Archive for December, 2005

Recently I was reading on Robert Kiyosaki’s RichDad.com Community Forum a question asked by a newbie seeking truth. None could answer, so I answered for him. I posted a copy of my message here hoping to benefit and inspire others who also seek it.

His question was: “For the purpose of holding title to investment real estate properties, when would a trust be more beneficial than a corporation?”

Later in the post someone asked him if he meant a Real Estate Investment Trust or REIT. He replied, “Well, I really don’t know the first thing about trusts, but I assume it’d be an REIT.” I had to laugh, and answer his question:

——-

no lol it’s not an REIT–its called a Land Trust.

Land Trusts protect property.
LLCs protect people.

An LLC can be a beneficiary of a Land Trust, thus protecting property AND people. This is the best configuration for a real estate investor.

If Robert Kiyosaki needs another million dollar book idea he should get Bill J. Gatten on his team of advisors and write a book with him about the Land Trust.

Furthermore, when you combine a Land Trust with a Triple Net lease to the tenant buyer as a beneficiary of the trust, magical things can happen. None can partition the property to satisfy judgments or creditors–not the seller, not the investor, not the tenant/buyer. None can lose the property as a result of a lawsuit, bankruptcy, or marital dispute–not the seller, not the investor, not the tenant/buyer. Landlords can convey tax benefits to the tenant buyer (namely the income tax deduction for paying mortgage interest and property taxes) None can attach a lien, or judgment, or otherwise cloud title to the property–not the seller, not the investor, not the tenant/buyer.

Only when the seller and/or investor and the tenant/buyer are in completely unanimous agreement can anything legally be done with the property. This is a blessing, not a curse.

Lease Options, Contract For Deeds, All-Inclusive Trust Deeds, Wrap-Around Mortgages, etc. all violate the lender’s Due on Sale clause, but there is no sale when the seller places their property into a Land Trust. Further, there is a legal exception allowed by the federal government that protects homeowners who place their property into a Land Trust from the Due on Sale clause–no lender can call it, regardless of whether their contract states it or not.

Likewise, these ‘other’ methods of creative real estate investment that are so popular today do not protect the property by themselves. For example, what would happen if an investor with 10 lease options were to file for bankruptcy, or if his wife were to fight for the cashflow in a marital dispute or divorce, or if he were to injure another in a automobile accident and be sued. What are the tenant/buyer’s rights?? They have none. The property would be taken to satisfy a judgment.

Further, what would happen if a tenant/buyer were to allow the water softner company to put a lien against their lease optioned property, and then not pay the bill? Or not pay the rent? What are the Landlord’s rights?? None. The house cannot be sold until the lien is satisfied.

Take heed. Many reputable attorneys are not specialized in the Land Trust. Very few even know what it is. Estate planning attorneys do not always recognize them, because they are not the every day type of trust. A Land Trust is a living revocable inter-vivos trust. Furthermore, the type of Land Trust I am speaking of is co-beneficiary directed, or more specifically known as the Equity-Holding Trust.

Do not let them tell you these are illegal where you live. They only want to sell you another lease option document. Research and you will find that they are legal in every state in the union without exception by virtue of the statue of uses (basically, they are legal because they are not specifically illegal).

I hope this has illuminated your confusion regarding the ‘trust’ used for real estate investment purposes.

Every day we are bombarded by ads. We all have learned to filter these out of our daily life. For example, how many of us all sort our mail over the trash can? Consider how much time you give each ad before it hits the round file–It’s usually less than a second for me.

However, when most people start out trying to create their own advertising, they instantly feel even though the ads don’t work on them they MUST work on other people–or else why would anyone else be spending money to do it in the first place? People think that copycatting so many of the other types of advertising they have seen (and unconsciously filtered) in the past is how things are done.

For example, some think putting words like ‘FREE’ or ‘INCREDIBLE’ or ‘THIS OFFER WONT LAST’ is just going to SUCK PEOPLE IN LIKE A MAGNET!!! To me, these are the classic words that instantly label what I am reading as another junk mail/spam/advertisement as I shoot it toward the trash bin at lightning speed.

Q: So, what is the BEST way to advertise to find deals?
A: The EXACT OPPOSITE of what you see everyone else doing. In other words, refrain from the “Monkey see, monkey do” method. Here are some terrible examples I see every day in my town.

Negatively Stereotyped/Overused:

WE BUY HOUSES!
SELL YOUR HOUSE FAST!
CA$H FOR HOUSES!

Only Attracts Newbies:

NO MONEY DOWN!
INVESTMENT HOUSE!
CHEAP FIXER!
HANDYMAN SPECIAL!

Q: Should I put my phone number on my ads or my website address?
A: Deciding to call someone is making a minor commitment. It is a commitment because they have decided to do so even though they are running the risk of losing face if they sound stupid or feeling that they’ve wasted your time on the phone unless they are positive you can offer them the solution they need. People who have questions avoid commitments. That is why, when given the choice between the two, most people will visit your website before calling you (if they have to) Visiting a website offers a no hassle, no pressure, no strong-arm salesman way to learn more before making that commitment.

PLUS, a website address adds credibility and professionalism to your ad. Not only that, but it’s automated. Personally, I CANT MEMORIZE phone numbers, and I have yet to write down phone numbers on ANY advertisment. But I CAN remember website addresses.

Q: What do you think about bandit signs?
A: Bandit signs, in my opinion, are generally ugly and over-used and many people despise them. You have to check with every city to make sure you won’t get slapped with a fine and they are generally a hassle. You are spending money on the signs, time writing on them if you use markers, time driving around and putting them up HIGH where hopefully nobody will be able to get them easily, and spending GAS $$$ to check on them monthly? weekly? daily?

Here in Utah, they pay the Boy Scouts $0.25 for every one of those signs they tear down. And have you ever noticed that when a Realtor sign goes up with all the nice red directionals around the neighborhood, your signs are nowhere to be found??

But in general, people around nicer neighborhoods especially will tear them down and it I personally feel there is no faster way to create an instant negative reputation for yourself than this method of advertisement.

Hopefully, if you choose to use bandit signs, you are at least TARGETING your advertisement by placing them near the neighborhoods you’d like to purchase in (eg. appreciating neighborhoods, or neighborhoods full of junkers, or pretty house neighborhoods, or whatever your niche is)

And regardless of the advertising method you choose, you must be TRACKING it so you know where to continue spending your advertising dollars in the future. Every time a new person calls you, you should ask “How did you hear about us?”

You should be tracking every penny you spend on your advertising efforts and finding out how much it costs you per successful deal and which method of advertising is working best for you.