Land Trust Questions -Creative Offer to Purchase - Posted by Brian (IN)

Real Estate Investing
#1

Posted by Bud Branstetter on October 30, 1998 at 21:17:02:

Putting the property into the land trust is legal. To transfer the interest is a violation of the due on sale. Fortunately the lender is unlikely to catch you. It does not relieve you of the obligation on the mortgage. The deed is into the land trust not the investors name.

Do you have the cash to close the deal? If so why do you need the investor. Is he putting up any cash so that he has something at risk. You are doing the work of finding and financing. When you wholesale the idea is to sell to an investor for cash. Either you didn’t do your homework and find those investors first or you misread what the property is worth wholesale. Acquisition is typically 70% or less and 75-80% after fix up. Can you make 10-15K profit?

Your ratios will be affected by a loan. There are lenders that will do 90% investor loans depending on credit. If you rent the prroperty many like to give you credit for only 75% of the income while your ratio’s include all your debt. Is it a win win deal for you and the investor?

#2

Land Trust Questions -Creative Offer to Purchase - Posted by Brian (IN)

Posted by Brian (IN) on October 30, 1998 at 19:29:40:

I have a contract to purchase a potential rehab property in the state of Indiana. I have been attempting to wholesale the property prior to me closing on it in about two weeks.

I have an offer from an investor that I am questioning.
His offer is as follows.

I obtain a new first mortgage at approximately 80% LTV. This amount of money will cover my purchase price and put money in my pocket. I then put the property into a Land Trust where I am the beneficiary and the investor is the Trustee. I transfer title to him using a Warranty Deed and Assign him the beneficial interest. (I think I have all those terms right?). The investor then signs a land contract with me for the same amount as my mortgage with 2 to 3 year balloon. His payments pay my mortgage. He then fixes the place up a little. Finds a lease/option tenant and rents it out for positive cash flow in his pocket and the rest of the equity in the property when the tenants excercise their option to purchase.

He says that the Due on Sale Clause in my new mortgage can not legally be implemented when title goes from my name to a trust. Is this true?

For future loans is my qualifying income effected? Will a commercial lender only take 75% of the land contract amount, similar to a lease, or will they take 100% so that it is not a negative for me?

Does this seem legal?

#3

Land Trust Questions -Creative Offer to Purchase - Posted by Millie I.

Posted by Millie I. on October 31, 1998 at 21:51:56:

Brian,

Indiana RE laws are a quite a bit different from other states. To be on the safe side, consult an Indiana lawyer. If you come to the 11/2/98 RE Meeting in Hammond, I can get you the phone number of a RE attorney that regularly comes to the meetings.

Millie I.
P.S. I assume you are Brian Woods. If not, you are
still welcome.