Because you don ’ t know them well , you do not want to enter a Partnership with him / her , nor do you want to form a corporation or LLC with this individual . These things present the potential for plenty of headaches in the long run .
You really do not want your good name associated with this person until you have verified their honesty , integrity , and your ability to “ get along ” together . And you sure as heck don ’ t want your name on a deed with this person for all the world to see the connection in the public records online .
A Land Trust is ideal for a situation like this . First , unlike with a corporation or an LLC , there is no Land Trust database on Planet Earth , so only you and your coinvestor ( s ) need to know you are business associates .
Also , you can divide the interest held in the Trust by the Beneficiaries , according to the dollars they invested . If you put in 65 %, then you ( or your entity ) holds 65 % of the Beneficial Interest in the Trust . Note : you can also divide the distributions unequally , like an LLC but unlike a corporation .
Should something happen to you or your fellow investor ( s ) then the Successor Beneficiaries named in the Land Trust seamlessly transition into place and the investment property is unaffected .
Because you are using a Land Trust , you can decide who , or what , has control over the decisions about the real property . For example , you may require that in exchange for your investment , you are named the Director of the Trust . Or you may be comfortable creating a Board of Directors to control the Land Trust , and therefore , the property held by the Trust .
Reason # 2 : You are buying a Pure Option or entering a LeaseOption . You could enter an Installment Contract where fee title will remain in the seller ’ s name until full payment is made to satisfy the terms of the contract purchase .
Your concern is that by the time you have created enough value added to the property to sell for a profit , the owner ( the titleholder ) may have done something stupid to cloud the title , such as filed bankruptcy , had a lien recorded against him / her , made repairs that resulted in a mechanics lien , gotten divorced , borrowed against the property , signed a longterm lease for under market rents , etc .
You can ’ t prevent problems like these from cropping up . What you can do is insulate your investment from these risks by using a Land Trust . It may be obvious to you by now , as a Land Trust Newsletter subscriber , that liens and such that would attach to an individual do not attach to the property in a Land Trust ... in most states . ( If it isn ’ t , I encourage you to go back and read through the Newsletter archive .)
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