Help on Land Trust Attorney and advice

[sarahlim2000]

Hi Tim,
I was reading your article in texasrealestateclub.com and I had order 4 books today from Amazon.com
1) The complete guide to your R.E closing
2) Land Lording
3) Managing Rental Properties
4) Land Trust for Privacy and Profit
plus one set of Bronchick - Your Step by Step Guide to Land Trusts ($249.00)
I started investing in real estate last September and had purchased 5 rental homes since. I put my name on all these 5 rental homes. I was/am looking for attorney to help me get my name out of the properties but none of the attorney I counseled with can give me a satisfactory solution, one said I need to deed it to another Warranty Deed and inform my bank of that, but
every loan has due-on-sale clause! the other one said I need to form 5 different LLC and deed my properties to my 5 LLC and notify my bank and insurance company of that, we asked our banks if it's ok to change our loan to LLC for asset protection, their answers are NO..... I don't think their advice sounds logical
to me. That's when I started to suft the net and I found your website plus I just joined a RealEstateCLub (RICH) in Houston.
I really want to settle this matter as soon as possible. Do you have any recommendation on the attorney that does the Land Trust in Hosuton Texas?
As far as I understand (from your chat forum), I need to form 5 separate trust for each rental home (123 south street Trust, 234 main st Trust....), and appoint a trustee to each trust and beneficiary will be my LLC (may be put 2 rental homes in one LLC)? If the beneficially is my LLC will this not alert the bank with the Due-on-clause and how about the insurance? If I create a trust to each of my property and beneficiary to my LLC do I have to inform my Hazard insurance of the changes? My name is on each insurnce coverange policy.
Please advice how should I get my name of the rental properties and with the right coverange with my insurnace. I plan to keep all the rental homes at for another 5 years.

In the future if I purchase any rental home, how will I do it, should I purchase the property under my name at the closing and form a trust right after? or is there a way to purchase a property using a trust with bank loan or mortgage company?

Thanks for any advice. Looking forward to hear from you.
Sarah at sarahlim2000@hotmail.com

[Admin]

Sarah,
Where are you located?  Generally, any information regarding asset protection and/or privacy issues will be state-specific.

(Folks, it helps the people who spend time responding if you'll include your location in your profile.  You can click the "Profile" button on the user bar above to add the information.)

Sarah, since I don't know your state, and even if I did, I might not know the correct answers, I'll try to provide some helpful information.

Yes, a title transfer will be required to remove your name from ownership.  You are not required to notify the bank in any documents that I've seen.

In some states, the cost to setup an LLC is so cheap that I know investors who do that.  Typically, it's another angle to avoid seasoning issues on resales and not for properties they plan to keep.  To maintain the integrity of the entity, there are certain requirements that must be met, and that would be tedious for numerous properties.

Yes, the insurance loss payee will need to match the property ownership.  This can be problematic if the loss payee does not match the borrower.  This is why I and many others use a land trust.  It does not provide any asset protection, but can provide privacy and allow for easing insurance issues.

As I said, rules vary by state.  Here are just a few twists:

trust must be recorded
beneficial interest must be recorded
any assignment of beneficial interest must be recorded
transfer tax as high as 3% may be due
trustee's name must be on deed
etc., etc.

Fortunately, for me, Texas doesn't have any of those requirements.  No, it would be difficult to get traditional loans in the name of an entity.  It can be done, but requires a relationship and frequently requires providing a business history, financials, and personal guarantees for residential properties.  I've done a few that way, but it's not the norm.

Sarah, I now see you're in Houston.  Sorry about that, but I guess I'll leave the prior info up as it may still help others.  I don't know any attorneys in Houston, but I'm sure you can find plenty of recommendations through RICH.

Yes, if you're buying traditionally, you can immediately transfer the title after closing.

Hope it helps...

[abeblimp]

Sarah,

I've got the same problem and lawyers telling me all sorts of different things.  I have 6 properties in Dallas and they're all in my name.  What did you end up doing?

[JoanAlyce1]

TRandle

I see you are in Round Rock, I am in Austin.  Have LLP, just now learning about the trust aspect.  Could you please recommend a trust knowledgeable attorney in this area or a book or course that has Texas specific trust forms ?

Thanks so much

[agkatz]

Wouldn't it be easier to just buy more insurance?  ;)

[Admin]

AK,
Insurance is useful, but the primary benefit of trusts is privacy which then becomes a lawsuit deterrent.

JA,
Bill Bronchick's Land Trust course is good, and although I haven't read it, I've heard good things about Mark Warda's book on trusts (check the recommended reading list on the site)...
http://www.texasrealestateclub.com/booklist.html

I've not run across attorneys that are big on trusts here so I won't be able to help there.   Again, for me, it's just a tool to keep me out of the public records for contingency attorneys and general privacy.

[agkatz]

I'm by no means an expert on this yet, but there are definitely a few issues we should explore further:

1.  "It's just a tool to keep me out of the public records for contingency attorneys and general privacy."  -- I think that this is probably a manufactured issue that is hyped up at seminars to get people to buy courses.  It seems to me that holding it in an LLC would be a safer route.

2.  From what I can tell from talking with a couple of attorneys, there IS NO land trust in Texas.  There is one in Illiniois, but we're not in Ill.    Which means that you're setting up a trust, but not necessarily one that falls under the criteria you may think it does.  So, if the Texas courts need to figure out what kind of trust it ACTUALLY is... they're probably not going to rule according to what Illinois says it is.  My gut feeling is that if lawyers (who make a living working with judges) are uneasy with the concept... it's probably better to stay clear.

3.  Because the Land Trust is not inherent to Texas, there may be unknown taxation issues associated with the trust you've created.  I don't fully understand this point, but you may want to talk with Charlie about it, as he brought up some issues that I was unfamilar with.

Be careful.  Wear your seatbelt.  Don't do drugs.  And avoid the dancing weiner.  
- Adam.

[Admin]

AK,
Part of what you've said is true.  However, I know from experience that the primary benefit, privacy, is effective.  I have received demand letters over the years and have no doubt the reason they were not pursued is a public search at that time showed nothing in my name.

And the properties are controlled by entities through being beneficiaries.  I think that if you get to court, the gig's up anyway, so that's irrelevant to me.  It's easy to find entities in the records and my sole goal is to spend $11 per property to ensure that contingency attorneys have to work and/or wonder enough that they request a retainer.

Another downside to straight entity ownership is insurance.  Many lenders will reject policies automatically if the loss payee doesn't match the borrower.  A land trust helps there as well.

There are no taxation issues - it's simply a passthrough so my entity treats it as it normally would.

CB doesn't use them and isn't very familiar with them.  We've had several discussions in the past.

just my view...