Dear Fellow investors,
I am working on my first sub 2 deal and obviously have a few questions…

I understand that I need a trust, do I need a lawyer to create a trust, if not where I can I find the information for it. I live in california and the deal is in Texas.


i don’t understand why you NEED a trust. Could you please explain how the deal won’t work without a trust?


Here is what my research has yielded. I need to create an iinter vivos trust.

Here is the supporting FEDERAL law.

US CODE TITLE 12 > CHAPTER 13 > 1701j–3. Preemption of due-on-sale prohibitions
(d) Exemption of specified transfers or dispositions
(8) a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property;


inter vivos trust documents are private. If you are asked for the documents you tell them to go pound sand.

ANY half ass attorney can avoid the DUE ON SALE CLAUSE WITH THIS US CODE by creating a trust for the benefit of a corporation. The seller of a property deeds the property into the trust and assigns the trust to the corporation.

The seller tells the mortgage company that they will be moving and using a property management company.

Obviously I have a quit claim deed executed JIC.

Go to and check out Bronchick’s Wealth Protection Library or Alternative Owner Financing courses. Richard Roop has this down in his 5 figure paycheck course also.

The idea, according to Bronchick and others is that on a Sub2:

  1. You have your seller put the property in a land trust , “1234 Main St Trust” or “Joe Smith Family Trust”, with you as the Trustee.

  2. Then you have the seller assign 100% beneficial interest in the trust to your corporation.

  3. Quit Claim to you as Trustee and record the deed

  4. Change of address to lender to you as trustee

  5. Power of Attorney to you as Trustee

  6. Homeowner’s policy to name trust as additional or if Lease Optioning, Landlord Policy in trust name, ans have your tenant/buyer get renter’s policy…

The idea with the trust is that you aren’t buying the property but the TRUST. Being trustee and having beneficial interest puts you in control of the propperty without tipping off the lender.

Anyway, I might’ve missed something so check out Bronchick as he covers trusts in all states… Good Luck!

I think you all are putting too much confidence in the value of a trust in a SubTo Deal. You don’t really need a trust to do a SubTo deal, only to conceal transfer of ownership from the lender.

It is true that Federal law prohibits lenders from exercising the Due on Sale clause when a homeowner transfers title to his own living trust. However, when the homeowner is no longer the beneficial owner of the trust, the lenders are free to invoke the DOS clause.

It is exactly this type of deal structure that got the NC Attorney General to investigate SubTo deals and charge some investors doing them this way with fraud. The state legislature reacted by proposing legislation that virtually bans SubTo in NC.

I understood the trust documents to be private. Only a judge can request them. So a lender can’t ask for them.

NC aside I haven’t followed it at all. Fraud is very, very broad. What could be fraudulent. The fact the beneficial interest changed? Trust docs don’t get recorded in FL. I’m safe.

In conclusion, the value of the trust is virtually priceless. How many conventional mortgages can you qualify for? My research has yielded me 1 maybe 2 million.

With trusts which are private hiding the sub2 deal. The sky is the limit. The lender can only request the trust docs by subponea.

I have bought 3 houses sub to in the past week. Something I have wanted to do for 5 years and the banks always say 10% down. I spent $30 in binder fees, avoided closing costs, kept cash in my pocket, etc
, etc, etc.

Show me who and where I have defrauded anyone and I will gladly quit claim all 5 of my houses to you.

He didn’t say they were “found guilty” of fraud, but that they were “charged” with fraud. I believe NC has made all type of sub2 deals illegal as the result of this, haven’t they? (I’m not sure of the details, I’m in Illinois, lol)

A trust makes it tougher for a lender to find out what happened, but in NO means is it impossible. A good lawyer will find out very quickly what has “really” happened. Remember that the lender doesn’t have to find you guilty of fraud to call the note due, he only has to see the deed changed hands.

Anyway, even when banks know what happened, as long as you pay the bill they don’t care enough to call it due. I don’t know one investor who’s ever had a loan called due… of course I’ve read hundreds of posts from new “wannabee” investors who are scared out of the business because they “think” it will!



According to the NC State Attorney General, concealing the transfer of beneficial ownership from the lender is loan fraud.

I will take those houses now.

Dave T,

Why every time someone mentions a “Trust” the word “Hiding or Concealing” is used in conjunction with them?

You don’t suppose the Attorney Generals have put this together. let’s see wild guess here, Conceal = hide – cover-up - obscure, or some in the legal enforcement community’s call it Loan Fraud. As you have said they do in North Carolina, so it is just a matter of time until someone wants to make point in some other state as what happens when you want to conceal a deal.

John $Cash$ Locke

I believe they would also have to prove that your intent was to conceal. There’s other reasons to put property in a trust besides hiding the fact it changed ownership.



Maybe you would like to expound on the other reasons an investor put’s a Subject To deal in a Land Trust.

John $Cash$ Locke

OK, John, I admit it. I have a negative bias.

The original post started this discussion by saying that a trust was NEEDED to complete a SubTo deal. I simply disputed the notion that a trust is really NEEDED for a SubTo. I still do. Unless you have updated your materials in the last couple of years, your own Subject To course does not espouse the use of a trust to facilitate a SubTo deal. Not one response in this thread has told me why a trust is NEEDED to do a SubTo deal – why the deal will fall apart without resorting to a trust.

To justify the need for the trust, someone cited Garn St. Germain protections from DOS calls when the homeowner places the property into a living trust. For the less informed, I simply pointed out that the Garn St. Germain protections do not apply when the homeowner transfers beneficial interest in the trust to someone not the homeowner.

Again, I still don’t see the NEED for a trust whose only purpose is to conceal transfer of beneficial interest in the property from the lender, in an effort to prevent the lender from exercising the DOS option. You know from your own discussions with the NC Attorney General that this activity has been prosecuted in NC as a form of loan or bank fraud.

If, as has been argued, the lender will not exercise the DOS option as long as the loan stays current, then I still ask, why is the trust NEEDED to facilitate the SubTo deal? That has still not been answered.

I am still willing to engage in a spirited debate. I am willing to be won over by the trust defenders, but I will need a more compelling argument to justify the NEED for a trust.


I personally haven’t and will not use one, of course I have only done 500+ Subject To deals without having the DOS clause accelerated, so I would need some real convincing that they are worth the paper they are written on.

It was my opinon that the main reason they are used is to hide the tranfer of ownership or to beat the tranfer tax and I just could not justify in my mind putting myself or anyone in the position of having to stand tall in front of the powers to be and explain why I or they did it.

If you notice in our great industry that things are being closely scrutinized by various govenmental agencies and one of the biggest reasons is when you read certian posts where investors talk about how they are hiding a real estate transaction they have done. Look at what is going on in Maryland, Texas and North Carolina. So those that propose they are hiding something keep talking until it hits their state and then let’s see how willing they are to explain what happened should they be the test case.

However maybe ZNICK can give us more reasons or ClayHomeSavers can tell us why since the trust is not recorded it is not a problem.

John $Cash$ Locke

If there was absolutely no reason to put land in a trust but hide it from the lender, wouldn’t we teach NOT to use them? Certainly it would tell a lender that something fishy is going on and they would immediately call every loan due that’s in a trust!

Trusts have been around for hundreds of years, were they originally conceived simply to protect sub2 real estate purchases? Is that the only use? Perhaps the Lousianna Purchase was a sub2 deal and some saavy investor put it into a trust so the indians who once lived on the land didn’t know who the present owner was!

In any case, here’s the real untold story… the last piece of property I put into a trust was not done to hide the fact it changed hands, but to preserve the land for environmental purposes… this is the reason I use trusts! I wanted to make sure no other buildings were built on it for the sake of nature.


P.S- For the record, I don’t use trusts either.

So, ZNICK, you have no reasons to offer why a trust is needed to do a SubTo deal?

I don’t dispute that trusts have their purpose. I myself use them for family estate planning. However, the question started when I asked why a trust was needed to do a SubTo deal. Unfortunately, vbyoga never responded to my question before everyone else jumped in, so we will never really know vbyoga’s reasons for asking the question in the first place.

I suppose John Locke has already provided a definitive response. Since he has done 500+ SubTo deals without once using a trust, the answer is that THEY ARE’NT needed at all for a SubTo deal.

I don’t feel they’re needed… in fact, I think some sellers get nervous by one too, if they don’t understand them.

I’m not saying they don’t serve some purpose, but a lot of investors and attorneys don’t feel they are “all that”. Lenders aren’t stupid, maybe 20 years ago they were more naive, but they know what’s going on nowadays. Sure, it makes it harder for them to find out the real owner, but a good attorney’s going to get it done anyway.

If you’re paranoid about the DOS and you’ll sleep better at night, go get one, it adds another step in the process and might buy you some time. Personally, I trust people like John and other investors who have done this longer tham myself, and just use entities.

I know that the chance of a bank calling the loan due is almost zero anyway, so why bother? Now that so many states are interpreting trusts as “shady”, why should I make myself look like I’m hiding something if I end up in court? If for some stupid reason a bank calls a note due on me I’ll either get private $ or a conventional mortgage anyway. I wouldn’t have taken the deal in the 1st place if it wasn’t good enough to loose a couple thousand somewhere and still be a winner, so even if I’m forced to actually (GASP!) finance it myself, I’ll still be happy.


So Cash, Am I to understand, IF I DON’T USE A TRUST I WILL NOT GET A DOS.

I am actually working on my 4th Sub2 deal and they are going to file chapter 7 bankruptcy. I don’t want to use a trust on any of my deals if I don’t have to.

I use them because a mentor of mine has reccomended them.

Obviously with this loan going through the BK it will get looked at hard. Especially since they have 27K in equity.

Tell us $CASH$ !! How do YOU do a sub2 deal without a trust?
Simply with a quit claim?

I have a quit claim on all of my deals that states-
To have and to hold…

SUBJECT TO taxes, covenants, restrictions, mortgages, and easements of record, if any: however this reference shall not operatie to remove or reimpose the same.


I use corporate entities to take title to my subject to properties. Let’s get past the point of luck being involved that the DOS clause was not accelerated in my case to many properties for luck to have anything to do with it. There is no guarantee however, no matter how you take title to property that this could not happen.

By taking title to properties using a quit claim deed, as the quit claim deed only transfers and interest some day you may find you have partners that you didn’t know about. Also when you go to transfer title to your buyers you may find that an attorney or title company will not accept a quit claim deed as a proper transfer method. Always use a warranty deed or other state specific device when taking title to a property.

When dealing with a property where the owners are in bankruptcy, the way I do it is set down with the trustee and show him there is no or little equity in the property. This way I have the property dismissed from the bankruptcy, then makeup any back payments or continue making payments to the lender and get on with selling the property.

Just some ideas for you to think about.

John $Cash$ Locke

(ZNICK - Your web site shows four properties that you have sold and in checking with the county records I found no record of a title transfer. My point being here separate your buy site from your sell site so that it is less likely someone can check on what you are doing.)


I just recently setup that website, I didn’t used to use one, but got it within the past 5-6 weeks actually. What is it that I don’t want sellers to find out?

I guess I’m confused by your suggestion… are you saying you think it’s better that sellers can’t see I’m reselling the houses? “Who” is it I don’t want to see them?

Of the 4 that are on there, the top one was acquired by sub2 and sold by L/O, the second one I’m closing on conventionally next week, the 3rd was an assignment closed last week, and the bottom one was also sold conventionally a couple of months ago. Those 4 properties are in 3 different counties as well.

Thanks for the suggestion, like I said above, it’s a bit confusing because I’m not sure what it is I’m trying to hide, and from who.