Re: Rent to Own with a Land Trust - Posted by LeasePurchase
Posted by LeasePurchase on June 03, 2005 at 17:18:00:
A Lease Option and a Land Trust are two entirely different things and have no relation to each other. You are either going to do a LO or you are going to use a Land Trust and assign beneficial interest.
In a Land Trust the resident does not have the option or the obligation to purchase. In a Lease Option or Purchase they have the option or the obligation to purchase. In a “Properly” formed Land Trust, the Resident will have the First Right to purchase at a future date for Fair Market Value minus any contributions they have made to the Trust.
Many investors beleive that they can setup a Land Trust and then Lease Option the property to the Resident from the Trust. This is not correct and defeats the purpose of the Land Trust.
Using a LO in or out of a Land Trust still requires a foreclosure instead of a simple eviction. Having the Resident as a beneficiary of the trust and then lease the property from the trust with only the right to purchase at fair market value on or before termination of the trust eliminates the need for juditial foreclosure and allows for simple eviction in the event of non-payment or any valid reason for eviction.
Using a Lease Option/Purchase allows and gives an Equitable Claim of Interest in the property to the Tenant/Buyer which means they may further encumber the property in a legal action such as Bankruptcy, Divorce, Judgements, Liens etc.
If “Properly” Stuctured, you can accomplish all the features and benefits of ANY form of Seller Assisted Financing including Lease Options, Lease Purchase, AITDs, Contract for Deed, Wraps, Rent-to-Owns etc. without any of the enherent legal risks of such methods.
Once a Trust is setup you or any beneficiary may have the right to sell their respective “Beneficial or Equitable Interest” in the Trust as long as it does not infringe on the interest of the other beneficiaries, much like selling an option.
I use my Roth IRA to purchase Options to Acquire Interest in a Seller’s Land Trust everyday. From my $10 Option Deposit I may get Upfront Profits, Monthly Cash Flow, Equity, Note Reduction, Appreciation, etc. all while someone else is making the payments and maintaining the property without any Risk or Liability to me or my Self-Directed Roth IRA.