YOUR PLAN OF ACTION
by Bill J. Gatten

Have you any idea what it is that you truly want at this point in your life?

Have you ever honestly sat down with pen in hand and pondered that question? Is it wealth that you want? Is it income? Is it financial security, fame or respect? Or could it be that all you really want is “show them” – i.e., retribution for someone’s telling you you’d never make it (you’re too dumb, too uneducated, too slow, too ugly, to fat, too skinny, too poor, too old…)?

And of the “wants” and “wishes” you harbor, how many of them are desires, and how many are actually “dire needs”?

Many, if not most, of us regularly confuse the concept of wanting something with needing it, and end up stopping miles short of our objectives as a result. A person may “want” a T-bone steak: but their real “dire need” is protein. They may “want” a smog-free environment: but their real “dire need” is…air.

All too often we say we would like to be wealthy, and then go to some considerable length to learn how to achieve wealth: but the fact is that if we haven’t established an honest dire need for that wealth, it will more than likely never dangle within our reach. One can wish for an apple to fall from a tree and maybe have that happen, if he or she is willing to wait a while: but when the apple becomes a matter of survival, and the difference between hunger and starvation…then out of dire necessity the “wisher” becomes an “initiator,” and will ‘make’ that apple fall by any means conceivable.

I was contacted this morning by a former PACTrust™ workshop attendee who said that after having attended workshop, at the end of the day, despite my “excellent advice (her words),” she left the meeting perplexed and not understanding how to implement the advice I had tendered (at considerable cost to her and sincerity by me). Her lament was that, without a complete understanding, she had been forced to return to her “regular job.” My response was that she could easily have asked questions and opted to stay for the free Q&A session afterward; she could have joined us weekly on the free TeleMentoring sessions we hold every Saturday morning; she could have called me or anyone on our staff with questions and concerns at any time; she could have stopped me in the middle of the presentation and demanded that I slow down because she wasn’t “getting it (as the more indomitable students do from time-to-time).”

My honest response to the lady was that it appeared to me that her “Want To” had been overridden her “Don’t Need To.” In other words, she would surely have chosen to change her life and relinquish her mundane job, had it not been a bit too much trouble. At that juncture she wasn’t desperate enough to put the need of a career change up there with the need for air. Do you suppose she might have paid closer attention and asked a few more questions and participated in the follow up sessions had she NOT had the tolerable job and sufficient income to fall back on, and hadn’t eaten for, say, a week or two?

Let’s assume for a moment that this same woman, even with her job to fall back on, had suddenly become a victim of certain dire needs that her salary just couldn’t cover. Say, a child that required special medical treatment that her insurance couldn’t cover; a husband who had bailed out on her leaving her with all the bills and insufficient means to handle daily life (and maybe throw in a broken a leg (or two). NOW do you think her “Want To” might be more readily replaced by a “Dire Need To”? You bet! And that’s why the careful outlining of your wants and dire needs, and knowing well the difference, is so extremely important.

You don’t have to break your legs or become destitute in order to carve out a better life: you only need to need to. When your dissatisfaction with the way things are outweighs your need for something better, then you will act accordingly. That will happen when you sit down and take inventory of your life…when you finally figure out what you are missing in this life that belongs to you just much as it does anyone else. The more aware you become of the inequity you are causing by your inaction, the more you will resent it and begin to do something about it. Do you know anybody is no smarter than you are, no better educated, no better qualified who is making five the money you are? Do you suppose they might be onto something you haven’t taken the time to discover yet?

The carefully guarded so-called “Secret of the Universe” is that you are its master. You think and create on purpose, and you are one with its very creator: the Universe’s creations by accident…it’s you that is in charge. Anything you can conceive of is already yours for the asking: just do what’s necessary to be able to hold it in your hand.

What are your own wishes, wants and dire needs?

Some of us are born with the gifts that seem to automatically make superstars of us without a lot of effort (natural athletes, natural actors, natural musicians, writers, the unnaturally lucky, etc); but unfortunately, most of us are not superstars by virtue of our birthright. In fact, most of us have to establish whatever stardom we ever attain, in the face of sometimes seemingly insurmountable handicaps that life has dumped on us. We did not choose our parents or their mindsets or the conditions under which they were raised or how they raised us. We are, however, victims of all of those aspects of our own heredity, parentage, peer-pressure and early environment. Fortunately, though, we have been given the gift of free will, and the right to override or neutralize any part of our personal programming that we are willing to look at and take the time to try to understand.

The most common error (and the most disastrous one) in goal setting is that of mistaking wishes (wants) with burning desire (dire needs). It is only the latter that can lead us to real life-change and abundance. To but make a wish, we need do nothing but put it out there and wait and see what happens: with dire needs, however, we die in some way when they are not fulfilled…we are simply incapable of allowing them to go realized without severe damage to our psyche, and we will fight hard to prevent that from happening.

The difference between wishing or wanting…and sincerely needing is analogous to the difference between asking Santa for something, or demanding it of someone who owes it to you. If you’d like to build a 40-story high-rise or a 1,200 foot-long aircraft carrier, you certainly are free to do so if you wish, and if you have the means and knowledge to complete your work. But, until completion of such work becomes an absolute dire necessity, you likely never will. It’s when a major aspect of your life depends on it that you will do what all builders of 40-story high-rise buildings and aircraft carriers have always done…imagine it, design it and build it.

So…before writing out your objectives, choosing a mantra, and heading off on your trek to riches, take the time to figure out what your goals actually are; which of your “wishes” are worthy of being converted to “dire needs”; and what your resources are for accomplishing these aspirations. Should you come up short in the “means” area, then you need to write-out a plan for either attaining what you are lacking, or for replacing what your are lacking with something else of equal value that you have more than enough of (e.g., physical work can replace the need for cash; eliminating someone’s burden can replaces the need for credit; patience can replace experience; caution, diligence and research can replace formal education; know-how replaces a college degree, and so on)

Never forget that, according to Epictetus in the 5th Century BC: “A [person’s] wealth is measured only by the expense of [that person’s] pleasures.” In other words, when life itself is your reward, and when the least expensive pleasures are your greatest reward, you are already wealthy beyond calculation: no matter how much or how little money you have. My own true net-worth quadrupled when my children were born, and quadrupled again with the arrival of my grandchildren. Think about it…who is wealthier, the man with a big mortgage and a 60 month payment plan on a new Mercedes Benz convertible, or a well-loved, warm Eskimo with eight good dogs, a jolly fat wife and two years worth of walrus meat in his locker?

Converting a need to a burning desire (dire need) is the first real step in goal setting and requires definitive action. To wit: If you’re having difficulty in making the decision to jump off the high cliff into the cold raging river below, in order to save your own life…just do this: Tie the end of a long rope around your waist, then tie the other end around a massive round rock and roll the rock toward the cliff. When you’ve finally rolled the stone over the edge…your fate is sealed. You needn’t worry about making the decisions any longer. Definitive action tied to need is what brings “pre-existent potential” into the physical universe.

To become successful in life you must first know what it is that you want, and then you must decide what you truly need. Just ask yourself which of the following you could live without if you had to…what’s left over are your needs.

* Happiness
* Contentment
* Freedom
* Permanent Financial Security
* Acceptance/Popularity
* Good Health?
* Fame/Recognition?
* Monetary Wealth?
* A more fulfilling lifestyle
* A new career
* A new spouse

So what will be your Plan of Action (your “POA”…your “rope” and your “big ol’ rock”)

Your POA is your design for success. It is the very map of your destiny. It becomes your guide to all of what you must do to become who and what you need to be, and to attain all of what you need to own and control.

Goals that are held only in the mind are never goals at all. They're just residual random electronic impulses left over from wishes. It’s only when these wishes are physically transformed into matter by the process of putting them down on paper that they can begin to metamorphose into dire needs. Handwriting your goals is always preferable to typing them out in your word processor…the more arduous and physical the mind-to-hand task is, the more likely the transformation will be (i.e., moving a concept from the ethereal realm of potential into the realm of physical reality).

Forty years ago, I was dissatisfied living on only $326 per month (before deductions), but with that income I could cover a $60.00 per month rent payment, a $35.00 per month payments on my new Ford Falcon; I could buy gasoline, JC Penny’s clothing and groceries; and I could still have enough left over to go to the drive-in movies once a month or so. In those days I was envied by many who couldn’t afford even as much as I could: but I was also looked down upon by those with whom I most wanted to associate: high school friends who were coming out of college as doctors, lawyers, engineers, dentists, etc.). But now, 40 years later, I find myself earning more than most of my friends, but prone to becoming frantic if my monthly income drops below $20,000.00 (after deductions).

What do you suppose it is that I’m doing any differently today that I was forty years ago? Absolutely nothing except for following a plan. Because of my plan, I live in a bigger house now and drive nicer cars. And I’ve thrust necessities into my current lifestyle that weren’t there before (vacation cruises, country clubs, frequent airline travel, nice hotels, fine dining, fine clothing, housekeepers, gardeners, maintenance people, big screen TV’s, etc.): luxury items that were unheard of back then. But now a days I never think of these items as luxuries…today they are (in my mindset) integral pieces of whom I have worked and planned to become and whom I choose to be (and I ain’t finished yet). And were I now to be deprived of any one of these previously unnecessary items and services, a part of who I envision myself to be would cease to exist (i.e., that part of my persona would die). My so-called luxuries are no longer just wants and wishes…but are now a part of my bundle of dire needs to be defended and preserved. Could I live without these things? Certainly! Could I be happy without them? Absolutely. Would I fight to hang on to them? You bet!

Writing your POA:

When you outline your goals, be sure to write them in the present tense as a note to yourself, as if you were writing to a third party to whom you are making reverent, unbreakable promises: vows than can not, and must not ever, be compromised: “My earning are becoming $xxx per year and shall reach that amount by the end of 20___.” “My property acquisition requirement is at an average of no less than one property per-month, to be achieved by the end of 20___” “I am already as wealthy as I have a honest need to be, and must only convert the potential of my God-given wealth into physical reality by my promised actions.” “I am becoming ever more perfectly in tune with the abundance and intelligence that is existence itself, and can only prosper in the most spectacular of ways…always.”

Over time, you'll need to be continually adding to, subtracting from, and refining your objectives: reorganizing and making changes as your circumstances change (because of the success of your plan of action). By constantly reviewing and adjusting your Plan of Action, you will begin to develop an ever clearer focus, and begin to realize that what were originally mere hopes and dreams, are now moving ever closer to necessity and manifesting in three dimensions. For example, once you have fulfilled some of the early promises to yourself, and progressed to, say, actually having gotten a property under contract, the “wish” of someday being a property owner, now becomes reality and creates an unyielding need to bring in a resident beneficiary, tenant or buyer…a true “dire need,” the fulfillment of which is merely a part of your survival.

With a written plan, the possibility of success become the probability of success, an as you continue to tighten up the plan you can’t help but move closer and closer to the certainty of success: finally fulminating in the rich, rewarding and bountiful life and lifestyle that was yours for the taking all along.

It’s so easy. You merely need to sit down and determine once and for all what it is that you truly want at this point in your life. Whatever it is, it already belong to you, you merely have to reach for it by making it something truly you can’t live without.

B. Gatten

To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.

The C-Corporation

The label, "C-Corporation" merely refers to a standard, general-for-profit, state-formed corporation. Characteristics of the “C-Corporation” include the following:
Separate Legal and Tax Life. A corporation which is properly formed and operated as a corporation assumes a separate legal and tax life distinct from its shareholders. A corporation pays taxes at its own corporate income tax rates and files its own corporate tax forms each year IRS Form 1120.
Management and Control. Normally, a corporation's management and control is vested in its board of directors who are elected by the shareholders of the corporation. Directors generally make policy and major decisions regarding the corporation but do not individually represent the corporation in dealing with third persons.
Thus, transactions with third persons and day-to-day activities are conducted through officers and employees of the corporation to whom authority is delegated by the directors of the corporation.
Shareholders. Shareholders are the owners of a corporation. Although shareholders have no power over the corporation’s daily activities, shareholders possess the ultimate power in that they can appoint or remove Directors of the corporation.
Directors. The Board of Directors is responsible for the long-term management and policy decisions of the corporation. While the Directors are considered to have the highest level of DIRECT control over the corporation, there are, however, a few instances when the shareholders are required to approve Actions of the Board of Directors (e.g. amendment to the Articles of Incorporation, sale of substantially all of the corporate assets, the merger or dissolution of the corporation, etc...).
Corporate Officers. Corporate officers are elected by the Board of Directors and are responsible for conducting the day-to-day operational activities of the corporation. Corporate officers usually consist of the following: (President, Vice-President, Secretary, Treasurer).
Management & Staff. Management and Staff are DIRECTLY responsible for the daily activities of the corporation.
One Person Required. In most states, one or more persons may form and operate a corporation. Some states, however, require that the number of persons required to manage a corporation be at least equal to the number of owners. For example, if there are only two shareholders, there must also be a minimum of two directors serving on the board.
Fringe Benefits. Corporations may often offer their employees unique fringe benefits. For example, owner-employees may often deduct health insurance premiums paid by the corporation from corporate income. In addition, Corporate-defined benefit plans often afford better retirement options and benefits than those offered by non-corporate plans.
Corporate Formalities. To retain the corporate existence and thus the benefits of limited liability and special tax treatment, those who run the corporation must observe corporate formalities. Thus, even a one-person corporation must wear different hats depending on the occasion.
For example, one person may be responsible for being the sole shareholder, Director, and Officer of the corporation; however, depending on the action taken, that person must observe certain formalities: Annual meetings must be held, corporate minutes of the meetings must be taken, Officers must be appointed, and shares must be issued to shareholders.
Most importantly, however, the corporation should issue stock to its shareholders and keep adequate capitalization on hand to cover any "foreseeable" business debts.
Shareholder Liability for Corporate Debts. Where corporate formalities are not observed, shareholders may be held personally liable for corporate debts. thus, if a thinly capitalized corporation is created, funds are commingled with employees and officers, stock is never issued, meetings are never held, or other corporate formalities required by your state of incorporation are not followed, a court or the IRS may "pierce the corporate veil" and hold the shareholders personally liable for corporate debts.
Avoiding Double Taxation. Generally, the corporation is taxed for its own profits; then, any profits paid out in the form of dividends are taxed again to the recipient as dividend income and the individual shareholder's tax rate.
However, most small corporations rarely pay dividends. Rather, owner-employees are paid salaries and fringe benefits that are deductible to the corporation. The result is that only the employee-owners end up paying any income taxes on this business income and double taxation rarely occurs.
NOTE: See "The S-Corporation" below as a popular taxing alternative for corporations.
Duration of a Corporation. As a separate legal entity, a corporation is capable of continuing indefinitely. Its existence is not affected by death or incapacity of its shareholders, officers , or directors or by transfer of its shares from one person to another.

The S-Corporation

An S Corporation begins its existence as a “C-Corporation” (discussed above) -- (i.e. as a general, for-profit corporation upon filing the Articles of Incorporation with the appropriate STATE office. However, after the corporation has been formed, it may elect "S Corporation Status" by submitting IRS form 2553 to the Internal Revenue Service (in some cases a state filing is required as well).
Once this filing is complete, the corporation is taxed like a partnership or sole proprietorship rather than as a separate entity. Thus, the income is "passed-through" to the shareholders for purposes of computing tax liability. Therefore, a shareholder's individual tax returns will report the income or loss generated by an S corporation.
Qualifying for S Corporation Status. To qualify as an S corporation, a corporation must timely file IRS Form 2553 with the IRS. This election must be made by March 15 of the current year if the corporation is a calendar-year taxpayer in order for the election to take effect for the current tax year.
However, a "New" corporation may make the filing at anytime during its tax year so long as the filing is made no later than 75 days after the corporation has began conducting business as a corporation, acquired assets, or has issued stock to shareholders (whichever is earlier).
To qualify for S corporation status, the corporation must:
• Be filed in one of the 50 United States.
• Maintain only one class of stock.
• Maintain a maximum of 75 shareholders.
• Be comprised SOLELY of shareholders who are individuals, estates or certain qualified trusts, who consent in writing to the S corporation election.
• NOT have a shareholder who is a non-resident alien.
Losing S-Corporation Status. Failure to observe ANY of the above requirements could revoke S-Corporation status at any time. An S-Corporation that loses its status as such may not re-elect S-Corporation status for a minimum of five years.
Corporate Formalities. An S-Corporation follows the same state formalities as does a C-corporation (i.e. filing Articles of Incorporation and paying state fees).
IRS Filings. The S-Corporation must complete and file IRS Form 1120s to report its annual income to the IRS each year.
General Shareholder Requirements. ALL shareholders of the corporation must be U.S. Citizens or have U.S. Residency Status. If, for any reason, shares are somehow sold or transferred (even if by will, divorce, or other means) to a shareholder who is a foreign national, the corporation will lose its S-Corporation status and be treated as a C-Corporation.
Who Should Elect S-Corporation Status? Owners who want the limited liability of a corporation and the "pass-through" tax-treatment of a partnership will often make the S-Corporation election. In most cases, corporations that would benefit from S-Corporation status are those who plan on distributing the majority of earnings to its shareholders in the year those earnings are realized.
Corporations who plan on retaining earnings for future investments in future tax years often choose the C-Corporation because, under the S-Corporation, earnings will be taxed as if they were distributed to shareholders regardless of whether a distribution actually occurred or whether the corporation retained the earnings for future investment.

The Limited Liability Company (L.L.C.)

Rules governing the Limited Liability Company (L.L.C.) are usually distinct from the rules and laws governing corporations. In general, however, the L.L.C. is a state-created entity intended to provide it's members / owners with the limited liability afforded to corporate shareholders while minimizing many of the formalities corporations are required to observe.
If you are considering forming an L.L.C., you should be aware of the following facts:
IRS Treatment of the Two-Member LLC. If your LLC has two or more owners, The IRS will tax the LLC owners as if the owners were members of a partnership. A partnership files Form 1065 (U.S. Partnership Return of Income).
IRS Treatment of the One-Member LLC. An LLC with only one member / owner is taxed by the IRS as a sole proprietorship is taxed. Thus, the sole member of an LLC will file (Form 1040), (U.S. Individual Income Tax Return) and will include (Form 1040, SCHEDULE C) (Profit or Loss from Business) with his/her tax returns.
"Tax My LLC as a Corporation!" Regardless of how many members the LLC has, the LLC may file an Election to be Treated as a Corporation for Purposes of Taxation (IRS Form 8832). If an election is made to be treated as a corporation, the LLC must file Form 1120 (U.S. Corporation Income Tax Return). IRS Form 1120, Form 1120 Instructions
Minimum Members Required by State Law. Traditionally, most states have required that an LLC consist of two or more members (owners). Recently, however, the majority of states are allowing single-member LLCs.
Separate Legal Entity Status. Similar to the corporation, an LLC is recognized as a separate legal entity from its "members." Thus, an LLC can own property, commit itself to contractual obligations, and even commit crimes.
Limited Liability for Members (owners). In most cases, only the LLC is responsible for the company's debts thus shielding its members from personal liability. However, there are some exceptions where individual members may be held liable:
1. Guarantor Liability. Where an LLC member has personally guaranteed the obligations of the LLC, he or she will be liable. For example, where an LLC is relatively new and has no credit history, a prospective landlord about to lease office space to the LLC will most likely require a personal guarantee from the LLC members before executing such a lease.
2. Alter Ego Liability. Where an LLC member has personally guaranteed the obligations of the LLC, he or she will be liable. For example, where an LLC is relatively new and has no credit history, a prospective landlord about to lease office space to the LLC will most likely require a personal guarantee from the LLC members before executing such a lease.
Fewer Formalities than the Corporation. Although a corporation's failure to hold shareholder or director meetings may subject the corporation to alter ego liability, this is not the case for LLCs in most states. An LLC's failure to hold meetings of members or managers is not usually considered grounds for imposing the alter ego doctrine where the LLC's Articles of Organization or Operating Agreement do not expressly require such meetings.
Shared Management and Control. Management and control of an LLC is vested with its members unless the articles of organization provide otherwise.
Voting Interest According to Ownership. Ordinarily, voting interest directly corresponds to interest in profits which directly corresponds to share of ownership unless the articles of organization or operating agreement provide otherwise.
Transfer Requires Majority Consent. No one can become a member of an LLC (either by transfer of an existing membership or the issuance of a new one) without the consent of members having a majority in interest (excluding the person acquiring the membership interest) unless the articles of organization provide otherwise.
Perpetual Duration. Traditionally, most states did not allow an LLC to have a perpetual existence; LLCs were traditionally required to specify the date on which the LLC's existence would terminate. Today, however, most states allow a perpetual duration for an LLC if stated in its articles of organization.
Dissolution Upon Certain Events. Unless otherwise provided in the articles of organization or a written operating agreement, an LLC is dissolved at the death, withdrawal, resignation, expulsion, or bankruptcy of a member (unless within 90 days a majority in both the profits and capital interests vote to continue the LLC).
Operating Agreement Required. To validly complete the formation of the LLC, members must enter into an Operating Agreement. This Operating Agreement may come into existence either before or after the filing of the Articles of Organization and depending on your particular state’s laws, may be either oral or in writing.
Different Laws in Different States. While laws governing corporations have grown to be quite uniform amongst the different states over time, LLC statutes can vary quite drastically from state to state. This is most likely due to the fact that the LLC is a VERY new form of business structure only recently recognized by most governments (e.g. Hawaii only recently began recognizing the LLC as a legitimate form of business in 1997.


To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.

"LIES" TO TELL TO GET YOUR WAY IN THE CREATIVE REAL ESTATE BUSINESS:

Have you ever ridden a roller coaster? Did you ever stop to think why you’d do that, but you wouldn’t want to ride in a rattling little jalopy going the same speed on a winding mountain road of the same track-width, with sheer drops on both sides? Well, the answer obviously is that one is real and dangerous and the other is real, but not dangerous. On the roller coaster you can have the thrill of Fear with a predictable safe outcome, rather than fear with death being a potential outcome. The roller coaster screams are usually through gleeful smiles and followed with “Wheeeee!” Whereas the mountain-road out-of-control screams are accompanied by horrid grimaces and followed with an exclamation more like “Oh sh………”

Prevarication (lying) is another fun and dangerous pursuit with disastrous results (whack on the head, jail time, loss of respect, loss of friends, etc.): but have you ever secretly wondered what it might be like to have a license to tell wild lies all day long for just one day, just to get what your want from people…but not damage your Karma in the process: Would it be great to have that, but in addition find out at the end of the day that all the lies you told turned out be be the Gods Honest truth, and that you never really lied at all? Would that be cool or what?

Well, let’s try a little experiment. Here are some of the wildest lies imaginable that you could tell in order to acquire or sell or lease properties. Let’s see how many of them could be made to fly (actually become the truth at the end of the day) through the use of the North American Realty Services Equity Holding Trust (the “NEHTrust™ aka: the “PACTrust™”). And remember…none of these statements have to be true: they are simply what you say in order to get your way irrespective of their veracity (as it were).

Accept them as lies at first, and ask yourself…”If this statement were true, would it get me what I want?” Also know that your objective in telling the lie is to acquire that property, or the control of it, with no cost to you.

BOLD-FACED LIES TO TELL A LANDLORD HOSE PROPERTY WANT TO CONTROL

Mr. Landlord...I saw your ‘For Rent’ ad (sign), and if I can have the opportunity to buy the place from you in a few years…

• I'll pay you more than your asking for rent

• I'll pay all your maintenance costs during the rental agreement

• I'll pay all your property tax expense while I rent from you

• I'll cover all your management costs during our agreement

• I'll eliminate all your negative cash flow

• I'll take 100% responsibility for the property and everything associated with it

• I'll put in a a 3rd party tenant for you, and guarantee his rent and performance 100%

• I'll set our arrangement up so that the property and the title are shielded from bankruptcy, tax liens, creditor claims, probate, or marital dissolution legal actions on your part

• I'll eliminate all of your negative cash flow

• I’ll put and end to your vacancies

• I’ll completely annihilate all land lording woes and headaches for you, forever

BOLD-FACED LIES TO TELL A ‘FOR SALE BY OWNER’…

Mr. FSBO. I saw your :For Sale by Owner” ad (sign), and if you can stay on the loan a while longer, say for a couple years, and leave your equity in until then, I’ll buy the place from you now for full value. And not only that, but…

• I’ll pay you more for the property than your asking

• I'll even pay more for the property than it's worth

• I'll take over all payment responsibilities without even going on title

• I'll pay you the full value for your home, townhouse or condo and give you all cash

• I'll pay you full price: 1) all cash, or 2) buy for a higher price on your terms

• I'll preserve and protect all of your equity through this bad market

• I'll pay all your maintenance costs

• I'll pay all your property tax expense

• I'll cover all your management costs

• I’ll buy the property from you today, but let you keep half of my appreciation over the next 5 years

• I'll buy your house for full value and have you keep the principal reduction

• I'll buy your house and put you into another one with only minimal up-front
cost and no credit check

• I'll buy your house and put you into another one with no down payment

• I'll buy your house and give you a letter than will allow you a 100 percent Debt to Income Ration credit on you next loan

• I'll arrange it so that you can stay on the loan and give me the benefits of ownership without a Due-on-Sale Clause violation

• I'll never need to be on your title

• I'll protect your from any liens, suit or creditor judgment that could befall
me

• I'll close in a week (if the Escrow and documentation process doesn’t slow me down)

• I'll clear up and re-establish your credit with your lender (re. arrearages, back taxes and penalties)


BOLD-FACED LIES YOU CAN TELL A TENANT/BUYER TO MANIPULATE HIM/HER…

Dear Mr. Mrs. Tenant/Buyer…thanks for calling. Through me and my offer…

• You can lease the property with a full tax write-off

• You can rent the property without a credit application

• You can buy the property without a new bank loan

• You can buy the property without a credit application

• You can buy the property without a down payment

• You can put your closing costs on a credit card

• You can rent the property, but still participate in it’s appreciation and equity build-up

• You can rent the prperty, and still participate in the mortgage loan principal reduction

• You can own the property without great or even "good" credit

• You can own the property, versus renting, and pay less than you would to rent it

• You can enjoys all the benefits of homeownership without further scrimping
and saving

• You can live virtually rent-free, given reasonable appreciation over time

• You can buy now with all benefits of homeownership now, but finance later when/if you feel like it

• You can have 100% of the benefits of Fee Simple Real Estate Ownership, including tax write-off, and never have to go on title (thus protecting your home from the threat of litigation of all types)

OK…now the jig’s up. All your lies have to suddenly becomes truths. Well, if you were planning on suing the Equity Holding Trust system (PACTrust or NEHTrust)…then they are: plain and simple! I’d dare anyone to just try to make ALL of the statements become truths when using any other creative financing vehicle.

I’d suggest giving this one a lot of thought.


To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.

ARMCHAIR LANDLORDING

Bill J. Gatten

Since the advent of the NARS Equity Holding Trust™ concept, some of us—in the know—have not laid out a dime for management, maintenance, repair, upkeep property, tax insurance or vacancies relative to SFR income properties. Why not? Because we hold each property in a land trust wherein our tenant is a successor beneficiary. As such, the tenant pays all mortgage payments, handles all maintenance, property tax and insurance (and our positive cash flow). Each of these tenant beneficiaries has gladly taken on the full responsibility of home ownership in exchange for the benefits of: income-tax deductions, equity build-up from mortgage principal reduction, appreciation potential, and pride of ownership (all of the fee-simple bundle of rights). Moreover, they move into their own home with minimal cash up front and no particular credit requirements, or need for a new bank loan.
And best of all I don’t need to be there, go there or even seen the property or the people in most cases. In have properties in dozens of states that I have never seen, never met the tenants and never spent a penny on. If any thing would go wrong, I have a “ground partner” or the tenant him/her self to take care of problems, relieving me of the obligation.
The agreement provides that at the end of a specific, mutually acceptable, term (3, 5, 10 or 20 years) the property will be sold and any resultant net profit (after a return of my, or the original owner’s, beginning equity) will be shared relative to our particular percentages ownership in the title-holding (land) trust. The resident’s options at termination are to either—1) refinance, pay the other beneficiaries their profit, and keep the property, or 2) sell the property, pay the other beneficiaries their shares and keep the remainder of the profit, 3) walk away and pay nothing further, or 4) petition (ask) that the contract be extended or that the other parties take less for their shares.
Why not sell tax-benefits...appreciation potential…and loan principal reduction? Why not trade management responsibilities for pride of ownership—especially when doing so reduces the tenant’s expenses? It only requires that the property be held in a carefully constructed co-beneficiary land trust (www.landtrust.net).
Wait a second…my tenant pays less, and I get more? Really…?

Although historically reserved only for those with lots of cash and/or great credit, tax benefits, appreciation, principal reductions, etc. all have significant value and are highly sought-after commodities, especially by folks who have never had access to them. So...why not “sell” these elements of ownership to someone who needs them worse than you do? Why not earn more, relax more and avoid the costs and man-hours of landlording, while your tenant actually ends-up paying less than normal rent (after tax). The tenant need only be assigned a successor beneficiary interest in your title holding land trust, and be made a triple-net lessee in the property. With proper documentation, he has just become a homeowner in the eyes of the IRS and you are free of management, maintenance, vacancies, tenants toilets, trash and trouble.
Compare the tenant normal rent to paying a bit more per-month and receiving profit-potential, tax deductions, lower monthly out-go and all incidents of homeownership. Think about it…given a 1/3rd tax bracket, someone paying $1000 per-month in rent pays $1,500 after-tax each month. Therefore, becoming an “owner” (via a co-beneficiary land trust) results in nearly a $500 per-month increase in spendable net take-home-pay. This is to say that when one owes his landlord $1,000, one and one half times that amount must be earned in order to have the $1,000 left over after the government takes its 1/3rd)
Therefore, which is better for you and your tenant? Renting at $1,000 per-month, or sharing ownership at $1,250 per-month? The latter provides each of you an additional $250 per-month, while freeing you from payments, insurance, property tax, vacancies, maintenance, management and negative cash flow. Over a period of 5 years $250 per month pays each of you $15,000 that you both would have lost otherwise.
Q: How is it that the IRS will allow someone to “give” the tax benefits to a rental tenant?
A: Under the Internal Revenue Code, any beneficiary in a land trust will be treated tax-wise as an owner of the trust property, so long as he or she: 1) Makes the payments and permanently resides in the property, 2) Has the risks and burdens of ownership 3) Has a contractual obligation to pay deductible sums, and 4) Has either an equitable interest in the property, or has a beneficiary interest in a land trust, in which the trustee holds such equitable interest [IRC Section 163(h)4(D)].
Q: What if the tenant defaults? Won’t it be difficult to get him out of the property if he’s an owner? Wouldn’t eviction fail in view of a claim of “Equity”?
A: No. Despite the tenant beneficiary’s ownership benefits and income tax treatment: under the land trust, he/she is NEVER an owner of the property per se. The trustee is the legal and equitable owner. The tenant beneficiary remains, therefore, subject to simple eviction. In the event of default, the default constitutes constructive notice of that party’s desire and immediate intent to sell its interest to the non-defaulting beneficiary at Fair Market Value. The non-defaulting party may offer what it chooses, but if the offer is not deemed acceptable to the defaulting party and it is willing to spend the effort and money to do so, it has thirty days in which to pay a stipulated default fee along with all arrearages, and to order an MAI appraisal. If it is proven that more is owed than reflected in the initial offer, the claimant must receive the confirmed amount…by way of an unsecured promissory note, which is due and payable when the property is sold at the trust’s termination. Should there be no challenge of the offer, the trust is revoked and the deed is transferred to the non-defaulting beneficiary.


To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.

Land Trusts in Texas

Dyches Boddiford & George Yeiter.
Trusts have been used as an entity to hold assets, such as real estate
for hundreds, if not thousands, of years. Obviously, it’s old stuff. But,
with each generation’s trials and tribulations, trusts evolve to meet new
challenges.

High Taxes and aggressive litigation are today’s motivators. Tax risks
range from income tax to draconian death taxes that consume up to
55% of the assets a person leaves behind. Trusts are often used along
with more modern adaptations of other old entities, such as partnership
aberrations, to include family limited partnerships and limited liability
companies. The quest is to keep what you have accumulated and to
have some extended control of it, even after death.

A perfect example of using ingenuity to keep one’s assets away from
the grips of the tax man was a trust established by Maria Cristofani in
1984. Maria established a trust and transferred to it real estate with a
value of $70,000. The primary beneficiaries were her two children
and, as contingent beneficiaries, 5 grandchildren should the two
primary beneficiaries die within 120 days of Maria. All was fine until
Maria died and the IRS audited her estate tax return.

Naturally, the IRS wanted more money. They claimed that Maria
failed to file a gift tax return and owed back gift taxes. The IRS argued
that Maria was entitled to give $10,000 per year to the two primary
beneficiaries, but that taxes were owed on the $50,000 not excluded.
The estate disagreed, claiming that the 5 contingent beneficiaries did
have an interest in the trust. The trust had a Crummey power and, in
accordance with that power, the trustee had given written notice to all
7 beneficiaries of their right to withdraw. Thus, the full $70,000 was
excludable.

This means that multiple-beneficiary trusts now can be used to expand
the fit-tax exclusion. It took someone with a tolerance for risk to mix
old law, and an old trust entity with a new way of looking at the old to
save Maria’s family substantial wealth.

Over the years trusts have been used extensively in the attempt to
control how much the government inherits. Some of the more familiar
trust names include: Bypass Trust; Marital Deduction Trust;
Generation Skipping Trust; Grantor Retained Income Trust; Insurance
Trust; etc. The common thread for all of these trusts is to legally avoid
paying the majority of the deceased’s wealth to the government.
Failure to act is to assure that the estate will pay the highest possible
tax.

A NEED FOR PRIVACY

Real Estate Investors often use trusts as business devices. It is hard
persons never being in business to understand, but business can be
war. There is an ever growing number of enemy soldiers attempting to
invade and plunder the investor’s castle of wealth. Sometimes this is
accomplished by out and out illegal means, such as thieves that rob
and destroy property or those who embezzle by not paying rent. The
cruelest enemy is he who uses the law to plunder. Today, lawsuits are
treated as a lottery.

Enemy troops look for excuses to sue; it is nearly a guaranteed profit.
If a person can find some excuse to sue, even if very flimsy, the
defendant will almost always settle for at least a few thousand dollars
because it is cheaper to settle than to incur the cost of legal defense. It
has become so bad that in some cities, such as Buffalo, NY,
unscrupulous people publish lists of landlords and divulge such things
as the number of properties, the number of units and the total value of
real estate owned. Why? Because contingency fee lawyers will not
spend the time and money to go after someone with minimum assets.
They look for the ‘fatted lamb’.

LAND TRUSTS

A result of this attack is a defense system. Trusts are used by some
investors as a key part of their defense. The most common trust used
in real estate investing is referred to as an Illinois style land trust. The
primary purpose is to remove the legal title from the investor’s name.
The title is held in the name of a trustee and the investor is both the
grantor and the beneficiary to the trust. the trust does not offer the
same kinds of protection a corporation or limited liability company
can, but it has a place in the castle’s defense and is the most
economical of all entities to set up and maintain.

Legal advisors often recommend trusts be used in conjunction with
other business entities assuming the amount of wealth involved is
sufficient to justify the cost of the business entity. Trusts, on the other
hand, are usually very economical. An attorney prepares the original
trust and it can be duplicated for additional use. The fee to have a
knowledgeable attorney prepare a land trust can range from $300 to
$1,000. Some of us do our own trusts, but a great deal of knowledge
must be obtained before you consider doing this. There are no
additional expenses, such as franchise fees or income tax returns. A
land trust is reported on the beneficiary’s tax return as if the beneficiary
personally owned the property.

OTHER TRUSTS

There are numerous possibilities for the name given to a trust. Such
names are often chosen to reflect the primary function of the trust:
Education Trust; Wealth Replacement Trust; Charitable Remainder
Trust; Spendthrift Dynasty Trust, etc.

Since names are assigned to trusts the public can get the wrong
impression. It is often assumed that a named trust is like any other
consumer good, such as the name ‘car’ or ‘truck’. A person wants to
buy, say, a car but not a truck. They want a Spendthrift, but not an
Education Trust. Actually all trusts are just trusts. The primary thing
that differentiates them are clauses written into the trusts. For example,
a single clause will turn an education trust into a spendthrift education
trust.

The point is not to let names become confusing. The fundamentals of
trusts are simple to comprehend. First, all trusts are either inter vivos
or Testamentary. Inter vivos trusts are set up while the grantor is alive
and are often referred to as a ‘living trust’. The testamentary trust, on
the other hand, is set up after the person’s death by authority written in
the deceased’s will. All trusts will be either an inter vivos or a
testamentary trust.

REVOCABLE & IRREVOCABLE TRUSTS

Inter vivos trusts are either revocable or irrevocable. Revocable means
the grantor can either revoke the trust or else maintain some
significant power to maintain control of the trustee or use of the trust
assets. Irrevocable means the grantor totally gives up rights and
powers and walks away entrusting to the trustee all of the assets in the
trust, referred to as the ‘corpus’.

The government treats most inter vivos revocable trusts as grantor
trusts. As previously mentioned, grantor trusts are reported on the
grantor’s tax return. Irrevocable trusts have more complex tax returns.
in a nut shell, they are either a simple trust or a complex trust for tax
reporting purposes. These returns are best prepared by professionals.

Most investors will be dealing with inter vivos or living trusts. Trusts
used to hold operational real estate will generally be revocable, grantor
trusts. These trusts are more for operational purposes that estate tax
planning purposes. In general irrevocable trusts will be used to deal
with estate tax planning.

Depending on the client’s objective, the attorney will draft a base trust
to emphasize certain objectives, such as children’s education , or a
land trust. Examples would be an education trust that is an irrevocable
inter vivos trust and the land trust that is a revocable inter vivos trust.

COMMON CHARACTERISTICS

Some common characteristics of the living trust are:

Assignment - In certain cases trusts can be assigned to third parties
without changing the public records. Thought we do not recommend it,
some real estate investors have used this feature in dealing with due on
sale clauses of mortgage contracts.

Assurance - The trust may provide greater assurance that the grantor’s
wishes will be met. Wills are more easily contested by disgruntled heirs
and “want to be” heirs.

Avoids Guardianship of the Assets - Using a Trust the
grantor/beneficiary has greater assurance that his assets will be
managed in a manner prescribed by him and will be spent as he
instructs in the trust document. If a trust does not exist and a guardian
is appointed by the courts, then the courts and guardian make these
decisions with no input from the incapacitated party. A guardianship is
more expensive to administer than a trust since the Court usually
requires a periodic accounting by the guardian.

Incapacitation of Trustee - If the owner of the property becomes
incapacitated, managing assets can become a problem. A trust allows
for an alternate trustee to step into the shoes of an incapacitated
trustee without affecting management of the property.

Limited Liability - There is no significant liability protection. At best,
the trust provides greater privacy as to who is the beneficiary. In most
states living trusts are treated as the alter ego of the grantor. As such,
liability may be attributed to the grantor.

Privacy At Death - Ownership transferred upon the death of the
grantor/beneficiary of a trust is private when contingent beneficiaries
are listed. Unlike a will, which is probated, a trust document does not
become public record. Land trusts typically do not have contingent
beneficiaries and, therefore, any property held in the trust would simply
be included in the deceased’s probated estate.

Privacy While Living - Some real estate investors wisely seek privacy
regarding the ownership of their real estate. They do not want their
name as the owner of the public property records which would allow
anyone to know how much wealth they owned in real estate and
where that real estate is located. It can also cause a serious operational
problem. For example, a judgment against the investor even for a
small amount would give the judgment holder immense leverage
diminishing the investor’s opportunity to negotiate a lower settlement
on the judgment. The judgment attaches to all of the investor’s real
estate. This would prohibit the investor from selling any real estate
without first paying the judgment in full.

Probate - Where a trust has contingent beneficiaries listed, costs
associated with probate are avoided since the trust is not probated at
death.

Taxes (Income) - There is no tax benefit. The tax information is
reported on the grantor’s personal tax return.

Taxes (Estate) - The Irrevocable trust, Insurance trust, Bypass trust
and Marital Deduction trust are the most common trusts used to save
estate taxes. Note that an irrevocable trust is a book trust and can be
used for many purposes, such as the trust names indicate, Charitable
Remainder Trust and Spendthrift Dynasty Trust. The revocable land
trust saves no estate taxes.

To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.

History of the Land Trust

The land trust probably evolved from the Massachusetts Business Trust. References to the Massachusetts Business Trust as a real estate title-holding device appear as early as 1854. The Illinois Supreme Court, in Hart v. Seymour, 35 N.E. 625, a case involving a Massachusetts Business Trust, established the modern legal foundation for the land trust in 1893. (IL6-270) The land trust in Illinois was first judicially recognized and held to be valid in 1921 in Kerr v. Kotz, 132 N.E. 625. (IL5-253)
In Chicago Title & Trust Co. v. Cacciatore, 185 N.E.2d 670, the Illinois court commented:
"The law of this State and the decisions of reviewing courts for more than 80 years have encouraged public reliance upon the real property concepts exemplified in the land trust now before us. Millions, and probably billions of dollars have been and now are invested in similar trust arrangements and thousands of titles depend thereon for their validity. " (IL5-253)
It was estimated in 1972 that about four out of every five pieces of real estate in Cook County had been or were at the time held in land trusts. (IL5-253) The land trust has been recognized by the legislatures in several states, and court precedent has been set in all states for the use of land trusts.
Nature of a Land Trust

A land trust is subject to the laws and legal principles generally applicable to trusts.
In the leading case defining the nature of a trust, Schumann-Heink v. Folsom,159 N.E. 250, the court stated:
"The trust is a very comprehensive institution. It is as general and elastic as contract. It originated and was reduced to practice under the jurisdiction of courts by the civil laws, was expanded and developed in the courts of chancery and has been employed in every field of commerce and trade as a substitute for the corporate or partnership organization. Such a trust is created by the execution of a declaration of trust by one or more trustees, to whom there have been or will be presently transferred the property or money, which is to constitute the corpus of the trust…
If the declaration of trust involved in this case creates a trust and there is nothing in it that is against the public policy of this State, then the decision of the case depends upon the application of the well-established principles of the law of contracts and trusts. Because a new use is being made of the trust does not mean new principles of law are to be applied in determining the rights of the trustees, the cestuis que trust or persons dealing with the trustees." (IL8-218)
An Illinois case, Robinson v. Chicago National Bank, 176 N.E.2d 659, provides a very succinct description of the land trust:
"The land trust is a device by which the real estate is conveyed to a trustee under an arrangement reserving to the beneficiaries the full management and control of the property. The trustee executes deeds, mortgages or otherwise deals with the property at the written direction of the beneficiaries. The beneficiaries collect rents, improve and operate the property and exercise all rights of ownership other than holding or dealing with the legal title. Two instruments create the arrangement. The deed in trust conveys the realty to the trustee. Contemporaneously with the deed in trust, a trust agreement is executed. The pertinent provisions of the trust agreement are summarized as follows: While legal title to the real estate is held by the trustee, the beneficiaries retain "the power of direction" to deal with the title, to manage and control the property, to receive proceeds from sales or mortgages and all rentals and avails on the property. The trustee agrees to deal with the res of the trust only upon the written direction of the beneficiaries or the persons named as having the power of direction. The trustee is not required to "inquire into the propriety of any direction" received from the authorized persons. The trustee has no duties in respect to management or control of the property or to pay taxes, insurance or to be responsible for litigation. The only specified duties upon the trustee are to "execute deeds or otherwise deal with the property upon the direction of the beneficiary or other named authorized persons." (IL6-271)
Creation of the Trust

A typical land trust is generally created by a trust agreement under a given date and identified by a number or other description, executed by the trustee and the beneficiaries, certifying that the trustee has or is about to take title to designated real estate which it will hold in trust for designated beneficiaries according to their respective interests. (IL8-216)
A deed in trust conveys title to the realty to the trustee, granting him broad powers to protect and conserve the title, to sell and convey the realty, and generally to deal with the title as if he were the owner of the total estate. The deed also relieves buyers of land trust property of any obligation to require that the trustee apply acquisition payments in a manner consistent with the terms of the trust agreement or any duty to inquire into the authority or necessity of any act of the trustee. The deed in trust explicitly provides that the instruments supplied by the trustee shall be conclusive evidence to third parties that the trustee has acted within the terms of the trust agreement. The Beneficiaries are not named in the deed in trust. The deed specifies that the interest of every beneficiary under the trust consists only of rights to the avails and earnings of the property. The interest is stated to be personal property, and no title to the realty passes. (IL2-506)
Statute of Uses

In Chicago Title and Trust Co. v. Mercantile Trust & Savings Bank, 20 N.E. 2d 992, the court held that a land trust is not executed by the Statute of Uses. The court used two arguments to support its holding:
1. An interest in a land trust was personalty, thus making the Statute of Uses inapplicable.
2. The trustee had two duties, which were sufficient to make the trust active, thus preventing the merger of the beneficial and legal estates by the Statute of Uses.
The court relied upon three bases for its holding:
1. Partnership Law: An agreement creating an interest in the profits or proceeds of the sale of real estate creates no interest in or lien upon the land itself.
2. Equitable conversion: Under the doctrine of equitable conversion, the beneficiary's interest was personal property because the trust agreement required the trustee to sell the property and pay the proceeds to the beneficiary.
3. Provisions of the trust agreement: The nature of the beneficiary's interest was controlled by the trust agreement provisions labeling the interest as personal property. In other words, the trust achieved a contractual, as distinct from an equitable conversion.
Whether a land trust is executed by the Statute of Uses must be determined on a state-by-state basis.
The Personal Property Fiction

It has long been recognized in Illinois that a land trust is a unique device that is quite unlike a conventional trust. In fact The Illinois Trusts and Trustees Act provides specifically that "the provisions of this Act do not apply to any: (a) land trust." (Ill. Rev. Stat. Ch. 17, Sec. 1653) In Levine v. Pascal, 236 N.E. 2d 425 the court stated that a land trust by its nature is characteristically different from common-law trusts.
The representations in land trust documents that the interest of the beneficiary is personal property, and that the beneficiary has no equitable title or interest in the real estate are wholly fictional. Professor Henry W. Kenoe, a leading commentator on land trusts, has characterized them as agreements to call a dog a cat. This is how he referred to the personal property fiction:
Alice sat across from the desk of a large white rabbit in the Land Trust Department at the Wonderland trust company. "Mr. Bunny," she said, "since the real estate which I hold is now in a land trust with your company, I should like to review with you, as the trust officer in charge, my duties as a landlord; and I want you to tell me how to have the leases signed."
“ Well, young lady," said Mr. Bunny, " as a preliminary matter, let me dispose of a misunderstanding on your part. You no longer hold the real estate. We do. The deed which you gave to us clearly states that Wonderland Trust Company has all of the legal and equitable title in the property which was once yours." Then noting Alice's rising alarm, he continued: "But do not be afraid for we can do nothing with the property except upon you written direction, it says so right in the Trust Agreement."
Alice's fears seemed to subside, but Mr. Bunny continued to reassure her. "Besides you are entitled to the management and control of the property and to the rents, issues, proceeds and avails. That too is right here in the Trust Agreement."
“ That sounds like a schizophrenic arrangement to me" said Alice. "Oh no" said Mr. Bunny, "we have finally achieved the goal of the Philosophers. We have now separated Pure Form from Pure Substance."
The Illinois courts have noted the fictional nature of the personal property designation of the beneficiary's interest. In 1979, the Illinois Supreme Court stated that land trusts are not trusts at all, but rather a legal fiction under which the beneficiary has "what is referred to as a personal property interest {while in fact having} most of the usual attributes of real property ownership." People v Chicago Title & Trust Co., 389 N.E. 2d 540
"In examining a land trust it is apparent that true ownership lies with the beneficiaries though title lies with the trustee. The trustee derives all of his power from the beneficiary and acts solely on the beneficiary's behalf. The beneficiary may withdraw or modify the trustee's authority at any time … Indeed, there is not a single attribute of ownership, except title, which does not rest in the beneficiary. The rights of creation, modification, management, income and termination all belong to the beneficiary… In reality, the transfer to the trustee is a formality involving a shifting of legal documents. The land trust is, in fact, a fiction that has become entrenched in the law of this State and accepted as a useful instrument in the handling of real estate transactions. Outside of relationships based on legal title, the trustee's title has little significance."

Flexibility of the Land Trust

The scope of the use of the land trust is unlimited. Whatever is lawful and may be accomplished by contract, can be realized by the creative drafting of a land trust agreement.
Beneficial Interests

The interest of any beneficiary consists of
A. A power of direction to deal with the title and to mortgage and control the property.
B. The right to receive proceeds from rentals, mortgages, or sales, which right shall be personal property and may be assigned and transferred as such. The interest of the beneficiary is stated to be only in the earnings, avails and proceeds arising from the sale or disposition of the real estate.
C. A beneficiary has no legal or equitable title. A beneficial interest in a land trust is personal property. (IL8-217)
Some states have enacted legislation that specifies that beneficial interests under a land trust are personal property, not real estate. Other states recognize the doctrine of "equitable conversion.” In those states, a contract for the sale of real estate converts the seller's interest from realty into personalty. Personalty is a right to the proceeds of the sale. The land trust states that the trustee is to sell the property at the end of the term of the trust agreement. Even without this sales provision, most courts will still respect the intentions of the creator of the trust that the beneficiary's interest be considered personal property:
"Whether the interest of a beneficiary is an interest in real estate or in personal property depends on the provisions of the trust instrument. Where real property is held in trust, and by the terms of the trust a duty is imposed on the trustee to sell it and hold the proceeds in trust or distribute the proceeds, the interest of the beneficiary is personal property, The interest of beneficiaries, who have under the terms of the trust agreement, no right, title or interest in the realty as such, either legal or equitable, but only an interest in the earnings and proceeds with power to direct the trustee to deal with the title and manage and control the property, and the right to receive proceeds from rentals, which right is to be deemed personal property, is personal property only and not real estate." (90 C.J.S. 186 Trusts)
A beneficiary of a land trust obtains some of the legal attributes of a personal property interest while retaining absolute ownership and control of his real estate (People v. Chicago Title & Trust Co., 389N.E.2d 540). (IL9-283)
Yes, you can have your cake and eat it too!
The mere power of direction is revocable unless coupled with an interest, given for a valuable consideration, or as part of the security (Walker v. Denison, 86 Ill. 142). (IL8-229) The power of direction need not necessarily be in the beneficiaries, a grantor may create the trust for named beneficiaries, excluding him, and yet retain control and power of revocation. (IL8-220)
Beneficiaries

Death of a Beneficiary
The death of any beneficiary does not terminate the trust nor affect the powers of the trustee. Unless otherwise provided, the interest passes not to his heirs, but to his personal representative, such as an executor or administrator. (IL8-217) If there are no provisions for survivorship, the interest of the deceased beneficiary, being personal property, should be probated as such. (IL8-228)
• Land trusts with designated remainder beneficiaries may be used as substitutes for wills in the testamentary disposition of property, and are not invalid for failure to comply with the Statute of Wills (Conley v. Peterson, 184 N.E.2d 888). Therefore, property over which the owner retains absolute control before death may be kept out of his probate estate after death. (IL9-286) Placing property in trust under duly executed conveyances, even if made in lieu of a will, is not to be considered as a testamentary disposition, even if the trusts created are revocable (Gurnett v. Mutual Life Ins., 191 N.E. 250). (IL8-220)
• Land trusts can be used to avoid probate, as well as ancillary administration of real estate, owned by nonresidents or owned by residents in other states. (IL9-286)
• Real estate of a land trust beneficiary can be insulated from claims of a surviving spouse. (Johnson v. La Grange State Bank, 383 N.E.2d 185). (IL9-286)
• A land trust may facilitate minimization of estate and gift taxes by inter vivos transfers of the beneficiary's interest (Estate of McClure, 608 F.2d 478). (IL9-286)
A land trust may specify who will be the successor of the beneficiary upon his death. This is called a testamentary disposition. These are simply instructions made by an individual to be carried out when he dies. If there are no such instructions, the beneficiary's interest will usually vest in the personal administrator of the beneficiary's probate estate. Therefore, if there is a testamentary disposition the decedent's interest will pass through probate, with little problems and no public knowledge of the owner. If you have a living trust, you can make it the beneficiary of your land trust. If you have several land trusts, you can make your living trust the beneficiary of all of your land trusts. Thus, you can change your estate plan by making a change to your living trust, rather than change all of your land trusts. Regardless, inheritance taxes must be paid if you are the grantor.
Gross Estate

In the 1995 case, Estate of Bowgren v. Commissioner, 105 F.3d 1156, the court held that the value of beneficial interests transferred in an Illinois land trust may be included in a decedent's gross estate when the settlor retains a personal power of direction that is not subject to a fiduciary obligation and can be utilized to defeat the transferee's enjoyment of the interests. (Il1-489)
In this case, Mrs. Bowgren created a ninety-eight unit Illinois land trust and deeded her real estate to the State Bank of St. Charles as trustee. The trust agreement provided that the interest of any beneficiary consisted of a power of direction, which included the right to deal with the real estate title, the power to manage and control the real estate, and the ability to receive the proceeds from the property. The agreement also deemed the beneficiary's interest to be transferable and assignable personal property, with the bank remaining the sole owner of record of the real estate. The bank retained the power to convey title, execute and deliver deeds, or otherwise deal with the real estate but only when authorized in writing by Mrs. Bowgren or the beneficiaries. (Il1-489-490)
In the four years following the formation of the trust, Mrs. Bowgren transferred twenty-seven units of beneficial interest, nine to each of her three children. (Il1-490)
The court held that the decedent's power of discretion was not subject to a fiduciary obligation, could trump the enjoyment of the beneficiaries and, therefore, the value of the interests should be included in her gross estate. The court looked to the language of the trust agreement and concluded it established two distinct powers in Mrs. Bowgren: "the power of direction as the individual specifically named in the trust agreement and the power of direction as the sole beneficial interest holder." By applying the Illinois court's decision in re Estate of Bork, 496 N.E.2d 329, the court concluded that Mrs. Bowgren's power to direct the trustee to convey title was exclusive and not subject to a fiduciary duty. (Il1-491)
The court also found that the power of direction is an independent, transferable property interest separate from the beneficial interest, which can be maintained without explicit language, and the creation or existence of its assignment is determined by the intent of the parties. Finally, the court decided that any settlor retaining the power to terminate the interests of the beneficiaries cannot logically possess a power of direction that is subordinate to those of the same beneficiaries. Not only did Mrs. Bowgren retain a power of direction over the trustee superior to that of the beneficiaries, her power was not limited by a fiduciary duty owed to the holders of beneficial interest. Under Illinois law, no fiduciary duty is owed to the recipient of a beneficial interest in a land trust when the assignment of interest is gratuitous. (Il1-494-495)
Under sec. 2036(a)(2) of the I.R.C., property is included in the gross estate if the decedent at the time of death possessed "the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom". Since at the time of her death Mrs. Bowgren retained the right to designate enjoyment and possession of the property through her power to order conveyance of the property and her power to exclude the beneficiaries, the property must be included in her gross estate. (Il1-495)
Similarly, the court held that the property was includible under sec. 2038(a)(1) of the I.R.C., which provides that property includible in the gross estate includes transfers by trust, when the transferee's enjoyment was subject at the time of the decedent's (transferor's) death to an exercise of power by the decedent in conjunction with any other person "to alter, amend, revoke, or terminate". (Il1-495)
Because of Bowgren, in order to avoid gross estate tax liability, a settlor will be forced to sell beneficiary interest outright and abandon control over those properties, rather than donate and marginally supervise. To avoid the inclusion of Illinois land trust interest in his gross estate, the settlor will have three options. (1) Relinquish the power to direct the trustee to convey the property and to designate the interests, as the settlor desires. (2) The settlor can dismiss his ability to alter, amend, revoke or terminate the beneficiary's interest. (3) The settlor can sell the interest to the beneficiary in a personal property, not real estate transaction. (Il1-496)
Partition
Because beneficial interest owners are considered partners, property held in land trust may not be partitioned (Harmon v. Martin, 71 N.E.2d 74). (IL9-290) Partnership property is not subject to partition unless the purposes of the partnership have been achieved (Whitaker v. Scherrer, 145 N.E. 177), or the partnership has been dissolved (Korziuk v. Korziuk, 148 N.E.2d 727). (IL9-290) When the trust agreement expressly precludes the vesting of any legal or equitable right in the real estate itself in a beneficiary, it is insulated from partition (Breen v. Breen, 103 N.E.2d 625). (IL2-511)

Homestead

Since the declaration of trust only places full legal and equitable title in the trustee, but the beneficiary retains the sole and exclusive right to the possession of the rents, issues, and profits of the property, a beneficiary occupying property held in trust as a residence is entitled to his homestead, because he is rightfully possessed by lease of said property or otherwise. In Watson v. Saxer, 102 Ill. 585, the court stated that any holder of a possessory interest in land may invoke the aid of the (homestead) statute, without regard to the extent of his title, and therefore protect the right of a person who had sold a lease on property used by him as homestead and invested the proceeds in other property. (IL8-226)

Dower

In Illinois, the two cases of Nicoll v. Ogden, 29 Ill. 323 and Nicoll v. Miller, 37 Ill. 387 are authority for the proposition that the widow has dower interest in trust property unless the effect of the conveyance to the trustee is to convert into personalty. (Il8-227) In some cases, the dower or homestead is specifically reserved in the deed in order to bar the parting of title by the trustee without the knowledge or consent of the spouse, although the same result could be accomplished by appropriate wording of the trust agreement. In such a case, if the wife had a joint power of direction, her authority would be said to be coupled with an interest. (IL8-228)

Operation of Trust Property

The severance of the legal and equitable title from the right to possession and the rents, issues and profits, operates to prevent the imposition of liability on the trustee for torts and contracts of the beneficiary. The beneficiary has the right to execute contracts in his own name. Under the trust agreement, no beneficiary has the authority to contract for or in the name of the trustee, so if contracts are executed by the beneficiary as agent for the trustee, the latter may disavow the contract. Leases for a term of years and contracts involving substantial rights should be executed by the trustee in its fiduciary capacity. (IL8-229-230)

Judgment Liens

Illinois law provides that judgment liens can only attach to real estate interest. (IL9-287) A judgment against a land trust beneficiary does not create a lien on the real estate title that comprises the corpus of the trust, and such a judgment has been held not to create a lien on the beneficial interest (First Fed. Sav. & Loan Assoc. v. Pogue, 389N.E.2d 652). (IL9-287) A judgment creditor may impose a lien upon a beneficiary's share of the property's avails and proceeds, but he may not place a lien upon the property itself (Levine v. Pascal, 236 N.E.2d 425). (IL2-511)

Contractual Powers and Rights of the Beneficiary

The Illinois courts have held that the beneficiary could lawfully contract to sell the real estate, but could not represent himself as the owner with power to convey title (Madigan v. Buehr, 260 N.E.2d 431), since the beneficiary, having no title, cannot contract, represent, or otherwise act in the name of, or on behalf of, the legal title holding trustee (Kurek v. State Oil Co., 424 N.E.2d 56). (IL9-300)

Property Tax Liability

The Illinois Supreme Court has held that land trust beneficiaries are real estate "owners" for real estate tax purposes, in People v. Chicago Title & Trust Co., 389 N.E.2d 540:
"In a land trust the legal and equitable title lies with the trustee and the beneficiary retains what is referred to as a personal property interest. It is important to note, however, that though referred to as personal property, the beneficiary retains most of the usual attributes of real property ownership under the trust agreement… The term "owner" as applied to land, has no fixed meaning applicable under all circumstances and as to any and every enactment. It usually denotes a fee simple estate, but in Illinois it may include "one who has the usufruct control or occupation of land with a claim of ownership, whether his interest be an absolute fee or less estate." Title to property does not necessarily involve ownership of property. Title refers only to a legal relationship to the land, while ownership is comparable to control and denotes an interest in the real estate other than that of holding title thereto…
In examining a land trust it is apparent that true ownership lies with the beneficiaries though title lies with the trustee. The trustee derives all of his power from the beneficiary and acts solely on the beneficiary's behalf. The beneficiary may withdraw or modify the trustee's authority at any time. Indeed, there is not a single attribute of ownership, except title, which does not rest in the beneficiary. The rights of creation, modification, management, income and termination all belong to the beneficiary. In reality the transfer to the trustee is a formality involving a shifting of legal documents. The land trust is, a fiction that has become entrenched in the law of this State and accepted as a useful instrument in the handling of real estate transactions. Outside of relationships based on legal title, the trustee's title has little importance." (IL9-305)
The court reasoned that the purpose of the revenue act was the collection of taxes for benefits received, and thus concluded that imposition of tax liability on the beneficiary, who received all the benefits of land ownership, was appropriate. (IL9-306)

Duties of the Beneficiaries to Each Other

1. Beneficiaries are not considered partners in relation to each other.
2. They cannot dissolve their arrangement with each other.
3. They cannot go to court to force a dissolution and accounting of the trust arrangement.
4. They cannot sue to partition.
5. Beneficiaries under a land trust cannot bind each other for trust obligations.
6. Beneficiaries are obligated to manage, maintain and preserve the trust property.

Beneficiaries' Obligations to the Trustee
1. The beneficiaries agree to defend (pay for a lawyer) and indemnify (pay any claims against) the trustee for any lawsuits against him arising from his management of the trust property.
2. The beneficiaries agree to reimburse the trustee for any expenses incurred in administering the trust or the trust property.
3. The beneficiaries must provide the trustee with any assignments of beneficial interest.

Trustees

Choosing a Trustee

It is important to carefully choose a trustee. It is best to choose a friend or relative you can trust, and who has some background in real estate. You could also choose an attorney. It is best that you and your spouse not be a trustee. To do so would negate any attempt at achieving secrecy or privacy. Since a court order is only valid in the state in which it is issued, naming a trustee in another state will make it more difficult for an attorney to serve process on the trustee. However, some states require that the trustee reside in the state where the trust property lies.

Liability of Trustee

The trustee is not liable for real estate taxes (Proviso Township High School District v. Hynes, 49 N.E.2d 276), or tortuous (Fields v. 6125 Indiana Ave. Apts, Inc., 196 N.E.2d 485) or statutory violations (Robinson v. Walker, 211 N.E.2d 488) arising out of the operation and maintenance of the trust property. (IL9-280) Nonliability is a corollary to the trustee's nominal status. (IL9-281) The trustee has no liability because it has no control over the management and operation of the property. (IL9-281)
Trustee's Obligations to the Beneficiaries

A trustee has duties and obligations that arise from two sources: the trust agreement and general trust law principles. Under general trust principles, the trustee becomes a fiduciary for the beneficiaries. Black's Law Dictionary defines "fiduciary" as:
"One who stands not for his own benefit, but for the benefit of another person, as to whom he stands in a relation implying and necessitating great confidence and trust on the one part, and a high degree of good faith on the other part."
Generally, the duties and obligations of the trustee as provided in the trust agreement include:
1. To hold title to the property for the benefit of the beneficiaries.
2. To protect and conserve the property.
3. Not to reveal the identity of the beneficiaries.
4. Not to record the trust agreement in the public records.
5. Not to execute any legal documents without the direction of the beneficiaries.
6. To maintain records of the names and addresses of the beneficiaries and their interests in the land trust.
7. To resign and hand over the books and records if he resigns, or if his activities are terminated by the beneficiaries, by the terms of the trust agreement or by the law.
8. To execute any mortgages, sales contracts, leases, options, etc. at the direction of the beneficiaries.
The trust agreement can be amended to add or remove duties or obligations.
Benefits of Using a Land Trust

Asset Protection

No one outside of the trust knows the identity of the beneficiaries, because the trust agreement is
not recorded. An adverse party therefore has no way of determining that a person owns a beneficial interest in a trust, since a search of the county property records would show that a person owns no property. It is unlikely that an adverse party would sue someone who owns nothing.

Ease of Transfer

When real property is transferred, a deed must be recorded in the county records. This creates a notice to the whole world that you are the owner of the property. On the other hand, a Beneficial Interest in a trust is a personal property right, which may be assigned from one beneficiary to another, with no requirement that it be recorded anywhere in the public records. An assignment need not be notarized unless the trust agreement requires it. To effect an assignment of beneficial interest, less paperwork is required than in a typical real estate closing.

Avoidance of Due-on-Sale Clause

Many loans contain a due-on-sale clause, which states that should there be a change in ownership of the property, the lending institution may call the entire loan immediately due and payable in full. Placement of the property in a land trust qualifies under an exception in the Garn-St Germain Depository Institutions Act of 1982, preventing the lending institution from calling the loan.
Garn-St. Germain Depository Institutions Act of 1982
12 U. S. Code 1701(j)

(a) Definitions
For the purpose of this section-
(1) The term "due-on-sale clause" means a contract provision which authorizes a lender, at its option, to declare due and payable sums secured by the lender's security instrument if all or any part of the property, or an interest therein, securing the real property is sold or transferred without the lender's prior written consent.
(d) Exemption of specified transfers or dispositions with respect to a real property loan secured by a lien on residential property containing less than five dwelling units, including a lien on the stock allocated to a swelling unit in a cooperative housing corporation, or on a residential manufactured home, a lender may not exercise its option pursuant to a due-on-sale clause upon-
(8) a transfer into an inter-vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property;
Secrecy/Privacy
The beneficiaries are not identified in the deed to trust recorded at the county recorder's office. The beneficiaries are identified in the trust agreement, but that document is not public information. The trust agreement requires the trustee to not reveal the names of the beneficiaries, except when so ordered by a court. Thus secrecy of ownership is one of the primary benefits derived from the land trust.
• Secret ownership provides financial privacy for the beneficiary who may not want to disclose the extent of his real estate holdings. (IL9-284)
• If the beneficiary is a landlord, the land trust arrangement helps him avoid the inconvenience and annoyance of dealing directly with tenants. (IL9-284)
• Secrecy of ownership can facilitate the purchase of large tracts of land for development at lower prices than might be demanded if the buyer's identity were known. (IL9-284)
• Secrecy of ownership helps insulate the trust property from creditors, especially attachment creditors. (IL9-284)
• Because the trust will not go through probate, the owners name will not be revealed.
Protection against Judgment Liens
In Illinois a judgment lien is a lien on an interest in real estate that is effective even if the real estate interest is not recorded (Niantic Bank v. Dennis 37 Ill. 381). The Illinois judgment lien statute provides that the term "real estate" includes not only lands, tenements, and hereditaments, but also all of the legal and equitable rights and interests therein. Ill. Rev. Stat. Ch.110, Sec. 12-105 (Ill9-291) The Illinois courts have consistently held that a judgment lien does not attach to a land trust beneficial interest because such an interest is personal property (Melrose Park Nat'l Bank v. Melrose Park Nat'l Bank 462 N.E. 2d 741). The Illinois Appellate Court laid the philosophical foundation for this interpretation in Chicago Title and Trust Co. v. Mercantile Trust & Savings Bank 20 N.E. 2d 992, in which the court held that a land trust is not executed by the Statute of Uses. Since the legal title, therefore, remains in the trustee, a judgment creditor's lien against the beneficiary does not attach to the title of the real estate (Chicago Title and Trust Co. v. Mercantile Trust & Savings Bank, 20 N.E.2d 992). (Il9-291)
A 1966 case, Sterling Savings & Loan Association v. Schultz 218 N.E. 2d 53, the Appellate Court finally made a definitive decision stating that a judgment lien does not reach the beneficiary's interest in a land trust:
"Since the only interest of a beneficiary under a land trust is considered to be personal property, a judgment cannot attach to such interest. The Illinois Statute relating to judgments against real estate specifically states that a judgment is a lien on real estate. It makes no mention of personal property, or of the interest of a beneficiary under a land trust."
Collateral Assignments of Beneficial Interests
The Illinois courts have consistently ruled that since the beneficiary's interest is personal property, if the beneficial interest is assigned as collateral against a loan, a default by the beneficiary gives the lender no interest in the real estate. The lender may only sell the beneficial interest (Horney v. Hanes 142 N.E. 2d 94) (Levine v. Pascal 236 N.E. 2d 425). (Il9-301& 303)
Advantages for Real Estate Owners
Because the recorded legal title is separated from the beneficial interest, a land trust arrangement facilitates voluntary transfers of property, including tax-free exchanges, through simple assignment, (Kortenhof v. Messick 309 N.E.2d 368) of the beneficial interest rather than by deed. (IL9-285) When the beneficial interest is transferred, the resulting benefits include:
• The record title is not disturbed. (IL9-285)
• Liability for real estate transfer taxes is avoided. (IL9-285)
• Reassessment for property tax purposes is delayed. (IL9-285)
• Expense incurred for recordation is circumvented. (IL9-285)
• Purchase of new title insurance can be circumvented. (IL9-285)
• Depreciation deduction for tax purposes. (IL5-257)
When real estate is owned by a number of different persons, conveyance of title is simpler if the title is held in a land trust. Advantages include: (IL9-285)
• Signatures on conveyances need not be obtained from, nor title searches made on, the individual owners. (IL9-285)
• A land trust prevents impairment of the legal title through involuntary transfers by, or liens against, beneficiaries, thus assuring that the legal title is insulated from bankruptcy, insanity, death, judgments, litigation, or marital disputes involving the individual beneficial owners. (IL9-285)
• In land syndication arrangements use of the land trust permits syndications to avoid double taxation of corporate income, which is taxed first to the corporation and then, on distribution of dividends, to the shareholders. (IL9-285)
• Land trusts can help prevent wrongful conveyances of the real estate title by individual partners and other multiple owners not authorized to make conveyances, as well as by real estate contract sellers in fraud of the rights of the purchaser. (IL9-285)
• Partition proceedings are not available to the beneficiaries. (IL9-286)
IRS Liens

If a property is held in a land trust, IRS liens will not attach to the property.
Disadvantages of Using a Land Trust

• Because the beneficiary's interest is not recorded, he has no right to notice of a foreclosure or tax deed proceeding (First Lien Co. v. Marquette Nat'l Bank, 306 N.E.2d 23). (IL9-311)
• He is not considered a necessary party to:
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.

IT’S MY BIKE

By Roberta M. Standen
North American Loan Servicing,
And Equity Holding Corporation, Midpines, Ca.

Roberta Standen is the co-owner and operator of North American Loan Servicing of Midpines, California. An accomplished author, lecturer, Member National Council of Exchangors and Qualified NCE Counselor, and NMS (National Marketing Specialist), “Bobbie” is also former real estate broker, sales trainer and long time loan-servicer. She is the co-owner with her husband, Thomas K. Standen, of Equity Holding Corporation, one of the two 501C corporations acting as Trustees for the NARS PACTrust™ and NEHTrust™. Responsible for the making of many millionaires, Roberta Standen’s wit and wisdom is considered among the finest in the real estate investing and note buying industry.

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It’s been 15 years since I first spit out the words, “IT’S MY BIKE.” Since then I’ve been known to repeat those words often as an affirmation, to shout them to the backside of a slammed door, and to whisper them cautiously but determinedly under my breath (and usually through clenched teeth) upon hearing the words, “Why not? Or why should I?” But, I’ll never forget the time I first uttered the phrase.

Several years ago managing dozens of aggressive independent, highly motivated real estate agents had become a formidable task. Those who did the least expected the most and those who did the most demanded the most, and that their not-so-beloved broker capitulate to their every whim, and that they be given all sorts of concessions and bargains in order for them to get the listing, keep the listing, close the deal or save the escrow. You know…things like reducing commissions to the office, paying for the home warranty policy, and the replacement of a hot water heater…whatever they thought it should take to make them whole, despite the damage to the company.

Worse than narrowing the margin of profitability, however, was the awful realization that as a broker I was compromising my own integrity and running scared half the time. I was constantly afraid of loosing agents, loosing income, loosing listings, loosing sales and loosing escrows…when the actuality was that I was gradually loosing self-respect… as well as my sanity! The agents would bellyache about floor-time and balked at staff meetings. They continually whined for me to increase their commission percentages and/or to supply them with more and more space, materials and services…for free.

But then came that morning. The morning I walked into the office, called a staff meeting and boldly said-“Mark this day well on your calendar folks. The party’s over! From this day forward we are going to run this business the way I want it to be run. All of the nonsense is finished. No more will I allow buyers, sellers, agents, competitors or anyone else to control my company.”

Well, as the new operating plan unfolded, I thought I was going to be hung in effigy or tarred, feathered and run out of town on a rail, but I didn’t care. They hollered and yelled. They threatened to leave and/or to sue. Some even cried. When they demanded justification for my actions, I gave it to them without delay. To this day I don’t know where the following words came from, but in answer to the demand, I rose to my full 5’2” stature and out from the recesses of my soul, came the words-“The ONLY justification you will get, or for making my policy decisions, is this-‘Because IT’S MY BIKE!’”

From that day to this one, I have guarded “my bike” cautiously and carefully, never again allowing anyone to control MY business, MY clients, MY finances or MY time or MY life. And neither should you! As an independent professional in your own business, never forget that -It’s Your Bike!

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So, now you have made the decision to enter the real estate acquisition business, this is a truly laudable and courageous step for you, particularly those of you who have little or no experience or background in banking, real estate or in the financing field in general. Yes, it does take courage to step up and out of the mediocre-to stretch your boundaries, to get out of your comfort zone and plunge into a new venture. By now, you have probably purchased more than one “Get Rich Quick” course, attended a seminar or two and commenced the learning process, gleaning all you can as fast as you can. But, never forget that our profession is an honorable one, a potentially profitable one. and above all (even though you may be brand new at it) it’s YOUR business. It is indeed YOUR BIKE to ride and enjoy any time, in any manner and at any speed you deem to be honest, ethical, profitable…and fun!

Departing a bit from the analogy, let me firmly remind you that investing in, and acquiring, income producing real estate is indeed a business. Although, I am pleased to say that in our business we needn’t purchase expensive equipment, furniture and fixtures, or lease a building to operate from. We are the free ones, never tethered to any particular geographical area, office or staff. Our business doesn’t even require a structured formal education. What an opportunity! For what we do, all one really needs is a calculator, basic knowledge of how money moves, a telephone, a mode of transportation, determination and a real NEED to succeed.

Our “stock in trade” is our ability to negotiate and to put transactions together. Although a “game” in the broad sense, it is not a frivolous one-it is a business, and it’s your business. And just like your bike it will take you anywhere and as far and fast as you want to go, and you’ll get there when you choose to. And guess what? You can also stop and rest anytime and anywhere you wish (I find Jamaica and the Virgin Islands a nice place for that this time of year).

And here’s the best part … you are free to choose whomever you want to ride with and for how long. In reading posts on several discussion groups, and after visiting with investors all over the country, I am always surprised at how many have the perception that “profit” in our business is somehow intrinsically devious or unethical. It may be my imagination, but there does seem to be a commonality to this concern. The conversation often goes something like this-“What will the buyer think if they find out at closing that I negotiated the purchase for $5,000 less than their purchase price. Or…what will the seller think if they find out that I negotiated a sale after acquiring the property from them, and made another $10,000 for myself?”

Hello! This is called a PROFIT folks! And profit is honorable (or was the last time I looked). This is the American entrepreneurial business model. There is absolutely nothing wrong with making a profit. A transaction need merely be a Win/Win for everyone involved. The seller should receive what he agreed to and the buyer should received what he agrees to and for what he was willing to pay. And you, the businessman or woman, are supposed to (and expected to) make a profit. Hey, IT’S YOUR BIKE!

When I buy a sack of sugar from Mr. Potts, my local grocer, I have yet to ask what he paid for it and you know what? I don’t care. I wanted and needed the sugar (and it’s none of my business what Potts’ wholesale price was). Likewise, I can’t imagine the wholesaler who sold the sugar to Potts, asking the price he plans to sell it for, or demanding to know what profit he plans to make.

Can you imagine the wholesaler calling Potts and saying, “Hey, I heard you sold that sugar and made $50 a sack…whus’ up wid’ dat?” Do you really think he cares? Do you think I care? Do you think I have the right to know? Also, how can I possibly be intimidated by Mr. Potts, or suffer his rejection when I buy the sack of sugar? In your own situation, keep in mind that you are a buyer cruising down the street on YOUR OWN BIKE, persistently and aggressively looking for a seller who is motivated for whatever reason. Maybe he just needs to unload something that is seen as a very heavy burden for him, but something can be converted to your cash cow. What an exciting concept!

Another woebegone episode might go something like, “The seller won’t give me the information on the property that I need. He wants to know what I’m going to do for him, and with the property, before giving me any information!

What’s that all about? It’s like going to the Doctor and asking him what the diagnosis is before telling him the symptoms. If the Doc asks you where it hurts or if you have a fever, and you reply, “I’m not ready to divulge that information until you tell me what kind of shot your going to give me,” are you going to get what you went for? No! Most of the time when the seller refuses to give you the information you need, it’s because he doesn’t have the real “DNA” for your services (i.e., “Desire, Need and Ability”). In such a case, your next move should be simply to-Get back on Your Bike (it IS you bike!) and start peddling as fast or slowly as you wish down the same street until you find someone who does have a “Pain” and the right DNA, and understands that you have the “Cure” for it.

A bit of caution here-don’t expect your ride to always be smooth. There will inevitably be at least a few bumps in the road. There will be times when you get going too fast and ignore or fail to see the warning signs and plow right into a parked car or end up in a ditch. If you blow a stoplight, you might get a ticket or even get smacked by someone coming from the opposite direction. But whatever the interruption, you just have to get up one more time than you fall down. take your lumps, get back on your bike, keep on peddling and learn from your mistakes. And never, but never, be attached to any end-result.

Another caution-before boarding the bike, make sure you have a destination (a goal) and a map so that you always know where you’re headed and how you’re going to get there (plan of action). and then develop a passion to be the very best in the business that you possibly can be (determination). Long before you ever thought you would, you’ll be removing the training wheels and riding free…making a hard right onto Success Avenue and right into the parking lot of the United National Bank to deposit your profits. Remember IT’S YOUR BIKE! And it will take you anywhere you ever want to go, including the Virgin Islands, Jamaica and financial independence.

Enjoy The Ride!

To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.