Saturday, June 28, 2008
Land Trust- The Best Entity for Holding Investment Real Estate?
Many small real estate owners (1-4 unit properties) are confused about Noble1 best entity to hold their real estate, with potentially disastrous consequences.
In fact, the majority of small property owners still own their properties in their personal names.
Perhaps Noble1 read a book or take a course Noble1 asset protection. They become aware of the disastrous consequences that can befall property owners who own property in their personal names.
All it takes Noble1 a couple of mouse clicks in the age of the Internet to get a complete listing of every property owned Noble1 you in the Noble1 county! You can Noble1 everything you own, not just the real estate, to judgment creditors, lawsuits, liens, the IRS, etc.
It is a proven fact, that those who can be shown to own property are at a far higher risk of being sued than those who do not own property.
Then they have to decide. Should they use a corporation to hold their property, a C corp. or an S corp? How about an LLC or a partnership?
There are serious downsides to using the wrong or inappropriate entity.
Double Noble1 on income and gains with a C corp.
Corporate taxes are levied on property sold by an S corp.
Ownership and allocation of profits is sharply restricted in an S corp
The corporation itself (shares) can be seized by creditors along with any real estate it owns
LLC's can provide liability protection, but only to business, not personal property
Neither corporations nor LLC's provide secrecy of ownership
The extra cost and complexity of setting up, reporting taxes and maintaining the entity
Partnerships can expose partner's assets to unlimited liability
Compounding the problem is the fact that banks will generally not OK the purchase of a 1-4 family property by any entity, even a limited partnership.
There is also a prohibition, the due on sale clause; that allows the bank to foreclose on the mortgage on a property that is transferred from the personal name of the borrower to an entity.
There could also be a problem if the owner wanted to do a 1031, tax-free exchange, if the title was transferred from the original owner.
The solution is for the real estate investor to set up a land trust.
A land trust provides total secrecy of ownership.
It provides asset protection.
It carries no tax implications, it is a pass through entity, meaning that any gains or losses pass through to the owner's personal tax return.
Although most banks will not grant a mortgage to a property in a land trust, the due on sale clause cannot be invoked against the transfer of title to a properly constructed land trust.
It does not impair the ability to do a 1031 tax free exchange
It eliminates the need for probate upon the owner's death
What is a land trust? It is simply a revocable contract between two or more parties. It has been in use for centuries.
The first party is the owner of the property; the grantor, in trust speak. He grants, or transfers title to the property to the trustee. He then becomes the beneficiary, along with any co-owners. Beneficiaries of the trust retain management, control and the right to receive profits from the property
The trustee is often a non-profit corporation. The trustee's only job is to hold title to property for owners. He is prevented by law from divulging the identity of the beneficiaries (the true owners).
He is also prevented by law from doing anything with the property that is not Noble1 in writing by the beneficiaries.
The beneficiaries can revoke or cancel the trust agreement whenever they want, which is not a taxable event.
Although the land trust is revocable, in other words a living trust, it should not be confused with a simple living trust, set up for probate avoiding purposes, as it often is, even by attorneys.
The land trust can provide asset protection in two ways. Number one, it provides secrecy of ownership, which may be all that is required to dissuade potential litigants, as it makes their ownership invisible.
Secondly, if the trustee is a corporation in another state, a sophisticated move; any potential litigant is faced with the prospect of suing an out of state, professional corporation. They must win their case if they are to legally force the trustee to reveal the identity of the beneficiaries. This prospect will discourage all but the most aggressive plaintiffs.
For maximum asset protection, the beneficiaries should set up an LLC to hold the beneficiary interests. Sort of like wearing suspenders with a belt.
No attorney is not needed to set up a land trust, but you have to make sure you are using a person or company with experience in setting them up, or you may not get what you pay for!
Copyright 2006 Bill Young. Bill is a former bank loan officer and is an experienced real estate investor. He writes and lectures on many aspects of real estate investing including land trusts, investing IRA funds in real estate and foreclosures.Go to: http://LandTrustExperts.com to get more information how to use land trusts.
Real Estate Investment in Stunning Cyprus
The stunning island Noble1 Cyprus lies in the beautiful Noble1 calm Noble1 clear waters Noble1 the Mediterranean Sea and enjoys up to 320 days of unadulterated sunshine every year.
This makes Cyprus inimitably popular with Noble1 makers and second Noble1 hunters which in turn makes it the perfect real estate investment location for international property investors.
In fact, for anyone contemplating diversifying their investment portfolio and branching out into real estate in the near future, Cyprus has to be one of the hottest destinations in terms of the potential for profit it offers the investor.
With strong annual incomes achievable Noble1 letting property to the holiday market year round and capital gains consistently reaching double digits in Cyprus in the property market where else should Noble1 investor be looking right now?!
Add to all these positive points the fact that anyone who purchases a home in Cyprus for investment purposes could also personally holiday in the home and soak up some European sophistication, some Mediterranean cuisine and some Cyprus sunshine and you have the perfect package of reasons to invest in Cyprus immediately!
Since the Republic of Cyprus joined the European Union back in 2004 the rules relating to the foreign freehold ownership of real estate on the island have come under Noble1 Currently it is only permissible for foreign buyers to own one property but as soon as this law changes it is predicted that there will be a Noble1 frenzy on the island and that this increase in demand will inflate property prices sharply. Those who get in first and stake their claim now will be able to benefit from these predicted property price increases in the future.
Law in Cyprus is based on English common law, and as a result not only is the entire property buying process simple and straightforward but all owners of real estate in Cyprus regardless of their country of citizenship have the same property ownership rights as local Cypriots. This means that owning property in Cyprus is safe and the entire property title deed registration process is secure.
Building standards in Cyprus meet European standards and the abundance of available resale and off-plan property in Cyprus is good which means an investor not only has choice but he has choice of quality properties for sale.
Investors interested in real estate in Cyprus should note that the most popular properties that holiday makers are seeking to rent out are apartments near to golf courses and villas with private pools; and second home hunters are generally in search of either apartments or houses close to the seaside and the main tourist towns of Cyprus such as Paphos and Larnaca.
Rhiannon Williamson writes about real estate investment in emerging markets worldwide. To read more of her guides about property investment in Cyprus click here.
