Protecting Yourself with Land Trusts

Mike: Welcome back to the flipnerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.

Lex: Hi, everyone, this is Lex Levinrad with the Distressed Real Estate Institute and I’m going to be today’s host on the REI Classroom show. Today, what we’re going to be talking about is land trusts.

Mike: This show was sponsored by passiverental.com.

Lex: Land trusts are one of those things that a lot of people throw around, but many new investors, especially if you’re a new investor, a lot of people don’t understand what the real benefit is. So I’m just going to go over a few of the key points of why a land trust is so useful.

Number one, if you’re making offers on bank owned properties and short sales, many times you’re going to come across what’s called a deed restriction. A deed restriction is simply something telling you that you’re not allowed to flip the property for a certain period of time. Let’s say 30 days, 60 days, 90 days.

Really, there’s no way to get around the deed restriction, but by making offers in a land trust, it gives you a little bit of an opening to kind of skirt around a little bit because if they haven’t seen a copy of your land trust then they don’t know who the beneficiary is. Now, it’s not legal for you to change a beneficiary. If you have not yet designated a beneficiary then you wouldn’t be changing one.

So that’s one big advantage of using a land trust. Another one is simply privacy. Let’s say you’re a big investor. You buy a lot of properties. You don’t necessarily want everyone to know the address of every property that you own. You don’t necessarily want an attorney who’s looking to potentially sue you. Let’s say you had a tenant and they had an incident in one of your properties, you don’t want them to necessarily see everything that you own. So by buying properties in land trust, instead of your name showing up on the property appraisals website, the land trust name will show up. And if each property is in a different land trust, you’re kind of hard to find.

That goes hand in hand, of course, with asset protection because if you’ve got a net worth and you’re looking to shield that from creditors, if you’re looking to shield that just from prying eyes, a land trust will be beneficial for that as well. So when you’re making offers on any property, not just a bank owned property . . . in fact, I personally have all my rental properties in land trust, just get into the habit of making the offer in the name of the land trust.

Now, land trusts do work in most states. I’m not an attorney so that’s my disclaimer. There are attorneys that specialize just in land trusts, but I will tell you that I have been told that a land trust works in just about all states with the exception of, I believe, Louisiana.

Land trust law is pretty solid. So next time you’re making an offer on a property, think about using a land trust and making an offer in a land trust instead of using your own personal name or another entity name.

Mike: passiverental.com is your source for turnkey done-for-you rental properties. If you’d like to be an investor and not a landlord, please visit passiverental.com to learn how to purchase cash flowing, professionally managed rental properties in the hottest rental markets across the country. We can also help connect you with financing for your next property. Invest the easy way today and get started by visiting passiverental.com.

Please note, the views and the opinions expressed by the individuals in this program do not necessarily reflect those of flipnerd.com or any of its partners, advertisers or affiliates. Please consult professionals before making any investment or tax decisions, as real estate investing can be risky.

Are you a member yet of flipnerd.com, the hottest real estate investing social community online? If not, you can join for free in less than 30 seconds and get access to hundreds of off-market deals, vendors in your market to help you in your business, and you can start networking with thousands of other investors just like you. Get your free account now at flipnerd.com.

Please check out the FlipNerd family of real estate investing shows, where you can access hundreds of expert interviews, quick tips and lessons from leaders across the real estate investing industry. They’re available at flipnerd.com/shows or simple search for FlipNerd in the iTunes store.