Land Trust is a Good Option for Investors in This Market

Originally posted 2009-01-29 14:53:45. Republished by Blog Post Promoter

There was a great post at www.whataboutloans.com on the advantages of a land trust.  The post goes on to list advantages to the land trust to include:

• ease of control
• ease of transfer
• privacy of ownership

The article further defines the parties that own and use the trust and their roles in the transaction of a trust in relation to the purchase of real estate. 

Another key advantage to the trust that the article depicts is that the “beneficial interest in a trust is considered to be personal property, not real property. Therefore you can assign your beneficial interest in a trust to another party without a formal closing.”

Remember due to recent changes to Fannie Mae’s financing criteria investors need to reconsider how they take ownership of their new investor property.   Those changes are affecting investors who want to refinance the properties in their portfolio and have those properties under the entity, limited liability corporation (LLC). 

Freddie Mac backs many of the conforming loans on the secondary market, so any changes in the rules is very important and should be headline news; hence, this news release. 

The land trust is the best solution to combat this issue. 

What is a Land Trust?

Originally posted 2009-01-29 08:00:49. Republished by Blog Post Promoter

Changes to Fannie Mae’s Financing Criteria Affect Investors

Recent changes to Fannie Mae’s financing criteria have created a need for investors to reconsider how they take ownership of their new investor property.   Those changes are affecting investors who finance the property in their portfolio and have those properties under the entity, limited liability corporation (LLC). 

Freddie Mac backs many of the conforming loans on the secondary market, so any changes in the rules is very important and should be headline news; hence, this news release. 

 

The changes are as follows:

• Freddie Mac will no longer approve refinance for any property that has been under a limited liability corporation entity for the previous six months. 
• Freddie Mac is limiting the number of properties the investor can have financed to four not ten as in years passed.

 

Land Trust is Answer to Recent Fannie Mae Changes

  

The ownership option that will combat the change to the financing institutions’ criteria changes is taking ownership of the new investment property under a land trust.  What is a land trust?

 

A land trust is a method of real estate ownership in which the trustee has legal title to the property.   The beneficiary, though, has full power to control the property to include disposing of the property and management of the property. 

 

The trustee for the land trust can be an attorney, law firm, or a bank.  Remember, the trustee holds the legal title.  However, whether the trustee is an attorney, law firm, or a bank, those entities can not act without the written consent of the beneficiary who has full power to control the land trust.

 

 

Benefits of Land Trust

 

The land trust is not only the solution to the changes for financing, but the land trust also has great benefits such as:

• Privacy
• Succession
• Litigation
• Probate
• Flexibility
• Financing
• Asset protection

A land trust is considered to be superior to most business entities such as corporations, limited liability corporation, etc because the land trust has the added benefit of privacy.  The land trust does not have to be registered that means there is no public record of the officers, directors, shareholders, or beneficiary.  The trustee must keep the beneficiary and trust records in a secure location, and the trustee can not reveal the information unless subpoena.

 

Along those same lines, it is recommend that at time of purchase that of the new investment purchase for it to be conveyed directly to the trustee to avoid the owner’s name ever being part of public record.   There is other reasons anonymity or privacy is beneficial.  It can prevent unfair price increases on purchasing of property.  For example, when the land was accrued for the Disney World, Walt Disney used a land trust to disguise his intentions for the usage of the land to prevent increases in the price of the land. 

 

Still yet, another advantage to a land trust is asset protection.  The beneficiary is protected from judgments and liens.  The land trust prevents the judgment to automatic be attached to the real estate owned by the investor since the title is not in beneficiary’s name.

 

However, it is important to note that because the investor maintains control of the trust, the control or interest can be subject to creditor’s claim.  To avoid creditor’s claims, the trust needs to be irrevocable not revocable.   

 

The land trust is flexible because it allows for ease of multiple ownership.   Even though there are multiple owners all owner do not have to sign for the acquisition of a new property just the trustee who has written instruction from the owners sign the documents for acquisition of the new investment property. 

 

The land trust does can not be partition when one of the owners’ part, but the parting owner can transfer part of his or her interest in the trust.

 

The best is advantage of the land trust is ease of succession.  If the beneficiary of the land trust passes away, the interest in the trust is simply transfer via the previous written instructions to the trustee.  This eliminates the need for probate and the lengthy and costly process involve with the probate proceeding. 

 

The beneficiary of the land trust can be an individual or an entity, so if you have a limited liability corporation the LLC can be the beneficiary. 

 

The cost of the land trust may vary, but the investor may be charged as little as $100 to open a trust and $75 a year to maintain the trust for an investment property valued at $250,000.

 

Remember, the land trust is a legal document that must be review by an attorney to ensure that all of your interest is address.  If you have a LLC make sure your LLC has instructions in it as well for your beneficiary interest in the land trust. 

 

 

Buying American Will Help Keep Jobs

Originally posted 2009-09-02 05:00:09. Republished by Blog Post Promoter

The towns of Schererville, Hammond, Crown Point, Cedar Lake, and St. John have pledged to buy American products when possible.

If you are a resident of any of the towns above pat your town officials on the back in their effort in recognizing the plight of the residents by supporting the jobs that the residents are trying to hold on to.

It is important to recognize the efforts that officials are making in reducing cost, so send a letter and let the officials know you support them.

Let’s put pressure on other towns to do the same.

Real Estate Investor, Beware

Originally posted 2009-01-01 22:53:35. Republished by Blog Post Promoter

The IRS made changes to the tax that will affect 2007 tax returns if the investor claims a loss. In addition, just reporting a loss may cause your taxes to be audited.

The new law has to do with the real estate investor classification. The investor can be classified as a real estate professional. Under the new law, the investor qualifies as a professional, regardless if licensed real estate agent or broker by working at least 750 hours on real estate activities. The IRS considers real estate activities to be renting, leasing, converting, operating, developing, redeveloping, managing, constructing, and acquiring of real estate.

In addition, as a real estate investor you are limited on your deduction to your passive income in the amount of $25,000. That amount decreases as your passive income increases and tops $100,000. Still yet, the eligibility for the deduction disappears as your income goes over $150,000.

The reason this change came about was due to the increase in number of investors during the market “boom”.

The ramification of these modifications to the tax law hit the investor who works a full time W2 job the hardest. Remember, the losses can only be taken on passive income.

However, under that same law there are two classifications for passive losses. There is material participating passive loss and passive loss.

The material participating rule requires that the investor work on each property for 500 hours. The work can be any or all the qualifying activities listed above. The investor can also opt to combine all properties under one 500 hour block, but the election must be made at the beginning of the tax year.

Another tax law change is that in the designation of a limited partnership’s interest. The properties owned and/or held under this entity is no longer considered material participating, so are not eligible for the deduction if there is a loss.

It is important to note that no longer can research of potential properties that the investor is considering adding to his or her portfolio a valid passive activity.

Keeping accurate records is crucial. The investor needs to keep date, time, location, and activities and in some cases it may be helpful to have photos to show evidence.

The changes mention above came out in December of 2007 and are retroactive to 2007 and may be earlier tax returns. Have your accountant review your current and previous returns to make sure you are in compliance.

Related Real Estate Investing Articles

• Help Offered for Indirect Investors With Madoff (nytimes.com)
• House Flipping Makes a Comeback (online.wsj.com)
• Homebuyer Tax Credit Provides Incentives for Buyers Says Elika Associates (prweb.com)

$8000 Tax Credit For First Time Home Buyers Expires Soon

Originally posted 2009-07-22 15:37:01. Republished by Blog Post Promoter

Did you know that the $8000 tax credit expires 11/30/2009?  That means there are only 131 shopping days remaining.  The reason the number of days is significant is that the buyer do not have to pay the $8000 tax credit back to the government as long as the buyer resides in the home for 36 months after purchase.

This credit was part of the stimulus plan that President Obama signed into law. 

The credit, however, does not apply to everyone.  To qualify for the entire credit, your gross income must be less than $75,000 a year if you are a single home buyer and $150,000 if you are a married home buyer.    You can still get a partial credit if your gross income is greater than $75,000, but less than $95,000 as a single home buyer.  If you are married and your combined income is greater than $150,000, but less than $170,000, you can qualify for a partial credit, as well.  It is important to note, that in the case of a married couple both spouses’ homeownership history will be considered to determine eligible for the program. 

Unfortunately, the credit can not be used as a downpayment.  To qualify you must first purchase the home, then claim the credit using Form 5405 on your 2008 or 2009 tax return.

The tax credit, low interest rate, and lower than ever real estate prices should make homeownership a number one priority for anyone thinking of purchasing a home in 2009.

Give Serena a call at 219 803 4489 or email her at taylorbrownrealestate@yahoo.com to start building equity and create more tax write offs.

Indiana Property Tax Appeal

Originally posted 2008-12-28 04:11:27. Republished by Blog Post Promoter

On or before May 10 of the year that you feel that you received an unfair tax assessment, you will need to file a written appeal. 

Once the assessor gets notice that a property owner would like to have their property tax re-assessment, the assessor must forward the appeal documentation to the county board of appeals.

The board shall hold a hearing or review of the petition for re-assessment no later than 180 days after the board receives the notice.  The board will mail the notice to the property ownership of the date, time, and location of the hearing on the property owner’s petition.

There will be a series of videos discussing the forms required to file the appeal, and how to fill the form out.  As an added bonus, we will discuss an appeal that was reviewed by the board.  This reviewed appeal will give you insight in to what to do or not to do to get your property re-assessed in your favor. 

To get the forms needed for filing your property tax appeal visit
for Form 130 also called Form 11 CI www.in.gov/icpr/webfile/formsdiv/21513.pdf

For Form 11 RA visit http://www.in.gov/ibtr/files/DavidandPatriciaSullivan.pdf

For Form 113 visit http://www.in.gov/icpr/webfile/formsdiv/46725.pdf

Video 1 (Indiana Property Tax Appeal)

 

Real Estate Investor Related Articles

Protecting Your Investments - This article discusses the business entities that are available that are available for investors to protect their personal assets when buying and holding properties.

 

 

Property Tax Related Articles

Indiana Property Tax Appeal (Part 2) -Filing a property tax appeal can be difficult.  This article gives links to the forms needed to file the appeal and a video tutorial on filling the forms out.

Is a Short Sale The Answer?

There is a Formula to Whether Your Short Sale will be Approved

I have fifteen short sales that I am working on of those fifteen all of the lenders are stating that they need to net a certain amount.  I was beginning to think this was an isolated case until I came across the article at http://latimesblog.latimes.com. 

I discovered from this article that if the seller has a FHA loan, the lender “requires a net of 82% of current market value.  I was relieve to find out it is a formula that the lenders use.

The article went on to state that VA loans are required to net 88% of the current value.  Still yet, the conventional loans are required to net between 78% to 85% of the current value. 

As a homeowner who needs to sell it may be helpful to understand this formula.  Remember, a short sale can save your from a foreclosure as long as the lender can yield enough money from the sale.

Is Your State Doing Its Share to Help in This Housing Crisis?

For the state of Indiana, I would have to say that is a resounding, NO.

 

For the state of Illinois, I found the answer to be YES.

 

I found it interesting that the housing crisis is affecting all fifty states, but until recently only fourteen states have made legislative and program changes to help homeowners in their respectively states.  

 

The states that have passed legislation to regulate the cost of acquiring a loan are:

• Washington
• Connecticut
• Kentucky
• Maine
• Maryland
• Minnesota
• New York
• Pennsylvania

 

The latter states led the way for forty states to implementing a homeowner counseling campaigns.  This aspect has until recently only been done by a few concerned Realtors and mortgage brokers.

 

To curb foreclosures twenty one states are now intervening in the foreclosure process. With the state leading the way by not putting current paying tenants out on the street is Illinois.  Illinois were followed in their efforts of intervention is:

·         California

·         Michigan

·         New Jersey

 

Still other states have increase days before a default notice must be issued.  Those states are:

• California
• Colorado
• Connecticut
• Maryland
• Massachusetts
• New York
• North Carolina
• Pennsylvania
• Virginia

 

Some other states started their effort in helping homeowners is by creating foreclosure task forces.  The state that led the way is:

• Delaware
• Florida
• Texas

Now, there are seventeen states providing a foreclosure task force.

 

It is very important that the states have stepped up to help with the burden of foreclosure that is plaguing so many homeowners.  Let’s keep thinking outside the box and we will all may it through this challenge in the market and economy.