”. Here is the Script from Bill J. Gatten book walking you through the steps…
In my opinion, the ideal thing to do is:
Rather than “buying” the property per sé, consider buying only an interest
in the inter vivos land trust that owns the property; you would set up this
trust for the seller in order to shield the property’s title and to accomplish
your (and the seller’s) objectives. In other words, you can approach the
defaulting homeowner with an offer to bring all of his/her arrearages
current, if they will but place the property into a title-holding land trust,
move out of it, and assign a portion of the trust’s beneficiary interest to
you. Then, upon vesting the title with the nominated trustee in full
compliance with federal lending regulations (specifically 12 USC 1701-j-3)
no due-on-sale violation or compromise has occurred.2
At this point, you are free to deal with the trust property itself in any manner
you might choose. You can lease it out. You can lease-option it. You can offer it for
sale. You can equity share it with a third (resident) beneficiary who will live in it and
make all the payments, in exchange for income tax benefits and a share in future
profits. Or you can sell it under a “Contingent Sale” arrangement, wherein your buyer
agrees to leave the title in the name of the trustee until ready to make a down payment
and obtain a new purchase-money loan, with which to buy the property from the
trustee.
Wouldn't this save you if later down the road if the Seller decides to apply for another FHA loan? And Seems there are a few more Pro's to this as well. JMO I'm still learning..... :bobble
phil, are you suggesting that the seller put the property into a land trust and then sell you either all or a portion of the interest?
17. Transfer of the Property or a Beneficial Interest in Borrower. If all or any part of the Property or any interest in it is sold or transferred (or if a beneficial interest in Borrower is sold or transferred and Borrower is not a natural person) without Lender's prior written consent, Lender may, at its option, require immediate payment in full of all sums secured by this Security Instrument. However, this option shall not be exercised by Lender if exercise is prohibited by federal law as of the date of this Security Instrument.
If Lender exercises this option, Lender shall give Borrower notice of acceleration. The notice shall provide a period of not less than 30 days from the date the notice is delivered or mailed within which Borrower must pay all sums secured by this Security Instrument. If Borrower fails to pay these sums prior to the expiration of this period, Lender may invoke any remedies permitted by this Security Instrument without further notice or demand on Borrower.
As you can the actual wording of the clause cleary points out if all or any part of the property or interest in the property without the lenders prior written consent…
I love Sub2’s
I think it’s a great strategy, 1 of my 2 acquiring strategies.
I just don’t agree with some investors who feel the need to use land trust.
I know $Cash$ is known for Sub2’s. I hope he would chime in maybe on this topic. I think I could speak for everyone when I say I/we would all respect his input.
happy investing,
Nick Johnson
Motiv8td Investments LLC
No I agree 100%. Yea I was Only referring to a portion. I’m glad you pointed that out, thanks!
“If Lender exercises this option, Lender shall give Borrower notice of acceleration. The notice shall provide a period of not less than 30 days from the date the notice is delivered or mailed within which Borrower must pay all sums secured by this Security Instrument.”
In the statement that I highlighted, dose this mean what ever YOU/BUYER Paid the SELLER for The INTEREST . If so I didn’t post the hole book, but he stated that when he did the deal he would staple a $20 bill to the front of agreement. Of coarse SELL has no clue what its for so you tell them it makes the deal legal. So if I read the above correctly, then clearly your ok!
Not trying to argue, just making sure I see the loop hole! If not please correct me!!
“This is not to say that a lender couldn’t perceive of the transfer being a violation; however, the fact is
that the federal law (“Garn-St. Germain”) specifically exempts transfer into inter vivos trusts from being
considered due-on-sale violations by institutional lenders.”
After a quick Research, this is why the lender SOL.
I believe John Cash Locke has done over 500 sub2’s and never had the DOS called up.
In this market and with interest rates at an all time low I doubt seriously if any lender will call the due on sale it’s just not feasible on their end if they do.
Now when the interest rates go up that will change but for now I don’t see why people are worried bout the DOS just make sure if you take over payments that you make the payments current and on time.
Nick,
Guess I will speak up.
Personally I have never used a land trust and have done well over 500+ Subject To deals that are verifiable. Never had a loan called either.
In North Carolina the Attorney General’s office has a real problem with using Land Trusts. Here is an Article I wrote after speaking with a representative of the AG’s office.
http://www.reiclub.com/articles/nc-commission-answers
Bill Bronchick and Bill Gatten, which I know both of them personally have different methods of using a Land Trust that has worked well for them and their students.
My opinion from day one, when I first started doing Subject To deals, was keep every thing open and above board, do not try to hide anything. However, as I said in the Article if a person feels the need to use one then go ahead and do it.
John $Cash$ Locke
PS: Mr Investor, we apparently were posting pretty much at the same time and your statement is correct, I have done deals with up and down interest rates through the years and still never had a problem.
Thanks John for your input.
I certainly agree with you when it comes to some investor use it and have no problems, I just never have required the need to attempt to hide my actions through a land trust.
The real issue I have with ‘gurus’ selling newer investors systems that teach them they have to do a land trust, but never say the truth which is it’s not completely necessary, however it can be done that way.
to the original poster in this topic: erichoward07
regardless if you do a land trust or not, I hope you now see it’s not absolutely needed. You can do everything on the up & up and still be successful. I haven’t personally purchased John’s Sub2 program but if your looking to pay for education(which is always highly recommended) at least buy it from someone who makes statements like this:
"My opinion from day one, when I first started doing Subject To deals, was keep every thing open and above board, do not try to hide anything. However, as I said in the Article if a person feels the need to use one then go ahead and do it. "
I hope and wish you success,
Nick Johnson
ps… I don’t receive any commission or monies from referring you to John’s Sub2 program and I have not personally purchased it.
so basically your saying that a land trust is not a must and as long as i get a warranty deed with my Sub2 deals and make the payments on time i shouldnt have a propblem right
exactly
Just a few points.
For those in OH, using the Bill Gatten system requires a real estate license.
The Garn-St. Germain Act doesn’t prevent a lender from exercising the due on sales clause if there has been a change in the right to occupy the property. Once the homeowner gives up that right, the DOSC is triggered. Whether the bank finds out and does anything about it is another matter. I know of only 3 times where a loan has been called, but the risk is very small. What isn’t in the law is that the Office of Thrift Supervision, the agency that regulates matters concerning the DOSC, has the opinion that the DOSC exemption does not apply to investment property.
Hi BLL
Im in the cincinnati area where are you located maybe we could do some deals together
My advice to those starting out is to find an attorney who “gets it” and have them walk you though the parts that are unfamiliar to you.
While it will feel like you are paying them a lot, the money you don’t have to pay out from mistakes you will otherwise make will be more than worth it.
After you get a few deals under your belt you can negotiate their fee down, or do the paperwork yourself.