Five Reasons to Use a Land Trust- By: Hady Chahine
A land trust is a revocable, living trust, used to hold a title to a piece of real estate. As such, it is an incredibly powerful tool for real estate investors. For investors who are dealing with several pieces of property, this can be the best way to go because each piece of real estate is held in a separate trust. If you’re not convinced yet, take a look at these five reasons to use a land trust.
With the “Information Age”, the Internet makes it simple to find out who owns what piece of real estate. If you don’t want people knowing what property you own, using a land trust is essential. Since the land trust isn’t on public record for anyone, including city officials to see, it is the best way to protect yourself from prying eyes.
Protection from Liens and Title Claims
Property held by land trust will not have personal liens or judgments of the seller attached to it. If your name is on the title of a home, and there are any problems with the title, you may find yourself in a tough situation. In a land trust, you are protected from any personal liabilities associated with title claims that may have been filed without your knowledge, even if you purchased title insurance.
Protection from Homeowner’s Association (HOA) Claims
With a property in your own name, you are personal liable for all homeowner’s association dues. If these are not paid in a timely manner, the HOA can take out a lien and place it on the property. With a land trust, the trust and the property are the only things the HOA can tackle for what they are owed.
People will sue people with money, to try to get it. As such, they will likely use an attorney who works on contingency, only getting paid when they win a case. Since they will only take a case they know they can win, so they can make their buck, too, they will look for the rich people to target. When your properties are hard to find because of the land trust, you will appear “broke”. If you look like you don’t have anything, people will be much less inclined to sue you.
Making Loans "Assumable"
By using a land trust, a traditionally non-assumable loan—one that someone cannot take over payments on—can become assumable. This works by having the seller transfer the title to the trust, with himself named as the beneficiary. When the transfer takes place, it will not trigger the “due on sale” clause of the mortgage, which makes the entire balance of the mortgage due. Later, the seller will transfer the beneficiary to you. This transaction will trigger the due on sale clause, but since the transfer is not anywhere on public record, it will not become apparent to the lender, so the loan is “assumed” by the new beneficiary.
With all these benefits to using a land trust in place of your own name, there’s no real reason not to use one!
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Author - Hady Chahine: I'm a Certified Accredited Buyer's Representative. I've been helping Manhattan Beach and South Bay home buyers and sellers achieve their dreams since 2001. You can reach me at my South Bay real estate office - 400 S. Sepulveda Blvd., Ste. 100, Manhattan Beach, CA 90266.