Once a property is in a Land Trust, can it be sold on a Contract for Deed or Land Contract and be advertised as “Seller Financing”?
Wiz, If re-selling a Trust property is OK, Why do you do a Triple-net Lease instead? What’s the advantage there?
My thinking is that it’s easier to sell a CFD because you are actually selling the house, whereas if you do NNN lease… it’s a lease… advertising for Tenants not “owners” … who will have to like paying (high) rent, not financing payments. See what I mean?
I use a triple net lease combined with equity sharing. It enables me to get a nice positive cash flow with no responsibility for maintenance and repairs. My Trustee’s payment servicing company collects the rent and sends me a check each month.
A CFD is considered an immediate sale for tax purposes. The NNN provides the tenant/beneficiary first right of refusal given him/her the right to refi the property at the end of the lease at FMV.
In both cases, the tenant is getting homeownership benefits, i.e., property tax and mtg int. writeoffs. You don’t have to advertise for “tenants”, but direct your advertising toward people looking to buy.
Ok, the Triple net lease sounds good from a seller standpoint - good cash-flow, no maintenance, etc. But what do the buyers think of it?
Isn’t it harder to get people to pay rents equivilent to mortgage payments? For example, rentals here are about $1500/mo. Houses sell in the $350-450k range making financing on those properties $2500-3500/mo PITI - BIG difference between rents and mortgages…
How do you advertise the property? “Lease Option”, “For Sale” “Triple-net Lease with tax deductions and an option to buy” (that ad would cost a bundle!)? I curious about the sell side of things.
How do people handle the complexity of it all ? Does it discourage?
No. The tenant is an owner of the trust and considered an owner of the property by the IRS. He gets to write off both property taxes and mtg int. and I share future appreciation with him 50/50. He has all the benefits of homeownership, just isn’t on title. When he wants to buy me out, he can simply refi.
In writing:
I own a home in a land trust. I need someone to live in the property, make the payments on time, and be responsible for maintenance and repairs on a 3-year, triple net lease. I want you to treat this house with love – as if it were your own. I ask for no down payment – you will only pay closing costs, plus 3 months lease payments in advance. There will be no bank or credit qualifying. If you agree to this and keep your end of the bargain, I’ll give you the house. How? When you sign the lease and pay the closing costs and advance lease payments, I will immediately assign you a Beneficiary interest in my trust with a first right of refusal to buy me out.
You will (although only leasing) acquire IMMEDIATE home ownership benefits and are allowed by the IRS to write off the monthly mortgage interest payments and property taxes. You will also share in the future appreciation of the home on a 50/50 basis. At the end of three years, if you want to buy the property, you can do so at Fair Market Value. If you choose not to, there is no obligation or penalty. Everybody wins. Happy tenants make happy landlords.
Ad: Lease to Own. No down. Pay only closing costs + 3 lease payments. No bank/credit qual. Tax benefits incl.
It’s simple to explain and the trust is only 6 pgs. NO.