Randy Hughes explains how
real estate investors benefit
from the use of land trusts.
I have been a landlord for
43 years and I have always
threatened to write a book
of my experiences. Perhaps
one day I will write a “tell
all” book about the crazy
and unique tenant situations
that I have found myself in,
but for now, I will limit this
article to those experiences
that relate to using a Land
Trust.
Most rental real estate is owned by
mom and pop operations that have
no separation between the “owner”
and the “tenant.” The relationship
that develops is one of an adversarial
nature. The tenant knows that he/she
is dealing directly with the owner of
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the property and therefore has an
advantage when negotiating lease
and maintenance issues.
For example, when it comes
time to renew a lease it is diffi-
cult for the owner of a property
to drive up in his/her Mercedes
to demand a rent increase. Not
that the owner doesn’t deserve an
increase, but the perception from the
tenant’s point of view is that the owner
does not “need” an increase.
Unfortunately, most tenants in Amer-
ica today think that the owner of their
property is rich and has no cares in the
world! It is a common misconception
that people who own rental real estate
are wealthy. So, when it comes time
to renegotiate a lease the owner is at a
distinct disadvantage.
Most savvy real estate investors will
hold title to their property in a Land
Trust with perhaps the beneficiary being
PAGE 69 • 2016
Landlords and Land Trusts
a Limited Liability Company (LLC)
or Corporation. This structure gives
the investor the anonymity of owner-
ship from a Land Trust and the asset
protection benefits of the LLC.
When a Land Trust owns title to
real estate held inside the trust, the
Beneficiary is NOT the owner. The
Trustee is the full legal and equitable
title holder. This means that as the
Beneficiary you can honestly state (to
everyone including tenants) that you
are not the owner. This puts the Ben-
eficiary in a much better negotiating
position with tenants.
As the property manager you only
have certain powers bestowed upon
you by the owner. Beyond those
powers your hands are tied and it
becomes a take it or leave it proposi-
tion. For example, when a property
manager presents a rent increase to a
tenant it is from instruction from the
owner of the property. It is not up to
the property manager to negotiate,
just deliver the message. Negotia-
tions become much more matter of
fact when handled in this manner.
The property manager is just “doing
her job.”
There are other distinct benefits
to not being the “owner” of rental
Continued on pg. 95
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