Commercial Real Estate Broker · Fontana, CA · Member since 2008 · 68 posts · 20 votes
I just flipped 3 properties today to a all cash investor using a land trust. I had never done it before and I was skeptical but I closed all three deals same buyer within 3 hours.
Here are the steps if you want to use a Land Trust to flip:
1. Put in your offer as xyz title vesting tba in escrow.
2. Get offer accepted.
3. "Street Name" Land Trust Trustee xyz (whatever buyer that is in Step One)
4. Find a cash buyer
5. Sell your land trust to Cash investor ( Wholesale Fee)
6. Cash Investor is the 100% beneficary
7. He wires money to escrow.
8. Property sold
9. Beneficiary (Cash Investor) fires xyz as trustee and assigns his own trustee for property.
NO EXTRA COST FOR A DOUBLE CLOSE USING TWO ESCROWS
There are a few ways to do that. In an LLC you just fund the LLC. Or show personal funds with a letter stating that you will fund this purchase with personal funds. (not all banks will accept this, some want the buyer, escrow check and verfications of funds letter to have the same vesting)
When you show the personal funds as part of the POF landtrust. You lose the key ablility of the landtrust. The ablity to remane unkown and do business.
This thread is much like the whole REI industry. Hyped up simple information, sold to people with no working knowledge.
There are no secrets in real estate, there sure are no secrets for sale in real estate.
Those than can do. Those that cant GURU.
You have 4 things you need to succeed in this game.
time
money
knowledge
a good credit rating
without those you are pretty crippled in what you can do. The good news. Those fours things can be aquired with a little effort.
By the way, anyone looking for the info on the "how to" wholesale flip REO deals,come to the BP Summitt, I will cover this in my presentation, day 1 at 11 am.
@WillBarnard, Thank you for the detail and clarifications on this subject.
I'm wondering if you could recommend any more resources on wholesaling with land trusts? I see you had a talk on it at the BP Summit? Or perhaps, you could mentioned if there have been any major issues/trends since the last entry.
Yes, I did speak about it at the Summit and you can purchase a recording of the entire conference right here on BP.
As far as recent changes, most of it is not changes to the land trust itself or the strategy, but that the market has changed and the inventory of REO's (which this worked so well with) has dropped considerably, thus less opportunity to utilize that method.
Another change I have noticed is that the bank will now often require to see the trust bank statement to match the name vested on the contract. before, I would have "Will Barnard" as the trustee and the bank account for the POF was under "Barnard Enterprises, Inc" my corporation. Since the name of the account had my last name and I was trustee, they never questioned it before. Now they often want to see the trust bank account match.
@WillBarnard, On Aug 15, Dyches Boddiford spoke at our local REI club and he specifically said that a Land Trust does not file a tax return, it is a "flow through" entity, and that an EIN or SSN is not required. Can you clarify for me, please?
Alan, that is correct. I went back to see what I wrote previously to see why you pointed this out and I see in my post in January 2012, I was not very clear at all in item #5. Let me clarify what I was attempting to explain, and did a poor job of it. A trust does not, in itself, file a tax return, however, the social security number of the beneficiary used on the trust certification must file a tax return and report any income from the trust (thus the pass through entity you are referring to. If the beneficiary is an LLC or Corp, it would have an EIN number and the income derived through the trust would pass through onto the tax return of the entity. Or, a newly formed entity can be used and that entity would HAVE to file a tax return with the proceeds of the trust shown.
I was not clear at when describing the need to file a tax return, it is the entity or SSN of the beneficiary that Must file their tax return with the income of the trust passing through to that entity or personal return. In other words, contrary to popular belief, you can not avoid filing a return or paying taxes just because you use a trust.
The trust certification Does however require an EIN or SSN on it and that would be one from the beneficiary or a newly formed one on behalf of the beneficiary.