LLC vs Trust for hiding and mtg options

General Real Estate Investing
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EDITED

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Judd,

You can set up a land trust 100% in the name of your LLC as long as you are the Managing Partner. If you tell me the name of the state, I’ll look up the laws re land trusts for that state. for you.

Da Wiz

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Hi Judd,

Please don’t label me a guru. I’m just an investor who has learned a lot about my strategy of buying and managing my properties.

Georgia is friendly to land trusts. They are authorized under Georgia code 53-12-50 and 53-12-59. The trustee needs to retain the function of actively dealing with property matters in order to avoid characterization as a passive or dry trust.

With my own property, I have named the trust the *** Oak Street Trust. My wife and I are Beneficiaries and my LLC is also a beneficiary. Good luck.

Da Wiz

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How do you finance these properties? I though the person guaranting the mortgage had to qualify for and close the loan. I understand how to put the property in trusts, LLC and all that after the closing, but wouldn’t the name of the person still be on file at the recorder’s office? In IL the mortgages are recorded and the mortgagors are searchable online.

How are you structuring your deals and funding them to get around this?

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Hi Guru,

I get the seller to agree to a subject to situation through an option. I pay for him to set up the trust in his name and assign me a 90% beneficiary interest.

Then I locate a tenant/Buyer and triple net lease the property to him with a bump in the Mutually Agreed Value and a positive cash flow. The lease is for 2 yrs, 11 mos, 29 days to comply with the DOSC.

At termination, the seller’s mortgage is paid off, he receives the equity we agreed upon, then dismisses his 10% and assigns it to me.
The tenant has the right to purchase at FMV. It is not an option, but a first right of refusal. Doing the transaction in this manner, my name doesn’t go on title or on any loan.

The seller, under the terms of the trust, has no ability to “take the property back” as some have claimed. However, if the tenant decides not to purchase, the seller may have the option to buy it back.

Da Wiz