Why Use a Land Trust?
By Randy Hughes, aka Mr. Land Trust®
Do you remember 1969? Probably not. You may have been born after 1969 and did not find real estate as an investment until many years later. I remember the year 1969 very well. It was the year in which I purchased my first rental house. I was still in college and realized that I needed to break the cycle of poverty in my family.
First, I decided to get more education than anyone else in my family. So, I went to college and majored in business. While studying in college, I realized that most people in America who became wealthy did it through investment real estate. My initial interest was in apartment buildings, but since they took large amounts of down payment money (the “nothing down” concept had not been invented yet) I defaulted to the single family home as my IDEAL investment vehicle.
By the time I graduated from college I had acquired three rental houses and one small office building. After graduation I continued acquiring rental houses and titling them in my name personally. One sunny morning I woke up and realized the potential risk I was creating by owning all these properties in my own name. These were the days before you could access the county recorder’s office online. But, you could go down to the court house and walk into the recorder’s office to look up each owner of every property in town. Wow, was I stupid!
I began to research different ways of holding title to real estate. When I discovered the Land Trust it was intriguing but VERY difficult to find any information (especially accurate information). After years of research I compiled enough data to form my first Land Trust. Very quickly I became comfortable forming my own Land Trusts and I set out to change the title of all the property currently in my name to my Trustee’s names.
The title transformation from me personally to my Trustee was liberating. I not only physically felt better but, I actually slept better knowing that I was not “exposed” to the public. I recommend putting each piece of investment real estate into its own separate Land Trust. Why? Let me count the reasons.
First, realize that NO ONE will have an interest in protecting your assets like you will. This means that the burden is on you to learn how to protect your assets. Some professionals will tell you that a Land Trust is “old school” and not of value anymore. Others will tell you to title your investments directly into a Limited Liability Company (which creates a nexus for a lawsuit and causes excessive registration fees). I use LLC’s extensively in my business, but not to hold title to investment property.
So, who do you want to take your advice from? Someone who understands legal theory (but has no practical experience) or someone who has been in the trenches for the last 42 years? I have been a full time real estate investor since 1969 and I make my living in the “house business” not the Guru business. My goals have changed over the years and I now want to teach as many real estate investors as I can the benefits of using a Land Trust for privacy, profits and asset protection.