Land Trust?

Question

I have learned through posts that it is quite hard to close a reo property. I have seen information about land trusts but I am not sure how to obtain one, or what their purpose is regarding closing the deal. Could someone please explain in "newbie" terms how to close with land trusts on a reo or short sale property?

Thank you,

Michael Pitt

Thank you,

Michael Pitt

Laura Richards · Answer

REO's are not hard to close, just hard to win a contract because its a competitive market. A land trust will not make it easier or harder. It may, however, make your management of that property and resale easier. My experience is with Florida LT's. Not sure if VA offers a similar product (statute).

There are two main players in a LT. The TRUSTEE who holds title (remember a LT is just a legal piece of paper incapable of holding title). You need the trustee as the legal entity to hold title the land trust.  Next is the BENEFICIARY who directs the Trustee what to do with the property held in the LT. As an example, when making an offer in the name of a LT , the buyer name would be "Investor LLC, as Trustee of the 123 Main Street Land Trusted dated October X, 2014".

The bene can be any one person, any one entity, or a combination. There is a 100% beneficial interest that can be divided up anyway you choose (50/50, 72/25, etc, but dont start dividing things up beyond a simple 50/50 until you get more familiar with LT's).

Lastly, a LT is just a pass through entity meaning all profits and losses pass through to the bene's.

Things you will be asked when making offers in the name of a LT and closing in the name of a LT are 1) for a copy of LT, 2) tax id for beneficiary (they will ask for trustee but bc this is a pass through entity as described above they are just mistaken and actually just need the bene's info).

There a million and one uses for LT's in investing. You will be told they are illegal - not true. You will be told they are a waste of money and not all they are cracked up to be - spoken by people who don't know how to use them. You will be told only shady investors use them - there is always bad apple.

Hope this helps.

Tom S. · Answer

@Michael Vincent Pitt

Why not just close in your own name?  I've bought REO's before in my own name and the process was virtually the name as a standard Purchase.

- Tom