TRUST STRATEGIES RANDY HUGHES
Because of their low profile,
Land Trusts are very useful for
(off the radar) real estate
transactions. The following ideas
are merely suggestions that you
might consider. Be careful to
think through all the ramifications
before
engaging
in
these
concepts.
If you want to borrow money
conventionally and you will use a
deed to real estate as collateral
for the loan, you will have to give
the lender the full deed. In other
words, you cannot divide a deed real estate with $100,000 of equity could use some of its shares (but
up into pieces no matter how not all of its shares as is required by a personally held deed) as
much you are borrowing. For collateral for a $10,000 loan. With a share value of $1,000 there would
example, if you owned a parcel be 100 shares.
of real estate in your own
personal name (your name is on The beneficiary of the Land Trust could “temporarily assign” 10 shares
the deed), with $100,000 of for a $10,000 loan. This would leave 90 shares unencumbered that
equity and you wanted to borrow could be used for future financing. The flexibility of using a Land Trust
only $20,000, you would have to far exceeds the standard method of title holding.
collateralize that deed in full. In
other words, you would have to In another scenario, assume that two real estate investors have owned
give $100,000 of equity to their properties (of similar current market value) inside Land Trusts for
secure only a $10,000 loan. 30 years. Both investors are “out” of depreciation. Neither investor
wants to conventionally sell their properties and incur huge capital
The Land Trust can be used to
gains.
solve the problem of over
collateralizing
a
loan.
The Once again, the Land Trust trots in for the rescue. Each investor
beneficial interest of a Land (beneficiary of the land trust) sells the beneficial interest to the other on
Trust can be divided into an installment sales agreement. The terms are nothing down, interest
unlimited shares. Therefore, a only (no capital gain to report) and a tenyear balloon (enough time to
Land Trust holding a piece of figure out what to do next).