By Bill J. Gatten
North American Realty Service, Inc.
Granada Hills, CA. 91344
1 800 207 4273
The NARS Equity Holding Trust Transfer™ works like this:
A. In order to create the safest disposition of a property for sale, wherein seller-carry financing is the mode of choice (e.g., due to greater profit potential, a faster sale and ease of transfer), an owner of record places its property into a simple single-beneficiary title-holding land trust (the owner thereby becoming the trust’s beneficiary and director in all matters relative to the property, the trustee and the trust…for the following advantageous and beneficial reasons:
1. For privacy, estate planning, probate avoidance and assets protection
2. To shield the property from legal threat such as: marital dissolution litigation, creditor claims, Probate, bankruptcy…even IRS tax liens.
3. To be able, by a subsequent Assignment of Beneficiary Interest, to convey all ownership and income tax benefits to any third party who would become a co-beneficiary in possession (*done without a title transfer)…in order to command, say, 150% higher rents, and/or to eliminate all costs of income property management (vacancies, maintenance, repairs, etc.).
4. To be able, upon such an assignment and payment take-over, to avoid compromising or triggering a lender’s due-on-sale clause relative to keeping the underlying financing in place.
5. To make loan payment-assumption simple, in that the relinquishing party (“seller”) is so thoroughly protected, and needn’t worry about collections and disbursement of payments (handled by a third-party collection service appointed by the nominated trustee), and never need have his own, or the acquiring party’s (“buyer’s”) name on title… until the trust’s termination, at which time the property sold, or refinanced in the acquiring party’s own name.
6. To make selling (or disposition in general) easier, in that the acquiring party can be thoroughly protected while assuming the responsibility for the existing financing... without a down payment (necessarily) and without a new loan or standard credit requirements
7. To make "sandwiching easier (i.e., where the investor is a principal in the transaction between relinquishing and acquiring parties), in-so-far as the investor beneficiary needn't be concerned about the potential for untoward or illegal actions by, or personal problems on behalf of, the person remaining on the loan (the borrower of record): or of the beneficiary who occupies the property and handles all payments and other costs of ownership. This is so because no beneficiary party can act unilaterally during the trust term with respect to any decision concerning the property or its use.
8. To make dispossession of a defaulting tenant-beneficiary faster and easier, in so much as a defaulting resident beneficiary cannot claim having "equity" in the property in order to avoid simple eviction (i.e., claiming “equitable interest” in order thwart or forestall eviction or unlawful detainer action…a common practice by “professional tenants”).
9. To shield the acquiring party against illegal or illicit foreclosure or Unlawful Detainer by the relinquishing party (aka: settlor or first non-resident beneficiary) without just and appropriate cause
10. To allow for the collection of much higher “security deposit (the trust’s contingency fund)” without being restricted by landlord-tenant legislation...i.e., a land trust’s contingency fund can hold a sum from as much as a single payment or twenty or more payments (acquisition of interest in the trust, being wholly separate from the related triple-net leasehold of the trust property…allowing the parties to post as much in the fund as they choose)
11. To shield the non-resident beneficiaries (settlor or investor) from unfair and highly biased and restrictive landlord-tenant regulations
B. NEXT, following “A” above, a beneficiary interest in the executed trust can be silently assigned to a co-beneficiary (e.g., to a resident beneficiary or to you, the investor)
C. THEN when you are the assignee of beneficiary interest, you locate a third beneficiary (who would wish to “buy a home”) to lease the property from the trust on a "triple-net" lease basis (i.e., contracting to pay all costs of mortgage, maintenance, insurance and taxes in exchange for income tax benefits and the fee-simple benefits of homeownership). Such third-party lives in the property, takes care of it, makes all payments and handles all other costs of homeownership: all in exchange for all the advantages and benefits (100%) of homeownership (including full income-tax deductions for mortgage interest and property tax).
Note that at the investor’s (investor beneficiary’s) discretion, by manipulating percentages of ownership and what might be kept or relinquished at term, the EHT takes the form of, and protects, virtually ANY seller-assisted financing objective with full income tax benefits to the tenant/buyer (e.g., straight option, lease option, wrap-around, contract-for-deed, equity-share, subject-to, tax lease, etc.). And all of this is accomplished without the necessity of a title transfer to the acquiring party; without an open due-on-sale violation; and without the risk of jeopardy to the property’s title by any party’s lawsuits, creditor judgments, IRS tax liens, divorce litigation or bankruptcy actions.
The Equity Holding Trust™ Beneficiary Agreement clearly stipulates that upon termination of the trust (and the related lease agreement), the beneficiary who is residing in the property will either sell the property, or refinance tit in his/her own name, and thereupon pay the investor (you) any monies he/she may have expended in the beginning or have been carrying throughout the term of the agreement (out of the proceeds of such disposition).
In order to avoid characterization of the transaction as a security agreement or equitable mortgage the acquisition price for the property upon termination is never agreed to in advance: it is shown to be “the Fair Market Value of the property at the time of termination and disposition…though MINUS any monies owed to the acquiring party by the trust (e.g., from profits, allowable credits, earlier contributions, refunds due, etc.).
By use of the Equity Holding Trust Transfer™ arrangement, the investor can finally relax and receive profit through some or all of the following profit centers:
1) Up-front cash from the relinquishing party (“seller”), e.g., when upside-down or over-the-barrel re. Equity or monthly payments
2) Up-front cash from the acquiring party (“buyer”) to get in the property
3) “Sale” or use of the available income tax write-off (see IRC 163h(4)D),
4) A share in equity build-up from mortgage principal reduction,
5) A share in appreciation potential,
6) A return of any equity held since inception, or any expenditures during the transaction,
7) Receipt of a positive cash flow throughout the term,
8) Use of the passive tax write-off (depreciation) throughout the term of the agreement,
9) A subsequent sale of his/her interest in an established Equity Holding Trust to another investor (the ad says” “Look! Cash-flowing income property with no management, maintenance or payments…”).
At North American Realty Service, Inc. in striving for perfection and maximum simplicity we provide all documentation, legal review, trustee appointment, escrow appointment (seldom needed) and client consultation. We'll even help make the deal by teleconferencing with you and your clients and prospects. We guide you through every phase of the transaction process; we prepare all documentation; we appoint the trustee and the collection and disbursement service; we provide full client consultation, escrow settlement and legal endorsement. We also remain available and as involved as you need us to be in all post-settlement follow-up.
Bill Gatten
www.landtrust.net
bill@landtrust.net
1 800 207 4273
1. Fast
2. Cheap
3. Good
Pick any two from the list above
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
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