Or, how to own rentals far from home with no hassles! Most small, (1-4) unit rental properties are money pits! I know. At one time I owned 25 of them. The elusive positive cash flow exists on paper only. By the time you factor in the unexpected repairs, collection losses, vacancies, increased taxes and untimely replacements of major systems; most rental owners are under water by years end. On top of losing money, you are also subject to the constant harassment of tenants, toilets and trash! Constant complaints, late rents, damage to the premises are a dispiriting fact of life for most landlords. It seemingly comes with the territory. Is it any wonder then, that 1/3 of all small rental owners bail out every year? They thought they were buying a real estate investment and were prepared to at most struggle to get the rent check out of the envelope each month. Instead, they find theyve bought themselves a part time job that they have to pay to keep! Is there a solution to this dilemma? Fortunately, there is! It is called a land trust. A little known legal fiction that can turn a Money Pit into a Money Machine. The land trust can solve your negative cash flow while eliminating you tenant, toilet and trash problems! The land trust is what allows investors to own properties far from their homes with no hassles. I do not have the space in this article to explain what a land trust is or how to set one up, but I can show you how to use one to accomplish our goals. The first step is to have a land trust set up for you. Then, you transfer the title to your property to the trustee. Next, find someone that would love to buy a property but cannot, either because they dont have the down payment or cannot qualify for a mortgage. This group would include small business owners, self employed professionals and foreign nationals as well as those with recent bankruptcies or foreclosures. Because of the characteristics of the land trust, you can provide these people with a golden opportunity, namely the chance to own their own home or rental property. In return, they will gladly buy the property on your terms. You can generally sell your property to them for about 20% more than the current market value for the property on a long term contract, providing you with an instant profit, even if you paid current market value. You collect a cash down payment that you negotiate with the buyer. The monthly payments they make will be much higher than the normal rental payments, as they will be based on the higher purchase value. This positive cash flow will continue for 3-5-10 years or more, whatever you and the buyer decide. At the end of the period, he will get his own mortgage and pay you off. You can share the propertys appreciation with your partner, according to whatever formula you decide. I did mention that this arrangement avoided the usual landlord, tenant problems. Think about it. Your tenant is buying the property. Because of the advantages of the land trust, he has all the advantages of an owner. He has all the tax advantages, the mortgage interest and real estate tax payments. He shares the appreciation and the equity build up as the mortgage is paid off. He has everything except the title to the property. The situation is analogous to an auto buyer who finances a car with a bank loan. He enjoys all of the benefits of owning the car, he just does not receive the title until he pays if off. Just as he would not expect the title holder; the bank, to be responsible for maintenance and repair of his vehicle, neither would your tenant buyer involve you in the maintenance or repair of the house! Positive cash flow, no maintenance or repairs, sounds like a crme puff investment to me! Talk to your lawyer about setting up a land trust for you today. |
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