BiggerPockets

I have read through a bunch of posts about land trusts on BP and am getting mixed signals on their worth. I wanted to know if you guys are utilizing them? If so what benefits do they have for your particular real estate business and how much is costing to get them set up?

Thanks
Joey FONTENOT

A good article on land trusts:

http://www.nuwireinvestor.com/articles/land-trusts-for-real-estate-investors-helpful-or-hype-51300.aspx

My take is that it's an intermediate step on the way to transferring your property from your personal name (after getting a mortgage, we'll say) into an LLC, for the purpose of making it nearly impossible for a bank to detect the transfer and thus potentially invoke the Due on Sale clause (which most view as very unlikely anyway). This issue has been discussed "to death" on this site, but always engenders many different opinions.

The problem here is that if you do not have experience using land trusts you should not give advice. Most of what is said in these threads is incorrect. I know, I have been using land trusts in my real estate business for over 30 years. If you want to learn the truth about land trusts, go to [LINK REMOVED]

I am really not here to "peddle" anything. But, to truly understand how land trusts work it takes a lot more than a few threads on a discussion board. However, I will make my point from this one thread above:

"Land trusts are touted as providing top-notch privacy. I disagree. The privacy they provide isn't any better, and in some cases LESS, than that provided by a corporation or LLC"

This is simply not true. A land trust DOES have much better privacy than an LLC or Corp. (If you have ever been in court with a land trust you realize quickly that no one knows anything about them and they are confused by them...and cannot figure out who owns them). With a LT the only thing recorded is the Deed To Trustee...which does not disclose anyone other than the Trustee. Whereas, an LLC or corp. must register with the state the members or corp. officers and their addresses.

A land trust is primarily for Privacy, and these other entities are primarily for asset protection. So, it is smart to learn how to link these entities together for the best protection. Asset protection begins with privacy and the Land Trust gives you the quickest/cheapest/most efficient privacy of all the entities available to a real estate investor.

Hope this helps.

While it is true in some states that you can just list a Manager or Resident Agent it is not true in all. Furthermore it is not wise to title all your properties in the name of one or two entities (like an LLC or Corp). This is a nexus for a lawsuit and does not "insulate" each property from the other...like a trust does.

True, if you are financing your property with a lender that will sell the loan in the secondary market...they will not let you close directly into your trust. This is why I only deal with portfolio lenders who will let you me directly. However, even if you hold title in your name now you are still better off transferring to a trust than leaving the property in your personal name...for lots of reasons. [SOLICITATION REMOVED]

Ok, is this specific enough? The reason why you would use a Portfolio lender is that you can only obtain 9 mortgage loans that are sold in the secondary market (then they cut you off). If your portfolio stops at 9 then, I guess you are right. Otherwise, you are forced to use a portfolio lender (or private lender).

Also, you are right that I do not have time to spend hours on a discussion forum correcting all the misstatements about land trusts. I have written entire courses on this subject. I make my living in the real estate business not selling land trust products/information (it is just a practical hobby of mine that I enjoy). I have been a full time investor since 1969 and would not own a piece of property in my name and would always start with a land trust holding title. I have seen court cases where hundreds of thousands of dollars were preserved because the property was held in a land trust. I have personally avoided frivolous lawsuits because of my use of a land trust and can only tell you that experience works...theory is just B.S. and I would rather protect my assets with experience than conjecture.

I can obtain an unlimited amount of non-portfolio notes by simply purchasing properties subject-to. There is no "they" to cut me off with this as an option and there is no forcing of anything.

If you don't have time to spend hours on the forum discussing things then you shouldn't make broad challenges to specific points. Address the specific points. I have seen one specific point you made above and there is very constructive contrary evidence that there are tradeoffs you didn't address. The posters could have simply berated you and said that there is a whole lot of misinformation without citing specifics like you did. Notice how they didn't do that. They addressed specific points, many of which you agreed with. If that is "conjecture" I'm all for it.

I'm not sure what you're asking. I never said a Land Trust was the same as an LLC. There may be some similarities, but they're still quite rather different entities.

I thought in order to find out who the beneficiary is, there must be some serious research.

Or simply a court order forcing the trustee to disclose the beneficiaries of the trust. If a tenant trips and falls in a rental property, I much rather rely on an LLC to protect me personally than a "land trust".

First, the reason why 99% of the attorneys recommend using an LLC is because they do not study land trust law in law school and if they do not take the time to learn after law school (which most do not because it does not pay well)they do not know the benefits. I have attorneys who obtain my home study courses just so they can better serve their investor-clients. I also have attorneys call me from all over the US to ask LT questions because they do not understand them.

Second, yes I do use LLC's but only as the beneficiary of a Land Trust. This gives me the best of both worlds. The privacy of a LT and the asset protection of an LLC. Putting the title to all your properties in one LLC is just not smart. It is a nexus for a lawsuit and just one legal problem with one property will tie up all the other properties within the LLC. Furthermore, financing is much easier via individual land trusts and you are not linking them together via an LLC financing arrangement. It is cheap and easy to start with a trust and then construct from there. So why not do it? What's the big deal? Would you rather be more protected or less?

And yes, you (or anyone) can obtain as many non-portfolio loans as you can stand IF you are using subject to or many other methods of creative financing. I thought the original question related to obtaining conventional financing which is sold on the secondary market...and the restrictions I stated are correct. However, if you are using these other forms of creative financing I would encourage all of you to use a land trust to hold title. It will save you from future liens/judgments/divorce/incapacity/etc. against the seller/contract financier affecting your title (or your LLC if you were to use an LLC instead of a land trust)).