I own house #1 .I take house #1 and place it in a land trust called house#1 trust.I assign my LLC ,The Campbell Group, as the beneficiary.This will show I still have interest in the Prop. correct?So when I go to get another loan the lender wont say ,hey you have $500k in debt but you own nothing Im not giving you a loan.right?Yet my name and credit is somewhat protected if sued because the trust owns the prop not me .right?
David,
I would retain a 10% beneficiary interest in my own name and assign 90% to my LLC. When it’s time to get another loan, your application will show you own personal property, not real estate, so the value of your property will be legally listed under "stocks and bonds (which includes securities). I am assuming that your name is on the loan. Your trustee will write a letter to your new lender indicating that your property is under a triple net lease. The lender therefore does not adjust your debt-to-income ratio downward due to liablility for maintenance and repairs or the possibility of vacancies, since there is none. This is a regular feature and done all the time. It worked perfectly for me when I NNN leased my own home.
The Trustee owns the property – the Trust controls it under the direction of its Beneficiary(s) – YOU. If you have an unrelated third party as a tenant, you are totally protected as personal property cannot be partitioned.
Remember – ALWAYS use a non-profit corporation as your Trustee for protection. Others on this forum tell you to appoint a “trusted friend”. It’s not worth the risk. Here is a true horror story from someone who wrote asking for help that may help you to make up your own mind.
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"I am an condo owner who has entered a deal with a guy who talked me into doing a landtrust with him because I was desperate. He told me he would take over the mortgage payments for my condo while he worked on getting an investor to buy it. He paid me a months mortgage and the deal was struck and signed into a landtrust which was witnessed by a notary and filed with the courthouse. The guy appointed his own trustee, a friend.
My problem is I haven’t heard from the guy (it’s been 8 months) since signing the papers. Worse is he has a renter living in the condo - I’m stuck paying the mortgage out of my own pocket while his renter sends him the check. I found out that he had a renter because I was going to put an ad in the paper and rent it out - then went by the condo and someone was living there.
I get an email from him every month saying that he will send me money next month and that his investor is still looking at the deal, getting ready to buy.
I have another problem in that the guy lives in Texas and the condo is in Indiana (where I live). What are my options? I want to take the guy to court and get my money but I’ve also read that landtrusts are pretty tight and can be tricky when trying to take someone to court."
HELP!!
This is a perfect example of how a scam artist can take a sound method of acquiring property and misuse it giving it a bad name. It happens in “subject 2’s”, lease options, land trusts, etc. It only takes a few bad apples to spoil the whole barrel and is the reason that North Carolina is legislating against subject 2 transactions in that state.
This COULD NEVER HAPPEN in our transactions and is why we ONLY use the same reliable non-profit corporation as Trustee. It is well worth the $40 per month that he charges to collect lease payments and pay the mortgage (a cost that is passed on to my tenant). Yes it’s cheaper to name a “trusted friend” as trustee, but you get what you pay for. You can also drive a Yugo. Don’t cut corners, be honest, upfront, and ethical in your dealings, be fair to your tenants, and you’ll be very successful. Best of luck to you, David.
campbellgroup,
The state of North Carolina also considers using Land Trusts fraud when doing creative real estate deals and are prosecuting several folks who have been reported to the Attorney Generals office that used them to rip off home owners.
They call it “concealing ownership”, which falls under the Fraud Statutes.
John $Cash$ Locke
He is intentionally misleading you again. He is very threatened by land trusts because, unlike his subject 2’s, they do not violate the DOSC. The fact is that in ONE CASE, two guys used a land trust in a similar method to which I described above. They scammed their victim and belong in jail. They could have done the same thing with a lease option or subject 2, but chose to use a land trust. They named themselves trustees (we always use a non-profit corporation) and deserve what they get.
Subject 2’s without a land trust have NO LEGAL PROTECTION and violate the DOSC clause. NC House Bill 725 comes from the North Carolina Attorney General’s office, which has been on the rampage against investors for some time. The AG’s office claims to have “HUNDREDS OF COMPLAINTS” from people who were hurt by investors who bought properties “subject to” existing mortgage loans, then defaulted. This bill is targeted against the investor who buys a property subject to an existing loan, then resells the property by lease/option or land contract to a consumer. This bill will pass and Old John will be SOL.
The reason NC will be able to outlaw subject 2’s and NOT land trusts is the Federal protection afforded the land trust under the Garn-St. Germain Act. Land trusts are legal in all states and have been in use for over 100 years. All of our docs are reviewed by our legal staff prior to signature. What he refers to as “concealing ownership” is a legal feature of land trusts, approved by Congress, and is the law of the land.
Anyone naive enough to believe that a state can override Federal law need only look at segregation (which would still be in existence without Federal Law) and medical marijuana (which would be legal in many states without Federal meddling).
TR,
My point look at the last post by Gary, I did not adress him only gave factual information, from the powers to be in North Carolina.
John $Cash$ Locke
Cash,
Your input is well taken.We are upstanding business folk and I appreciate your concerns for the future of REI people but remember " Aweapon is not a weapon until used as one"
campbellgroup,
Your statement about weapons is accurate, however my point would be that is why they a have laws as to try and prevent the weapon being used as one to hurt or kill someone.
Same reasoning applies to real estate investing. States have the right to protect it’s citizens, Federal Laws says you can own a weapon, state laws dictate what you are allowed to do with it.
John $Cash$ Locke
State law said segreation was OK. Federal law said it was not. State law says you can smoke marijuana for medical purposes. Federal law says you can’t and they confiscate pot from cannabis clubs. Case closed.
Gary,
“State law said segreation was OK. Federal law said it was not. State law says you can smoke marijuana for medical purposes. Federal law says you can’t and they confiscate pot from cannabis clubs. Case closed”
I think you are smoking some of that stuff you keep referring to in your posts as an example of federal law, cause it is clouding your mind about what states can and cannot do.
If a state says you need a license to do a real estate transaction, or advise someone what to do with their property in your case telling them to put it in a trust and you remain involved, then if it is law you must comply with it. Has nothing to do with federal law, I know hard pill to swallow, but the real test is if the NC Bill 725 becomes law then you test it give a seminar and do not comply with the law.
Right now in NC Land Trusts are frowned upon by the Attorney Generals office, how many new folk have the money to go against the a state in litigation should they be challanged for using a Land Trust?
Since you said “case closed” I am sure you will not break your word and reply to my post as your closed your case.
John $Cash$ Locke
John – You mentioned the bit about having to be licensed in NC and it is very suspicious that you can still do a subject 2 if you have a license. It’s not hard to imagine who is behind this bill. I believe their attempt to force seminar presenters to say certain things will be deemed unconstitutional – free speech.
Gary,
I spoke a few days ago with a Broker who has been doing Subject To and Lease Option deals for years, not a student of mine, but has been in the business for 30 years, said he bought the Guru books way back when. Said the bill would not effect his way of doing business.
I really believe that they are tired of hearing about creative investing gone bad, I just spoke a few days ago with the folks representing the Attorney General’s office where real estate is concerned, I had to sit there an listen to case after case, land trust, no land trust, etc., that are currently under revue by the AG’s office. No inside stuff just things that have been made Public that you nor I would take the time to look up.
I do not think they will stop anyone from giving a seminar, but I do believe that if the material contained in some one’s course is not in compliance the presenter will have a problem. These folks in NC are pretty smart, they are not going to attack federal law only make someone comply with state law.
The post made about weapons was really right on when you think about it, federal law says you have the right to bear arms, no question, or you are allowed to own a gun.
How far can we take this, can you carry it concealed without a permit in most states no, in Florida if you carry one in your car it must take three separate actions to have it ready to shoot or it is against the law to have one in your car.
So when we say you have the right under federal law to bear arms, this would be a poor argument with the police should you get caught with one in your pocket," but officer the constitution gives me the right to bear arms", “yes you can, but in our state you need a concealed weapons permit to do so in your pocket.”
North Carolina has already thought about this one, so yes you can do real estate transactions in our state but you need a real estate license to do, thereby not treading on the constitutionality of Land Trusts. At one time I even had it down to if you have permission from the lender then the DOSC would not come into effect and that even changed, because they want you licensed.
Key words in the NC HR 725 bill “Real estate resale dealer. – Any person who advertises, initiates, or structures a real estate resale transaction.”
Brokers are licensed so they can do all of the above without violating the Bill under state real estate licensing laws.
John $Cash$ Locke
I think we can get past that with the land trust in that it refers to real estate resale transactions. As long as the seller (settlor) retains a beneficiary interest it does not qualify as a “resale” in my humble, non-attorney opinion.