Gain Privacy and Protection with Land Trusts-Part 2

land-trustInvestors interested in building wealth by controlling equity in property are using the Land Trust to utilize the many benefits previously outlined in Part 1 of Gain Privacy and Protection with Land Trust.

Investors often use the Land Trust as the safe and easy vehicle of preference by not awakening the institutional “sleeping giant” – the infamous due on sale clause contained in almost all Deeds of Trust and Mortgages held by Federal and State Chartered Banks. Careful reading and review of the Preemption of due-on-sale prohibitions in the US Code Title 12, Chapter 13 will be the beginning of the learning about the possibilities available in using the land trust. 

The following is an excerpt from an article entitled “LAND TRUSTS CAN OFFER GOOD RETURNS WHILE HELPING HOMEOWNERS IN DIFFICULTY”, written by Tom Anderson, President of Pensco Trust Company:

With today’s economy, many people are finding themselves suddenly out of work and facing economic crises, including potential foreclosure on their primary residence. Land Trusts offer such people an economic life raft from losing probably their most valuable asset, while offering investors (including IRA owners) who are willing to help, potential high returns on their investment.

Let’s suppose an unemployed individual is several months behind in his mortgage payments and receives a foreclosure notice from the bank.  Let’s also suppose there is an IRA owner who is willing to invest $25,000 to acquire a 40% beneficial interest in a land trust.  The $25,000 will be used to pay the homeowner’s outstanding mortgage payments, as well as the upcoming several payments and some improvements to the property.  The owner agrees to either refinance the mortgage on his home or to sell the property. At that time, the IRA would receive its original investment ($25,000) plus 40%of the gain from the sale.  The agreement can be structured to suit the specifics of each situation including extending the time required for the owner to accomplish either the sale or refinance.  The goal is for both parties to be happy with the arrangement and, therefore, each land trust is relatively unique to those involved.  One other important aspect of the land trust mechanism is that while the land trust is in effect the bank is precluded from calling the loan.

There are many other attributes of lands trust, depending upon the needs of the home owner and investor, such as serving as a conduit to a lease option, lease purchase option, or an equity share arrangement”   

As a Corporate Trustee for both a simple Land Trust and/or “Multiple – Beneficiary” Land Trust, we have found that a Land Trust is easy to establish and inexpensive to maintain. For more information on trustee services and benefits visit the Equity Holding Corporation website.

Note: This information is of a general nature and is not intended, nor should it be construed as legal advice. You should not act or rely upon the information herein without professional advice after thorough examination of the facts of each situation

Article written and submitted by Thomas K. Standen, President and CEO of Equity Holding Corporation, a corporate trustee specializing in land trust services nationwide.

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