#AskBP 074: What is Seller Financing and How Does it Work?

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Today on the #AskBP Podcast, Brandon discusses the ins and outs of seller financing and explains why the seller financing might just become your favorite method for finding deals. You’ll also learn this dangers of seller financing and what you need to be aware of before doing a seller financed deal.

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About Author

Brandon Turner

Brandon Turner (G+ | Twitter) spends a lot of time on BiggerPockets.com. Like... seriously... a lot. Oh, and he is also an active real estate investor, entrepreneur, traveler, third-person speaker, husband, and author of "The Book on Investing in Real Estate with No (and Low) Money Down", and "The Book on Rental Property Investing" which you should probably read if you want to do more deals.

2 Comments

  1. Brian Gibbons

    Brandon I will try this question.

    A Property Trust or land trust has a Beneficiary and a Trustee (manager)

    A Trustee holds title to a property for the benefit of the beneficiary. The beneficiary has the power to direct the Trustee under the terms of the trust. Therefore, the Trustee manages and deals with the property directly under the direction of the beneficiaries.

    A land trust is also an inter vivos trust because it is created while you are alive and it is a revocable trust because you can cancel it at any time you wish; however it is not the same as a living trust because a land trust is designed specifically for real estate and. not for your personal property. Another difference is that land trusts are mainly used as an asset protection tool where as living trusts are mainly used as an estate planning tool to avoid estate taxes; although, both types of trusts do offer estate planning and asset protection benefits.

    Instead of being your own trustee (as with a living trust),) you usually appoint someone else to be the Trustee of your property so that your name does not show on public record as being associated with the property that is in the trust. This is one of the main benefits of using land trusts.

    The overall purpose of a land trust is so that one person can hold the title to a property for the benefit of another.

    Land trusts have several different uses and numerous benefits. The primary use is for asset protection. When a property is in a land trust it is shielded from judgments and liens that are against the beneficiaries or may come against the beneficiaries.

    The Garn-St Germaine Act 1982 says you can place a property in a trust for estate planning purposes. Many investors name a Trust by the name of the owner or the name of the Street Address.

    The seller of the property then transfers their beneficial interest to the investor. This transfer in beneficial interest does trigger the due-on-sale clause and is not covered under the Gam-St. Germain act.

    However, such a transfer is only known between the Trustee and the beneficiaries, and is not recorded.

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