Investor · NJ · Member since 2022 · 154 posts · 224 votes
An irrevocable trust is about to 1031 a completely paid off multiunit into a triple net property out of state. If the sold property is $2 mil and a NNN property is identified at $2.5 mil, can the trust/trustee take out a $500k loan to make up the difference?
Does there have to be specific language in the irrevocable trust in order to do so? Or is revocable the only way to go? Trustee is trying to keep elderly parent safe but wants to grow the current value of the trust for future appreciation.
Ypsilanti, MI · Member since 2018 · 189 posts · 127 votes
4y
A trust is an entity, not a person. Which means you couldn’t get a conventional loan in the trust’s name, you would need some kind of commercial loan.
However, more commonly, people will transfer the property out of the trusts name and back into theirs. Get a conventional loan, then transfer it back into the trust.
in the case you’re describing, the equivalent would be to purchase the house with a loan in the individuals name, then transfer into the trust. I work in the title industry, I see this strategy a lot. I’m however, not a CPA or a loan officer. It’s best to consult both before making a move like this.
Lender · Charleston, SC MSA · Member since 2018 · 52 posts · 29 votes
4y
A revocable or irrevocable trust can hold title and be the borrowing entity. Depending upon the property that is being purchased, the lender may require personal guarantees from the grantor and/or beneficiaries of the trust. Residential property lenders will typically require the trust to convey the property to an individual for closing and then the property can be transferred back to the trust after closing as described above. However, commercial lenders will not require the property to be in personal names as they typically lend to entities such as LLCs, corporations, partnerships and trusts with the support of personal guarantees from the principals.