Land Trust Series Part III: True or False

I’ll just get right down to it and really start to ruffle some feathers. I am going to pose questions and statements I hear fairly regularly and answer them with a simple true or false followed by the answer I would give were I not bridled with those annoying little obligations of professional decorum and courtesy. Hey, it’s a blog. Anything goes. Right?

1. Land Trusts Are Illegal: FALSE

Illegal. Seriously? Are you aware of how statutes come to fruition?

Do all of you remember when you were little and your Mother (I would say “Momma” of course) explained to you the difference between stupid and ignorant? I do. My Southern Baptist Momma hauled all three of us heathen children to Vacation Bible School and by the time she picked us up we were all three in the back of her Astro Mini Van crying because we were going to burn in the fire and brimstone. Well, that preacher was flat out stupid because he knew better than to say such things to such small children. If he would have said them without knowing better he would have just been ignorant. It is far worse to be stupid than ignorant. Well, that is the same analysis one must use with the “Land Trust Are Illegal” folks. You must do a thorough analysis before labeling them stupid or ignorant, but, in the end, they must be labeled one or the other. Really, it’s my duty.

A land trust is not illegal. They are here because the legislature created a whole statute just covering land trusts. Nobody just made them up. No further discussion needed. *

2. Land Trusts Do Not Offer Asset Protection: FALSE

This statement dies here and I can kill it with the below example.

Investor 1 is named Stupid Money, LLC. He owns 5 houses as rentals and is currently doing 1 flip. All properties are titled in the name of Stupid Money, LLC. Stupid Money, LLC gets a code violation at one of his rental properties. The code officer files the lien naming Stupid Money, LLC as owner. 90 days later Stupid Money, LLC is ready to close on his flip, but the closing is called off because a code lien popped up on title. Stupid must clear and pay off this lien because it has attached to not only the rental in violation but all properties titled in the name of Stupid Money, LLC.

Investor 2 is named Lesson Learned, LCC. He owns 5 houses as rentals and is currently doing 1 flip. All properties are titled in their own individual land trusts. One of the rentals gets a code violation and the code officer files the lien against the rental naming the land trust as owner. 90 days later Lesson Learned is ready to close on his flip. Closing goes smoothly. Why? The lien attached to only the one property in violation. The code officer doesn’t know anything about the fact that Lesson Learned, LLC owns 4 other rentals and a flip because they aren’t titled in the name of Lesson Learned, LLC. Rather, each is owned by a separate entity- the individual land trusts.

Get it? **

3. Only Scam Artists Use Land Trusts: FALSE

I get beyond annoyed when someone tells me land trusts are useless and only used by scam artist. To all of you people I say, “Thank You!” Please, please, please keep thinking that and I will keep using them every single day, so will my clients and our portfolios will continue to improve.

What’s so shady about a landlord not wanting his tenants to know all the other properties he manages as rentals? What’s so shady about a huge investor not wanting everyone to know he is buying up all the 3/2’s in East Orlando under $175K? What’s so shady about me wanting to keep my real property out of probate? Nothing.

As with anything, there will be some bad apples. They are few and far between and usually the result of going to one too many guru seminars - or desperation.

4. Land Trusts Are Too Expensive: FALSE

I can get your property into a land trust, have the deed recorded and any authority documents drafted for less than 500 bucks in less than 72 hours – and that includes my Trustee fee!

If someone charges you more than that they are either ripping you off or you are making things way more complicated than they need to be.

Have I ever charged someone more than that? Yes, but I also met with them 4 times on structuring the land trust, redrafted documents 100 times and had to handle disbursing commissions to their agents. Don’t be THAT person. It will cost you.

As always, there are more, but this is probably enough for today. I am confident that with just these 4 little true or false questions I have now saved you from both the ignorant and stupid label – at least as far as land trusts go.

Feel free to message me or pose more true or false questions in the comments section.

* For the record, there was a whole lot more said in the minivan that night and my Daddy probably broke the record for the fastest any human being has ever climbed the front steps of a church hunting down a preacher.

** Take that Bigger Pockets Guru Guy who devoted pages and pages to saying otherwise.