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™Regarding Income-Tax Benefits Re. the ©Equity Holding Corp. Trust Transfer System™

Interestingly, ‘due to Equity Holding Corp’s length time in business, we’ve been subjected to more than a few proverbial “rodeos,” and have learned a lot about what our early naysayers used to pull out of their equally proverbial lawyer-hats in order to refute our (quite valid) claims: ‘most often in order to switch a client to something they knew more about, and for which they could rack up billing hours…’and… in so doing avoid the unprofitable trip to the law library or a few hours of (‘unpaid but honest) web research.

An Early example of who was right and who was in error is the Belden Case below.

Belden is essentially an unsuccessful charge by the IRS, which at first glance may appear less than remarkable for our own purposes, in that the Equity Holding Transfer™ is not involved.  Although, due to the subject matter of the case  (i.e., a lease-purchase arrangement), the claimant was initially refused his income-tax deduction for property taxes and loan interest under the Qualified Property rules of IRC §163.  However, the final decision in this case presented an early break-through for us and the EHTransfer™ relative to whether or not a property that was vested in, and leased from, a land trust trustee would be deemed a Qualified Property under §163 if challenged.

The case dealt with a simple lease-purchase arrangement wherein the tenants, Mr. Belden and his wife, were contracted to buy the property outright at a future time, and during the interim to make all mortgage payments and cover all expenses of ownership until the agreed-upon time of purchase.  Belden presumed that his tax deduction benefits were supported by IRS Code §163 and its various subsets, including §163(h()4(D), which we refer-to frequently in the promotion of the Equity Holding Trust Transfer™.

In reviewing the case (which is digested to save you some time), ‘note that the initial refusal by the IRS to honor Mr. Belden’s claim of deductibility was based on the fact that the tax payer’s name was not on the property’s deed of title (‘ergo no proof of ownership), and neither was his name on the property’s mortgage (‘ergo no proof of any contractual mortgage obligation).

IRC §163 (h)4(D): Special Rules For Estates And Trusts 

For purposes of determining whether any interest paid or accrued by the owner of an estate or trust is qualified residence interest; and any residence held by such estate or trust shall be treated as a qualified residence of such estate or trust if such estate or trust establishes that such residence is a qualified residence of a beneficiary who has a present interest in such estate or trust, or has an interest in any residuary thereof (re. funds remaining after a payoff pertinent to a particular occurrence, such as probate, insurance or lawsuit settlement).

All of this is essentially to say that a beneficiary of the Equity Holding Transfer Trust (a land trust), who is living in, caring for  and paying for, the property, is entitled to mortgage interest and property tax deductions: ‘the criterion being 1) residing in the property as a permanent residence; 2) having a bona fide contractual obligation to pay all related interest and property taxes 3) holding either – a) ‘the equitable interest in the property, OR b) holding the equitable interest in an estate or a trust that holds the equitable interest in the property.

Note here that these qualifications do not require the tax payer to be named on the property’s deed, or to be a guarantor on the underlying financing.

Re. Wendell D. Belden, et ux (et ux = “and wife”). v. Commissioner,

TC Memo 1995-360 , Code §§163 etal.

WENDELL D. BELDEN AND SANDRA J. BELDEN.

Case Information:

Code Sec(s): 163[pg. 95-2194]
Docket: Dkt. No. 4747-93.
Date Issued: 8/02/1995.
Judge: Opinion by Gerber, J.
Tax Year(s): Years 1989, 1990.
Disposition: Decision for Taxpayer.
Cites: TC Memo 1995-360, RIA TC Memo P 95360, 70 CCH TCM 274.

 MEMORANDUM FINDINGS OF FACT AND OPINION 

Respondent determined income tax deficiencies for petitioners’ 1989 and 1990 tax years in the amounts of $12,488 and $5,040, respectively. Respondent also determined penalties under section 6662 for 1989 and 1990 in the amounts of $2,498 and $1,008, respectively. The issues for our consideration are: (1) Whether petitioners are entitled to claim interest deductions under code section 163 for 1989 and and 1990; and (2) whether petitioners are liable for the penalty under section 6662 for negligence and/or disregard of the rules or regulations for either 1989 or 1990.

Petitioners Wendell D. and Sandra J. Belden are husband and wife, and they resided in Tulsa, Oklahoma, at the time their petition was filed in this proceeding. Petitioner Wendell D. Belden was a registered investment adviser during 1988. At all relevant times, petitioners reported their income and deductions on the cash method of accounting. On December 19, 1988, petitioners entered into a contract for the purchase of a residence (Crown Pointe property) and took possession within two weeks thereafter. On January 16, 1989, petitioners and the seller, Ahrend Homes, Inc. (Ahrend), entered into an occupancy agreement as a supplement to the contract for purchase, providing petitioners with immediate rights of occupancy.

The purchase contract committed petitioners to paying $500,000 for the property, $20,000 of which was paid to Ahrend as earnest money. Petitioners were to obtain $400,000 of permanent financing. The $80,000 balance was to be supplied by petitioners in the form of a promissory note to Ahrend at closing. The purchase contract was subject to the condition-subsequent that Ahrend obtain suitable financing for the $400,000 under terms acceptable to petitioners. In that regard, petitioners were required to be reasonable in their acceptance or rejection of the final financing secured by Ahrend. There was no stated time limit within which financing could be obtained. The parties had not contemplated the amount of time it might take to secure permanent financing.

 

Until arranging for permanent financing, the occupancy agreement with Belden required petitioners to pay Ahrend $3,500 monthly, commencing February 1, 1989. The $3,500 was in the same amount as the interest Ahrend was paying on its outstanding construction loan on the Crown Pointe property. It was the parties’ understanding that petitioners would bear the $3,500 construction mortgage interest as long as they possessed the house and until permanent financing could be obtained. The $3,500 payment was designated “interest only” in the occupancy agreement and terminated upon completion of the sale. During 1989 and 1990, petitioners’ $3,500 monthly payments totaled $42,000 and $18,000, respectively. All utilities were to be placed in petitioners’ names, and petitioners agreed to obtain liability and contents insurance. Following a 2-month transition period, petitioners were responsible for the costs of repairs to plumbing, heating, cooling, electrical equipment, and appliances. Ahrend was given the option of obtaining insurance on its interest in the residence, and was required to pay the local real estate taxes on the Crown Point property. Petitioners and Ahrend complied with all terms of the occupancy agreement.

The Crown Pointe property had been vacant for several years and had fallen into poor repair prior to petitioners’ agreeing to purchase it. Petitioners paid in excess of $13,000 to repair, maintain, or improve the property during 1989. The occupancy agreement provided that petitioners would be reimbursed for improvements that they made to the property, in the event that petitioners were not the ultimate legal title holders of the Crown Pointe property. If the sale was ultimately unsuccessful, petitioners were liable for any damage (which exceeded normal wear and tear) that they caused to the property.

Petitioners and Ahrend did not close on the purchase contract, title was not transferred from Ahrend to petitioners, and fi nancing was not obtained. These events did not occur because of the bank’s foreclosing on Ahrend’s construction mortgage on the Crown Pointe property. Ultimately, petitioners purchased the property from the foreclosing bank, receiving title on February 1, 1991. Petitioners were named as defendants in the foreclosure action because of their equitable or possessory interest in the Crown Pointe property. After commencement of the foreclosure proceeding, and prior to petitioners’ purchase of the Crown Pointe property from the bank, petitioners paid the $3,500 monthly payments directly to the bank. On February 1, 1991, petitioners obtained a $297,000 mortgage on the Crown Pointe property with a bank that had not previously been involved with the property.

OPINION

On their 1989 and 1990 Federal income tax returns, petitioners claimed the $3,500 monthly payments made in connection with the Crown Pointe property as deductible interest payments. These payments were made pending the closing of the residential real estate transaction in which the seller was to obtain permanent financing for the buyer, while the buyer had possession and the benefits of full use of the property as a personal residence. Respondent argues that the payments made by petitioners to Ahrend and the bank were rent and not interest. Petitioners bear the burden of showing that they were entitled to the deductions in question. Rule 142(a); New Colonial Ice Co. v. Helvering, 292 U.S. 435 [13 AFTR 1180] (1934).

Generally, section 163 provides for the allowance of a deduction for all interest paid on indebtedness. Personal interest, however, is generally not deductible. Sec. 163(h). “Qualified residence interest”, however, is excepted from the definition of “personal interest” within section 163. Sec. 163(h)(2)(D). “Qualified residence interest” includes interest paid during the taxable year on acquisition indebtedness with respect to a qualified residence. Sec. 163(h)(3)(A)(i). A “qualified residence” includes a taxpayer’s principal residence within the meaning of section 1034. Sec. 163(h)(4)(A).

In order to constitute “acquisition indebtedness”, the debt must be “incurred in acquiring, constructing, or substantially improving any qualified residence and [it must be] secured by such residence.” Sec. 163(h)(3)(B)(i). Generally, to be deductible interest under section 163(h)(3), a payment must be made with respect to indebtedness that is secured by the taxpayer’s qualified residence. Secs. 163(a), 163(h)(3)(B); sec. 1.163- 10T(o)(1)(i), Temp. Income Tax Regs., 52 Fed. Reg. 48410 (Dec. 22, 1987).

Petitioners were contractually bound to purchase and Ahrend was bound to sell the subject realty. The contract contained a condition subsequent by requiring that Ahrend find acceptable financing for petitioners, but petitioners were required to be reasonable in approving the financing located by Ahrend. Respondent characterizes the contract as being conditional, implying that petitioners controlled the outcome (they could avoid their obligation to take title and pay the remaining $480,000) by refusing to accept any financing obtained by Ahrend. Petitioners counter that they were bound to purchase, had possession of, and were the equitable owners of the realty. Respondent, on the other hand, argues that ownership of the realty is not the deciding factor, and thus, petitioners did not incur any indebtedness in 1989 or 1990 within the meaning of section 163(h)(3). Respondent contends that petitioners did not incur indebtedness until 1991, when title was received from the foreclosing bank and petitioners obtained a $297,000 mortgage. In that regard, respondent argues that Ahrend’s indebtedness cannot be relied on by petitioners to satisfy this requirement. Petitioners counter that they were equitable owners of the property, and that their payments to Ahrend were for interest on the construction loan as set forth in the agreements between the parties.

For petitioners to be entitled to the claimed interest deductions for 1989 and 1990, section 163(h)(3) requires that they show: (1) The interest was paid on “acquisition indebtedness” (i.e., debt “incurred in acquiring, constructing, or substantially im proving any qualified residence”); 3 and (2) the indebtedness was secured by such qualified residence.

Petitioners made the $3,500 payments either to Ahrend (which in turn made them to the bank) or directly to the bank after the time of the foreclosure. The occupancy agreement between petitioners and Ahrend designated those payments as interest on Ahrend’s construction loan, which was incurred to build the qualified residence (Crown Pointe property). The construction loan was secured by a mortgage on the Crown Pointe property, and that mortgage was foreclosed by the bank from which petitioners ultimately obtained legal title. We must now decide whether petitioners are entitled to deduct interest on debt that they are not personally obligated to repay.

Section 1.163-1(b), Income Tax Regs., provides that “Interest paid by the taxpayer on a mortgage upon real estate of which he is the legal or equitable owner, even though the taxpayer is not directly liable upon the bond or note secured by such mortgage, may be deducted as interest on his indebtedness.”

See also Baird v. Commissioner, 68 T.C. 115, 123 (1977). Respondent argues that the contractual relationship between petitioners and Ahrend was conditional such that petitioners could not become the legal or equitable owners until the property was deeded to them. In a Federal tax proceeding, the question of when a sale is completed is to be resolved by the facts and circumstances in each case, and no one factor is controlling. Id. at 124; Clodfelter v. Commissioner, 426 F.2d 1391 [25 AFTR 2d 70-1254] (9th Cir. 1970), affg. 48 T.C. 694 (1967). Concerning real property, a sale is completed at the earlier of transfer of legal title or the practical assumption of the benefits and burdens of ownership. Baird v. Commissioner, supra at 124; Dettmers v. Commissioner, 430 F.2d 1019 [26 AFTR 2d 70-5280] (6th Cir. 1970), affg. Estate of Johnston v. Commissioner, 51 T.C. 290 (1968). Our factual inquiry must focus upon the shift of the benefits and burdens of ownership. Baird v. Commissioner, supra at 124; Merrill v. Commissioner; 40 T.C. 66 (1963), affd. per curiam 336 F.2d 771 [14 AFTR 2d 5703] (9th Cir. 1964).

Petitioners did not acquire legal title until 1991. Accordingly, we must consider whether the benefits and burdens of ownership transferred to them prior to 1991. At the time petitioners entered into the contract with Ahrend, the only incomplete contractual requirements were: (1) Obtaining permanent financing, (2) execution and transfer of an $80,000 note from petitioners to Ahrend, and (3) transfer of legal title from Ahrend to petitioners. Petitioners had the complete right to possess and resided in the Crown Pointe property, beginning 2 weeks after the agreement was executed. While Ahrend had the option to obtain insurance on the residence and was required to pay the local real estate taxes, petitioners were required to maintain liability and contents insurance. All utilities were carried in petitioners’ names, and they bore the costs of any improvements, unless the property was ultimately sold to a different buyer. Following a 2-month transition period, petitioners were responsible for the costs of repairing the plumbing, heating, cooling, electrical equipment, and appliances.

Under Oklahoma law, if the parties enter into a contract for the sale of realty, factual inquiry must focus upon the shift of the benefits and burdens. A contract for sale, coupled with the buyer’s taking possession, constitutes a transfer of the benefits of ownership to the buyer and may constitute a transfer of an equitable interest. State Life Ins. Co. v. State, 135 P.2d 965, 967- 968 (Okla. 1942); Resolution Trust Corp. v. Sudderth, 854 P.2d 375, 377 (Okla. Ct. App. 1993); King v. Lunsford, 852 P.2d 821, 823 (Okla. Ct. App. 1993). In State Life Ins. Co. v. State, supra, the Oklahoma Supreme Court, in finding the transfer of equitable interest when legal title had not yet passed between parties who contracted for the sale of realty and transferred possession, stated that:

It may be that a mere contract or provision in a contract agreeing to sell real estate at some future date is insufficient of itself to create a present equitable estate in the vendee. But, as in all contracts, the intention of the parties, especially the vendor, governs. If the contract as a whole shows that the intention was to convey a present equitable estate the courts will give effect to such intention regardless of the separate meaning of particular or isolated words.

 

 

 

The present contract provided that the vendor bargained to sell and the vendee agreed to purchase

 

Among those terms was the immediate surrender of possession to the vendee. *** In such case rightful possession carries with it the beneficial interest, and nothing remains to be done except to pay the purchase money when due and to execute the deed. In such case there is a transfer of the equitable estate ***

Viewing this record in its entirety, we conclude that the benefits and burdens of ownership shifted to petitioners when they took possession of the residence. Baird v. Commissioner, 68 T.C. at 124; State Life Ins. Co. v. State, supra.

Petitioners rely heavily on a factually similar opinion of this Court. Amundson v. Commissioner, T.C. Memo. 1990-337 [90,337 PH Memo TC]. In that case a brother was allowed to deduct interest payments on his sister’s mortgage because of an informal agreement under which the brother would acquire a 50-percent interest in the subject residence if he made mortgage payments. Having concluded that the brother/taxpayer “had a 50-percent equitable interest in the property and, in effect, [that he] had assumed liability for the mortgage”, this Court held that the brother/taxpayer was entitled to deduct the interest payments. In the instant case, respondent argues that the taxpayer had no legal obligation to the lender that would permit an interest expense deduction. But the cases cited by respondent in that regard are similar to those which, in Amundson v. Commissioner, supra, were regarded as distinguishable because those cases involved taxpayers who had guaranteed corporate loans secured by collateralizing their residences. Because of the finding in Amundson that the brother/taxpayer had an ownership interest in the property, the cited cases were there distinguished.

This case also presents a unique set of facts under which we conclude that petitioners had a possessory and an equitable interest in their residence. Through their two contracts with Ahrend, petitioners effectively assumed the obligation to pay the interest on the construction mortgage until permanent financing could be obtained. The $3,500 payments were neither rent nor payments to reduce the purchase price. Moreover, the price agreed upon between petitioners and Ahrend remained at $500,000, irrespective of the lapse of time or the total number of $3,500 monthly payments made. Petitioners agreed to carry the existing mortgage interest during the interim period in which Ahrend searched for financing. They were the equitable owners of the property during that period and are entitled to deduct the payments as interest.

Under the unique circumstances of this case, petitioners are entitled to qualified residence interest deductions in the amounts of $42,000 and $18,000 for 1989 and 1990, respectively. Having decided that petitioners are entitled to the deductions in controversy, there are no deficiencies in their income tax, and there is no need to reach the issue of whether petitioners are liable for a penalty for negligence in either year.

To reflect the foregoing,

Decision will be entered for petitioners.

 

 

The next case (‘also digested for convenience) regards one of our own Equity Holding Transfer ™ transactions that was taken to task a few years ago by the IRS when they opted to refuse our clients their rightful claim of income tax deductions for mortgage interest and property tax.

 

As had been their contention in the Belden case, the refusal of the tax deduction came about because the tax payer (Daniel Adams and his wife) were not named on the loan and neither were they shown on the property’s title as owners: i.e., ‘due to their trustee being the legal and equitable title holder of the property entrusted to it…’which is the nature of any title-holding (“Illinois type land trust”).

 

However, because they apparently don’t read their own proclamations often…’or well: in Adams they neglected to look at their own IRC163(h)4(D), which states quite succinctly and clearly that a beneficiary in a “land trust” by any other name is indeed entitled to full income tax benefits as long as the beneficiary can prove being: 1) a full time resident; 2)  responsible for the full burdens of ownership; 3)  pays all property taxes; taxes and all debt relative to the property, and is doing so under a bonafide contract; and 4) is holding either an equitable interest in the property…OR…an equitable interest in an estate or trust that holds the property’s equitable title interest.

 

As long as these qualifications are met and the verbiage in IRS’ Revenue Ruling 92-105 is adhered to, ‘no longer is there a question about a title-holding trust’s full-pay co-beneficiary’s right to income-tax deductibility.

 

Here’s the Adams case:

 

T.C. Memo. 2010-72

UNITED STATES TAX COURT

 

A Federal Tax Court Ruling

 

ANTHONY J. ADAMS, Petitioner

 

v.

 

COMMISSIONER OF INTERNAL REVENUE, Respondent

 

Docket No. 2563-08.              Filed April 13, 2010.

 

Anthony J. Adams, pro se.

 

Bryan E. Sladek and Robert D. Heitmeyer, for respondent.

 

MEMORANDUM FINDINGS OF FACT AND OPINION

 

VASQUEZ, Judge:  For 2003 and 2004 respondent determined deficiencies in petitioner’s Federal income taxes, additions to tax, and penalties as follow

 

Year Deficiency Addition to TaxSec. 6651(a)(1) PenaltySec. 6662(a)
2003 $38,020 $6,304.00 $7,604
2004 $20,705 $1,983.25 $4,141
Unless otherwise indicated, all section references are to the Internal Revenue Code (I.R.C.) in effect for the year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.

 

 

 

As an initial matter, neither party argued or was briefed whether or not:

 

(1) The Essex Drive trust should have claimed the mortgage interest deduction pursuant to section 163(h)(4)(D)1 and the provisions of subchapter J;

 

(2) Petitioner (Belden) could have claimed the mortgage interest deduction as investment interest, Re. Davies v. Commissioner, 54 T.C. 170, 176 (1970) (property that was a residence in the taxpayer’s hands was business property in the land trust’s hands); or

 

(3) The Essex Drive trust was a mere nominee, a sham, or should otherwise be disregarded, see Norton v. Commissioner, T.C. Memo. 2002-137 (land trusts disregarded as shams and income taxable to beneficiaries).  These issues are deemed waived.  See Rule 40; Muhich v. Commissioner, 238 F.3d 860, 864 n.10 (7th Cir. 2001) (issues not addressed or developed are deemed waived–it is not the Court’s obligation to research and construct the parties’ arguments), affg. T.C. Memo. 1999-192; 330 W. Hubbard Rest. Corp. v. United States, 203 F.3d 990, 997(7th Cir. 2000) (same); Larson v. Northrop Corp., 21 F.3d 1164, 1168 n.7 (D.C. Cir. 1994) (declining to reach issues neither argued nor briefed).  Accordingly, our decision in the case will be based upon the extent to which section 1.163-1(b), Income Tax-Regs., applies and on the arguments the parties asserted or briefed with respect thereto.

 

For 2003 and 2004, respectively, respondent (the IRS) concedes that petitioner is entitled to deductions for:  (1) State and local income taxes of $3,823 and $4,161; (2) real estate taxes of $3,346 and $5,020; (3) charitable contributions of $11,263 and $11,637; (4) miscellaneous expenses of $1,330 and $989 (before application of the section 67(a) 2-percent floor); and (5) “Schedule E” net losses of $81,226 and $34,645.

 

The issues remaining for decision for 2003 and 2004 are whether petitioner is:  (1) Entitled to his claimed mortgage

interest deductions; (2) liable for the section 6651(a)(1) additions to tax; and (3) liable for the section 6662(a) accuracy-related penalties.

 

FINDINGS OF FACT

 

Some of the facts have been stipulated and are so found.

 

The stipulation of facts is incorporated herein by this reference.  Petitioner resided in the state of Michigan when the petition was filed.

 

  1. The Essex Drive Trust: Formation and Trust Agreement

 

In 2003 Michael and Zina Gedz transferred legal and equitable title to 325 Essex Drive (Essex Drive property) for a 5-year period to Equity Holding Corp. acting as trustee for the Essex Drive Trust, pursuant to a trust agreement.  A warranty deed memorializing the transfer was recorded by the Register of Deeds,

Oakland County, Michigan.

 

The trust agreement provides that the purpose of the Essex Drive Trust is to hold the Essex Drive property and the proceeds and profits therefrom in trust for the beneficiaries’ use and benefit.  The trustee is to deal with the Essex Drive property only when the beneficiaries authorize it to do so.

 

According to the trust agreement, the beneficiaries’ “interests * * * consist solely” of:  (1) A power of direction to authorize the trustee to deal with the Essex Drive property; (2) the right to receive or direct the disposition of proceeds from the Essex Drive property; (3) the right to purchase, lease, manage, and control the Essex Drive property; and (4) “the obligation for expenses and disbursements relative to the trust property.”  The beneficiaries’ rights to the proceeds are “deemed to be personal property”; the beneficiaries do not possess “any right, title, or interest * * * [in the Essex Drive property] either legal or equitable”

 

Expenses of the Essex Drive Trust are allocated among the beneficiaries according to their respective percentages of beneficial interests held, unless otherwise agreed.  The beneficiaries also are required to obtain insurance for the Essex Drive property.  A beneficiary’s interest passes to an executor or Administrator of his or her estate on death; otherwise, a transfer of a beneficiary’s interest to a third party is subject to the other beneficiaries’ rights of first refusal, and no assignment of a beneficiary’s interests is valid.

 

Unless all beneficiaries consent, a copy of the assignment is delivered to the trustee, and the trustee indicates its acceptance thereon.

 

The trust agreement further provides that the trustee is not obligated to file Federal income tax returns or schedules on behalf of the Essex Drive Trust, notwithstanding “section 671 of the * * * [I.R.C.] of 1954 or any other applicable regulation.”

 

If it becomes necessary for the Essex Drive Trust to file a Form 1041, U.S. Income Tax Return for Estates and Trusts, or other informational returns under “section 6031 of the * * * [I.R.C.] of 1954,” the trustee will not be obligated to prepare them, ‘but the trustee will sign informational returns if necessary at the

beneficiaries’ request.  The beneficiaries are to report and pay all taxes on the earnings and proceeds of the Essex Drive property or which otherwise arise from their beneficial interests.

 

  1. Petitioner’s Beneficial Interest and Trust Documents

 

In 2003 the Gedzes assigned a 40-percent beneficial interest in the Essex Drive Trust to BOGAT Management, and a 50-percent beneficial interest in the Essex Drive Trust to petitioner and Sandra Adams.

 

  1. Beneficiary Agreement

 

The Gedzes, BOGAT Management, LLC (Bogert and Gatten), and petitioner and Sandra Adams entered into a beneficiary agreement that provides that the beneficiaries collectively have the:  (1) Power of direction to authorize the trustee to deal with the Essex Drive property’s title; (2) “right to receive and/or direct the disposition of proceeds from rentals, mortgages, sales, or other related income sources”; (3) right and duty to manage the Essex Drive property; and (4) obligation to pay the Essex Drive property’s expenses.

 

The beneficiaries’ interests in the Essex Drive Trust are personal property interests.  The beneficiaries share in the Essex Drive property’s earnings, gains, proceeds, and expenses according to their respective percentages of beneficial interest held.  No beneficiary may make material alterations or improvements to the Essex Drive property without the trustee’s and the other beneficiaries’ prior written consent.  The beneficiaries’ rights to transfer their beneficial interests are subject to the provisions of the trust agreement, and any transfer must be agreed to by a majority of the beneficiaries.

 

The beneficiary agreement further provides that the Essex Drive property will be sold at termination (i.e., February 28, 2008) subject to a first right to purchase (right of first refusal) held by petitioner and Sandra Adams.  The terms of the right of first refusal are that the Essex Drive property is to be made available for sale to petitioner and Sandra Adams at a price equal to what would be proposed by a third party and that they have a right to offset the sale price by the value of their share of profits derived and any contributions that are agreed to have been paid by, and refundable to, petitioner and Sandra Adams.

 

Petitioner and Sandra Adams’ right of first refusal “begins with the date of * * * [the inception of the related beneficiary agreement (March 1, 2003) and terminates upon the Essex Drive property’s sale or other disposition.”  According to “Exhibit ‘A’ to the Beneficiary Agreement”, petitioner and Sandra Adams’ refundable contribution is the sum of $12,000.  Their initial contribution consists of all nonrecurring costs contributed including closing costs, contributions to existing equity “($0.00 -‘Down Payment’),” Realtor®  commissions, and costs of agreed-upon expenditures for repairs and capital improvements to the Essex Drive property by petitioner and Sandra Adams.  Petitioner and Sandra Adams’ contributions are deemed fully “Refundable At Termination, If Equity Permits”.

 

 

  1. EHT Occupancy” Agreement

 

The related beneficiary agreement also provides that no beneficiary is entitled to occupy or possess the Essex Drive property unless an NEHT Occupancy agreement accompanies the beneficiary agreement.  The NEHT Occupancy agreement refers to the Essex Drive Trust as “Landlord” and to petitioner and Sandra Adams as “Tenant,” and provides that Landlord agrees to lease to Tenant the Essex Drive property, whereupon Tenant is to pay rent of $2,900 per-month, which includes principal and interest on all loans secured by the Essex Drive property.  Tenant is required to maintain insurance coverage for and is liable for all repairs and maintenance of the Essex Drive property.  Tenant may not make material alterations to the Essex Drive property without Landlord’s consent, and expenditures for repairs are not refundable or creditable to Tenant unless done at Landlord’s written direction.  Tenant may not assign or sublet its interest under the NEHT Occupancy agreement.

 

  1. Related Documents

 

Petitioner and Sandra Adams received other documents for the Essex Drive property.  The first document, titled “Beautiful Home”, states:  (1) No bank qualifying, no credit approval, and immediate tax benefits; (2) “Rent to Own”; (3) three payments and closing costs get you in at $320,000; and (4) participate in future appreciation and benefit in equity buildup.  The second document, titled “How We (TK Investment Properties, LLC) Can Benefit You (the Buyer))”, states that benefits provided to a buyer include:  (1) easier credit qualification and payment arrangements; (2) entitlement to all income tax deductions for “Mortgage Interest and Property Tax payments,” even though title does not pass to buyer; (3) receipt of equity buildup from reduction of the mortgage principal as payments are made; (4) receipt of appreciation of the Essex Drive property; (5) protection of the Essex Drive property from the buyer’s creditors; and (6) the pride of ownership without the rules and constraints of conventional real estate acquisition and mortgage processes.  These documents include an amortization table that was provided to petitioner and Sandra Adams, and sets forth the amounts of mortgage interest and principal paid for each successive payment.

 

III.  Petitioner’s Occupancy

 

Petitioner and Sandra Adams moved into the Essex Drive property in June 2003 and resided there for 5 years.  During that time petitioner made improvements to the Essex Drive property.  For example, he replaced the cedar deck for about $1,700 and installed an automatic garage door opener for about $500 to $600.  He re-landscaped the Essex Drive property and incurred costs of about $1,500 for “Dirt shoveling, [and] stuff like that.”  He also incurred costs of about $500 to $600 to have glass block windows installed in the basement because of Michigan’s harsh winters.  Since the Essex Drive property trust’s value declined, however, and at the end of the contract term petitioner did not exercise the right of first refusal to purchase the Essex Drive property.  Petitioner sent Equity Management Services payments of $2,900 per-month that included principal and interest on all loans secured by the property.  Petitioner credibly testified that that the fair rental value of the Essex Drive property was about $1,500 to $1,600 per month.  The escrow account statements from which the mortgage payments were made, bear the Gedzes’ names as mortgagees(? sic), and the Forms 1098, Mortgage Interest Statement, also bear the Gedzes’ names as mortgagees (?).  Equity Management Services, acting on behalf of Equity Holding Corp. sent petitioner copies of the escrow account statements and the Forms 1098.

 

  1. Petitioner’s Tax Returns

 

Petitioner filed his 2003 Form 1040, U.S. Individual Income Tax Return, in November 2005.  He filed his 2004 Form 1040 in February 2006.11  For 2003 and 2004, respectively, he claimed mortgage interest deductions of $24,135 and $23,471 that respondent disallowed.

 

 

 

 

OPINION

 

Petitioner has neither claimed nor shown that he satisfied the requirements of section 7491(a) to shift the burden of proof to respondent.  Accordingly, petitioner bears the burden of proof.  See Rule 142(a).

 

  1. Mortgage Interest Deductions

 

Section 163(h)(1) generally disallows a deduction for personal interest.  An exception to this rule is qualified residence interest.  Sec. 163(h)(2)(D).  Qualified residence interest includes interest paid or accrued during the taxable year on acquisition indebtedness.  Sec. 163(h)(3)(A). Acquisition indebtedness means any indebtedness that is incurred in acquiring, constructing, or substantially improving any qualified residence of the taxpayer and is secured by the residence.  Sec. 163(h)(3)(B)(i).  A qualified residence includes the principal residence of the taxpayer.  Sec. 163(h)(4)(A).

 

Generally, for interest on a mortgage to be deductible the indebtedness must be an obligation of the taxpayer and not an obligation of another.  Smith v. Commissioner, 84 T.C. 889, 897 (1985), affd. without published opinion 805 F.2d 1073 (D.C. Cir. 1986).  But section 1.163-1(b), Income Tax Regs., provides: “Interest paid by the taxpayer on a mortgage upon real estate of which he is the legal or equitable owner, even though the taxpayer is not directly liable upon the bond or note secured by such mortgage, may be deducted as interest on his indebtedness.”  Where a taxpayer has not established legal, equitable, or beneficial ownership of property, we have disallowed the taxpayer’s claimed mortgage interest deduction.  Hynes v. Commissioner, 74 T.C. 1266, 1288 (1980); Song v. Commissioner, 2  Whatever rights or interests petitioner held in the Essex Drive property are determined under Michigan law because the property is in Michigan, see Altmann v. Commissioner, 20 T.C. 236, 252 (1953), and the trust agreement provides that it is governed by Michigan law. T.C. Memo. 1995-446; Bonkowski v. Commissioner, T.C. Memo. 1970-340, affd. 458 F.2d 709 (7th Cir. 1972).

 

The Court considers State law to determine the nature of the taxpayer’s property rights.  United States v. Natl. Bank of Commerce, 472 U.S. 713, 722 (1985); Aquilino v. United States, 363 U.S. 509, 513 (1960).12  The Court also considers certain factors to determine whether a taxpayer is an equitable or beneficial owner of the property, including whether the taxpayer:  (1) Has a right to possess the property and to enjoy the use, rents, or profits thereof; (2) has a duty to maintain the property; (3) is responsible for insuring the property; (4) bears the property’s risk of loss; (5) is obligated to pay the property’s taxes, assessments, or charges; (6) has the right to improve the property without the owner’s consent; and (7) has the right to obtain legal title at any time by paying the balance of the purchase price.  Blanche v. Commissioner, T.C. Memo. 2001-63, affd. 33 Fed. Appx. 704 (5th Cir. 2002).

 

Under Michigan law, the term “trust” includes any express trust wherever and however created (with certain exceptions not shown here).  Mich. Comp. Laws Serv. sec. 700.1107(m) (Lexis Nexis 2005).  Express trusts may be created to sell, mortgage, or lease lands; to receive the rents and profits of lands and apply them to the use of any person, during the life of the person, or for any shorter term subject to the rules prescribed in Mich. Comp. Laws Serv. chapter 554; or for the beneficial interest of any person where the trust is fully expressed and clearly defined upon the face of the instrument creating it subject to the limitations as to time.  Mich. Comp. Laws Serv. sec. 555.11 (Lexis Nexis 2007).

 

Petitioner’s property rights or interests are as follows: he is a beneficiary of the Essex Drive Trust, which meets the definition of an express trust under Michigan law; however, the trust agreement provides that he does not have any right, title, or interest in the Essex Drive property. See id.  Other related documents refer to him as a buyer and certain attributes of a sale are present such as a down payment, closing costs, and petitioner’s payment of principal and interest, while other attributes of a sale are not present such as a transfer of the Essex Drive property by deed to petitioner.  The NEHT Occupancy agreement refers to him as Tenant and to his monthly payments as rent.  The escrow account statements, the Forms 1098, and an amortization table were sent to petitioner, even though he was not personally liable for the mortgage, and the escrow account statements and the Forms 1098 bear the Gedzes’ names.  We now turn to the benefits and burdens of ownership factors. Some factors weigh in favor of finding that petitioner had assumed the benefits and burdens of ownership of the Essex Drive property while others weigh against.

 

Factors that indicate that petitioner assumed the benefits and burdens of ownership are:

 

(1) He had a duty to repair or maintain the Essex Drive property;

(2) He was responsible for insuring the Essex Drive property;

(3) He had a duty to pay the Essex Drive property’s taxes, assessments, or charges;

(4) He had a right to the Essex Drive property’s proceeds from rents, mortgages, or sales;

(5) He had the right to obtain legal title at any time by paying the balance of the purchase price:  his right of first refusal having begun on the date of the beneficiary agreement and having terminated on the Essex Drive property’s sale or other disposition;

(6) He bore some risk of loss because he was required to maintain insurance on the Essex Drive property and because he could lose his refundable contribution, which may have included the value of the improvements petitioner made, if there was no equity in the Essex Drive property; and…

(7) He agreed to pay the mortgage principal and interest under the NEHT Occupancy and beneficiary agreements.  See Amundson v. commissioner, T.C. Memo. 1990-337 (finding agreement to make mortgage payments created “enforceable interest-bearing debt” to taxpayer’s sister); see also Belden v. Commissioner, T.C. Memo. 1995-360.15  In short, petitioner treated the Essex Drive property as if he owned it.  See Amundson v. Commissioner, supra (taxpayer’s performance of obligations as owner is indicative of ownership interest); see also Trans v. Commissioner, T.C. Memo. 1999-233 (same); Uslu v. Commissioner, T.C. Memo. 1997-551 (same).

Factors contrary to petitioner having assumes the benefits and burdens of ownership are: 

 

(1) He could choose not to exercise his right of first refusal and to walk away from the Essex Drive property, see Randolph v. Reisig, 727 N.W.2d 388, 392 (Mich. Ct. App. 2006) (right of first refusal does not create interest in land); see also Jones v. Commissioner, T.C. Memo 2006-176 (Optionee was not entitled to mortgage interest deduction because under California law he had no ownership interest in property and because he had not acquired sufficient benefits and burdens of ownership to establish that he was equitable owner);

(2) He had to enter into an NEHT Occupancy agreement with the Essex Drive Trust in order to possess or enjoy the use of the Essex Drive property, see Ryan v. Commissioner, T.C. Memo. 1995-579; and (3) although petitioner made substantial improvements to the Essex Drive property, the beneficiary and NEHT Occupancy agreements provide that he could not make material alterations or improvements to the Essex Drive property without certain consents.

Ergo, on the unique facts of this case, we conclude that the benefits and burdens that favor ownership outweigh the factors against ownership.  Petitioner has assumed the benefits and burdens of ownership of the Essex Drive property.  See, e.g., Derr v. Commissioner, 77 T.C. 708, 725-728, 724 n.11 (1981) (beneficiary of an Illinois land trust possessed most attributes of ownership).  Petitioner, therefore, is entitled to the mortgage interest deductionsRespondent’s determinations are not sustained.

 

  1. Section 6651(a)(1) Additions to Tax

 

The section 6651(a)(1) additions to tax were based on the deficiencies.  Because of our holding that petitioner is entitled to the mortgage interest deductions and because respondent conceded the other deductions that he had disallowed in the notice of deficiency, see supra p. 3, petitioner is not liable for the deficiencies.  As there are no deficiencies, petitioner is not liable for the additions to tax.

 

III.  Section 6662(a) Accuracy-Related Penalties

 

Because of our holding that petitioner is entitled to the mortgage interest deductions and because respondent conceded the other deductions that he had disallowed in the notice of deficiency, see supra p. 3, there are no under payments of tax.   Therefore, petitioner is not liable for the section 6662(a) accuracy-related penalties.  Respondent’s determinations are not sustained.

 

      To reflect the foregoing, the court’s decision will be entered forthwith under Rule 155.

 

 

VASQUEZ, Judge:

 

 

 

 

I DON’T KNOW WHO THE AUTHOR OF THIS ARTICLE IS, BUT IT IS REALLY WELL WRITTEN, AND I SINCERELY THANK THEM FOR IT (‘FOUND IN MY COMPUTER FILE, ‘BUT WITHOUT ATTRIBUTION OR ANY COPYRIGHT CLAIMS.

While utilizing a variety of credit resources – creative and institutional financing, hard money loans, and even private money – will help you to reach the pinnacle of real estate investing success much more quickly than you could with cash alone, the way you handle your personal finances can mean the difference between success and failure, and how quickly you can reap the rewards available in today’s real estate market. Getting a handle on your debt is much easier than you might think.

Reducing Your Debt Load

Let’s face it: monthly payments are a drag on any budget, but when you’re trying to squeeze every last dollar out of your meager paycheck so you can realize your dream of real estate investing riches, it becomes even more critical that you stretch your available cash as far as possible.

If – like most people – a large part of your monthly spending involves making monthly minimum payments to multiple credit card companies, you’re well aware that this spending enriches the card companies in the form of interest payments, but your balances come down very slowly.

Here’s how to dramatically ramp up the speed and watch those balances drop – and how to avoid increasing those balances with unwise spending.

For this exercise in financial empowerment, you’re going to need a few things:

All of your credit card statements
A calculator
A pen and paper
A beverage of your choosing

Look through each of your credit card statements and list the balance for each one in descending order from smallest to largest. For now, ignore the interest rate for each card. I know this flies in the face of the logic used by many of the so-called financial experts you see on TV, but I have a very good reason for advocating this approach – which I’ll explain more fully very shortly.

Once you have the balances listed, I want you to list the monthly minimum payment for each credit card next to the balances. Take a look at this example so you have an idea of what I mean:

Visa Card #1 $377 balance $15 minimum monthly payment
Visa Card #2 $536 balance $21 minimum monthly payment
MasterCard #1 $1183 balance $36 minimum monthly payment
MasterCard #2 $4219 balance $56 minimum monthly payment
Discover Card $5925 balance $146 minimum monthly payment

Now I want you to think about how much cash you have available on a monthly basis for attacking this debt. If you haven’t already done so, you should have a monthly budget that guides your financial decisions. If not, you need to create a workable budget today based upon your current income and financial situation.

For the purposes of this illustration, I want you to pretend that you can afford to apply an extra $250 per month towards paying down your excessive debt. It may be more or less than this amount, but this will give you a good idea of what I mean.

When you make your monthly credit card payments, I want you to pay the monthly minimum payments on each of your credit cards with the exception of the first one. Instead of giving the first one (Visa Card #1) their minimum monthly payment of $15, I want you to apply the entire $250 that you have for debt reduction, in addition to the minimum monthly payment of $15.

I realize that some of the financial experts advocate that you apply the extra payment money to the credit card with the highest interest rate because, they argue, the interest rate determines the payment and it will take longer and cost more to do it the way I advocate.

They’re absolutely right; it will.

By doing it my way you gain an important psychological advantage that the other approach can’t match. In two months time, Visa Card #1 will be paid in full, which will then reduce the number of credit cards on which you’re making payments. That forward momentum will give you real, tangible results – which will motivate you to continue what you’ve started. You can’t put a price tag on motivation and the sense of financial empowerment that comes from crossing a debt off your list and realizing that you’re making real strides towards actually taking control of your financial life.

The potential savings you could realize by following the advice of these experts is minimal, but if you don’t want to spend a penny more than necessary in order to get out of debt – and you don’t need the psychological victory, feel free to pay off the higher-rate cards first. Don’t waste too much time getting hung up on the process; the progress is what really counts!

Once you’ve taken care of the first card on your list, apply the minimum payment from the first card to the second one, and so on, until you have all of your credit cards paid off.

Controlling Your Spending

While it’s important that you reduce your existing credit card debt, you’ll never be successful if you don’t also control the credit card spending that gave you that debt in the first place. There are several ways you can go about reducing your reliance on credit cards, but in a perfect world, you would just promise yourself that your days of financing today’s wants and desires are over and that you’ll simply pay cash for those items from now on.

The reality is that many people are weak and can’t follow through with simple promises not to spend. If you can’t control the urge to spend, you may have to cancel your credit cards and put your personal economy on a cash-only basis. However, you might want to consider one of a few alternatives to cancelling your credit cards. These are admittedly off-the-wall choices, but they work – and it can be fun explaining to others the lengths to which you were willing to go in getting your spending under control in order to achieve your very serious dream of real estate investing success!

The Ice Baby Technique – This simple technique can help prevent unwise spending decisions by forcing you to delay the urge to spend. Simply place your credit cards in a small container of water – and then stick it in your freezer. Before you can use your credit cards, you’ll have to thaw them out first. While this technique won’t damage your cards, it will put your spending on ice, while giving your better judgment a chance to kick in before making a financial decision that you could regret.

The Boxed Plastic Technique – Rent a safety deposit box at your local bank and place your cards in the box. While you can still access the cards in a true emergency, you probably won’t be willing to drive to your local bank branch and go through the hassle of getting the cards out just to catch a sale.

The Hide and Seek Technique – Another option is to pull all of the shoeboxes out of your closet and to randomly place your credit cards in a box before replacing it in the rear of your closet. Don’t pay attention to exactly where in the closet your credit cards are. If you get the urge to spend, you’ll be able to get to the card – once you locate it.

Granted, these are unorthodox steps to helping you to control the urge to use your credit cards. There’s no doubt that they’ll work. It might seem a little foolish to wait for credit cards to thaw, take a trip to your local bank to “check” them out of a safety deposit box, or hunt for them in a pile of boxes. But they will have the desired effect; they will help you to control your spending.

By controlling your spending, you can get your debt under control, which will give you more money for the very serious business of creating wealth through real estate investing. The profits are real, the lifechanging nature of this opportunity is easily worth the cost, and the time for you to jump into real estate is NOW!

PRAYERS, WISHES, WANTS, NEEDS
DO YOU HONESTLY DESERVE WHAT YOU WISH FOR?

Some of us are born with certain gifts that seem to automatically make superstars of us without a lot of effort (‘natural athletes, natural actors, natural musicians, artists, and writers…the unnaturally “gifted”).  But alas, most “superstars” have attained that status by virtue of their common birthright. In fact, most of us have to establish whatever super stardom we are ever to attain, by the sweat of our brows, and most often doing so in the face of sometimes seemingly insurmountable obstacles and handicaps with which the evolution and unfolding of our individual lives have bestowed upon us/ (i.e., in order to test our resolve).

As far as any of us know with certainty, we didn’t choose the geographical location of our birth, ‘our parents or their nurturing abilities or their mindsets; …’neither did we sort through and choose the circumstances under which we, or our parents, were raised.  We are, however (none-the-less), victims of all of those aspects of our own heredity, parentage, peer-influences and early environmental factors. Fortunately though, we’ve each been bestowed with the gift of Free-Will, and the right to override, eliminate or neutralize any part of our personal beingness and neural programming that we are mentally strong enough, and willing enough, to look at closely enough…’and take the time and actions necessary to understand it and work through it, around it…’in spite of it.

This aspect of who we are, and whom we are entitled to become, has many names: ‘Directed-Destiny; Programmed-Life-Management; Self-Discipline; Structured-Determination, Focused-Achievement, and so on.  ‘But what it all boils down to is the reality of one’s ‘self-esteem, self-motivation and personal determination.  In other words, every one of is a composite of the circumstances and obstacles encountered throughout the process of living a human life from birth to death.

The most destructive error committed by so many of us is living without access to, or a full awareness of, our absolute right to self-determination (‘i.e., not knowing with any certainty that any reasonably “normal” human can become whomever he or she chooses to be–‘despite the steady stream of conflicting experiential influences that are encountered hour by hour throughout the course of every human lifetime.

When a person mistakes desire for necessity, i.e., ‘allowing wishing, hoping and wanting to replace the concept of acknowledging honest “needing,” the prospect of achieving maximum personal fulfillment in one’s life, diminishes exponentially with every “mock supplication.”  In other words, one’s praying for something superfluous relative to being or becoming whom you choose to be is a wasted effort.

Irrespective of whom or what you accept your God to be, ‘no prayer for something unnecessary has ever been answered, nor will it ever be even though unrelated synchronous events may make it seem so from time to time.   Consider the nonbeliever who declares before a large group of onlookers, “OK God, if you truly exist, strike me dead right now.”  ‘Nothing happens because the entreaty is obviously insincere and in no manner relative to any part of the supplicant’s life or welfare, or the evolution path of humanity.

From another standpoint, consider the likely result of someone’s praying that they will be made a millionaire within a week, when they have no need for more money than they already have, and have not considered what they will do with a million dollars should it actually fall from Heaven.  Consider how many “Aunt Mary’s” have passed-away due to a severe illness, after their entire family and their church has prayed for them to continue living despite their condition?  ‘Then considered the likes of someone like, say, Dr. Jonas Salk (1914-1995 – Polio vaccine) or Dr. Christian Barnard (1922-2001 Heart Transplant), or Madame Cure (“Marie Slowdowska-Curie 1863 – 193 – radiation): each of whom, instead of praying (i.e. “wanting” and beseeching an unseen force armed only with a “desire” for success) they Needed—‘with a burning desire for success)—’to assist in saving and enhancing the the lives of millions upon millions of human beings who would, ‘without the “Dire Need” that was such a crucial part of these famous people’s lives, ‘would otherwise all have died  of their maladies much earlier.

This concept of Dire Need being the Provider of abundance is what Napoleon Hill referred to re[eatedly in his book, Think and Grow Rich, as “burning desire (i.e., ‘unquenchable necessity).” It is only a burning desire that can lead us through the life-changes and mental programming and re-programming necessary for the fullest achievement of the abundance that is every free human’s absolute birthright and which each of us deserves.

To make a wish, we need do nothing but think it, retain it in our thoughts for a while, and wait and see what happens. With Dire Necessity, however, we must move several steps ahead, and acknowledge without question that unless the Need is fulfilled, we will actually die in some way or to some significant degree should the components of that which we summon into existence not manifest.

The part that most people have trouble understanding fully enough is that we humans are simply incapable of allowing any real Need to go unrealized. When it comes to Needs versus Wishes and Wants, we all will strive to fulfill every Need at any cost: while our wishes, hopes, dreams and prayers take a backseat until they are converted to Need.

Have any of us ever gone without water or food indefinitely?  No (‘at least none of us who are reading this article at the moment).  And that’s because we would die if we did.  And think about it, do drug addicts and alcoholics go without their regular ingestion of their chosen poisons?  No!  ‘Because a terrible sickness and feeling of imminent death and indescribable loss would overtake them and a major part of who they have become would have to experience a horribly painful trauma ending in death or something very close to it.

The fact is that no true need goes unrealized…ever! One might idly wish for food and drink and not get it right away: but when it becomes a matter of having it or dying, worms and insects become as tasty morsels.  A true Need for sustenance will never fail to appear (‘even to the extent of one’s own body’s resorting to ingestion of its own fat and protein reserves in order to prolong existence as long as possible.  Ergo, it would then seem that if a particular goal were to become a necessity incorporated within the concept of “avoiding elements of the loss of mortality, its attainment would be virtually certain.

In support of this concept, consider the reason we panic when deprived of air even for a brief while. It’s because without oxygen death is certain and imminent. When struck with any illness, our fear of dying calls our sympathetic and parasympathetic neural systems to the healing process ‘to the detriment of of the life-saving biological function of sugar, protein and fat stores.

When we have too little income, ‘why do we worry and fret about bills, creditor retribution, legal action and loss of our personal possessions? ‘It clearly is because we are overtly afraid of being unable to sustain our lives should we fail at those activities that we deem necessary for human survival.

It is the universal fear of dying that forces all of us to strive, ‘to forage, to earn, achieve and build (and re-build). Though we are hardly ever consciously aware of this ever-present, all-pervasive mortal fear, is always there: ‘prodding us ever onward, ‘relentlessly requiring toil, attainment, procreation and the building of nutritional stores and reserves.

In view of all of this, ‘doesn’t it stand to reason that if we would seek to accomplish something heretofore seemingly unattainable or impossible, that it would naturally manifest only if it were to be directly connected to our natural fear of death (‘i.e., making our heart’s desires necessities rather than idle wishes).

Let’s say you’d like to build a 40-story high-rise building, ‘or, say, a 1,200 foot-long aircraft carrier: you certainly are free to begin doing just that if you choose. Many humans over the years have in fact built thousands of these things, and were greatly rewarded for having done so. But, until completion of such a task becomes an absolute necessity, you and I will quite likely never start the project; and if we do start, we’ll likely never finish because doing so may become seemingly impossible relative to our understanding of physics, mathematics, metallurgy, plumbing, carpentry, welding, structural design, computer technology and seafaring.

So…who does build these colossal structures?  These builder are people, jut like you and me, except for the unquenchable burning desire that lives in them whcih directs them to fish the job and elicit all the assistance from human being to have the expertise that the designer may lack.  None of these people hope for completion of the project…they have a profound NEED for there there to be few barriers to completion, and they have planned sufficiently well that there needs will never have to rely on hoping, dreaming,wishing or praying for divine assistance to get the job done.  The know that their “God” only helps those who help themselves and will never pick up a hammer, screw driver or an arc welder or rivet gun to help finish the job..

It’s only when a major aspect of our life depends on the completion of the project, and the knowledge that we will die in part otherwise, that we will do all of what is necessary to complete the 40-story high-rise buildings or the aircraft carriers.  The determined achiever will simply do what all achiever have always done, ‘i.e., taking the concept from pure Potential by first imagining it, then converting thought to substance by first drawing it, and then adding dimension to make it physically real beginning with eliciting the help of others with disparate talents and abilities, and then seeing to its fully three-dimensional manifestation.

So…’before writing out your objectives, choosing a mantra, and heading off to visit Mahesh Yogi in India on your trek toward bliss, stop!   ‘And take the time to figure out what your goals actually are, and which of your “wishes” can be converted to “Need”; and then assess your resources for accomplishing your aspirations. Should you come up short in the “resources” area, then you have to write-out a plan for either attaining what you are lacking; or for replacing what you are lacking with something of equal value that you have more than enough of (‘e.g., physical work can replace the need for cash; eliminating someone else’s burden can replace the need for credit; patience can replace experience; caution, diligence and research can replace formal education; hard-learned valuable skills and tenacity trumps a university degree every time.

A good test of which Wants and Wishes can be converted to Need, and then to Dire Necessity is to ask yourself which of the following you could in-fact live without in reasonable comfort…if you had to.  Strike through those items that are not completely necessary, and without which some part of you would not surely die. Whatevr remains are those item that are beyond just idle wishes: ‘they are your Wants. But, it’s crucially important to know that until each Want is elevated to the status of a Need (‘a life-sustaining necessity) it will likely continue to remain no more than an allusive and baseless hope, if not a wholly unattainable Wish.

  • Full-time self-employment
  • More social acceptance
  • More public popularity
  • Fame
  • Prestige
  • A better/safer living environment
  • A rich person’s high-class lifestyle
  • A bigger and more prestigious home
  • A new, more rewarding career
  • A chauffer driven limousine
  • A new face
  • New teeth
  • A trimmer or more attractive body
  • New friends
  • Better friends
  • A larger bank account
  • A large stock portfolio
  • A retirement fund
  • True Happiness (Bliss)
  • Personal contentment
  • Freedom from drudgery (‘more time to nap and play)
  • More self-esteem
  • An enhanced inner feeling of personal value
  • A more vacations and the ability to afford them
  • A less strenuous, demanding or tedious job
  • A much higher income
  • A different or more attentive spouse
  • A new identity
  • A more attractive physique
  • A private airplane
  • Freedom from disease worries
  • A newer car
  • A more showy car
  • An executive job title
  • A bigger office
  • A well-defined life-purpose
  • Great spiritual fulfillment
  • Greater spiritual understanding
  • Absolute certainty re. the existence or non-existence of God, demons, ghosts, space-aliens, angels, mountain monsters and mental telepathy
  • The ability to comfortably take risks that will pay off a lot of mone

Prayers, Wishes, Wants (Desires)…and true Needs:

1)         Praying – Acknowledging your inability to attain a desire on your own, and presuming it might come to you by way of divine intervention

2)         Wishing – being dissatisfied with the status quo and imagining that some extra-local non-spiritual source will provide you with something not yet extant

3)         Wanting –Imagining something that is not present, but for which you are unwilling to exert any special effort for its attainment.

4)         Needing – Requiring something, without which an early level of death will surely ensue

5)         Dire Need – An object that must, by all means, be manifested at any cost in order to avoid death

Never forget that, according to Epictetus, a 5th Century BC orator: “[A person’s] Wealth is measured only by the expense of one’s [that person’s] pleasures.

”In other words, when life itself is your gift, and when the least expensive pleasures are your greatest rewards, 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 house and matching mortgage, five tapped-out credit cards and a 72-month payment plan on a new Mercedes Benz convertible–‘or a well-loved and highly respected Eskimo hunter with eight good dogs, a jolly fat wife, seven healthy children and five years’ worth of walrus blubber in the basement…’and plenty more where that came from?

The answer is, of course, ‘the Eskimo…’but only until and unless he would develop an eye for more than he has and not be able to afford it: say, an insatiable taste for filet mignon, Chateau Lafitte Rothschild and Mercedes convertibles. Should that happen, he instantly tumbles from real wealth… to abject poverty…UNLESS those things are what he truly needed and knew with certainty that he deserved and could afford them.

Converting a Want to a Need, and a Need to a Burning Desire (dire need) are the first real steps in serious goal-setting, and the process requires much thought and definitive action. For example, if you’re having difficulty in making the life-saving decision to jump off the 200 foot high cliff into the cold raging river below, in order to save yourself from the menacing band of angry marauding indians who are hot on your trail just a half mile behind you, and out to kill you…’and drawing nearer every second…’just do this: Tie the end of a long rope around your waist, then tie the other end around a large round boulder. Now roll the boulder to the edge of the cliff.

If, at this point you‘re still squeamish about jump into the river below, but know you have to, ‘simply push the rock the rest of the way over the cliff…’depending upon the length of your rope, your fate will be sealed in a couple seconds once the boulder hits the end of that rope. You needn’t worry about making decisions any longer, y ou set your life on a irreversible path to salvation.  A true Need tied to a definitive action is what brings all “Potential” into material reality and into our lives.

In 296AD, the Praetorian Prefect (a high office in the Roman Empire), Asclepiodotus, commanded an army belonging to the emperor Constantius Chlorus (Emperor of Rome 293-306), and led his troops against the usurper British emperor Allectus. Having arrived in Britain to confront Allectus, Asclepiodotus *’easy for you to say…) burned his own ships to prevent his men from retreating.  By burning the ships, a dire Need was fulfilled that might not have worked out so well for Asclepiodotus, had his soldiers been allowed to turn and sail home when they saw how outnumbered they were going to be in a couple hours, when the going got really tough.

To become honestly wealthy and attain abundance in this life you must first know what it is that you honestly want, and then you must convert that Want to a Dire Need and give yourself no choice but success (i.e., burn your bridges, decide that there can be no safety nets or turning back to the “old ways,” that  you’ve definitively decided to escape.

SO WHAT WILL BE YOUR PLAN OF ACTION (I.E., YOUR “POA”)?

One’s “POA” is that long rope and that big ol’ rock at the edge of the cliff above the raging river that was referred-to above.  It’s the relinquishing of those aspects of Life that have mired you down in the mud of a lack of satisfaction with your current circumstances.

The 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 (‘not what you ‘want’ or ‘hope’ to be), and to attain all of what you need to own and control during this roller coaster ride called “Life.”

Goals that are held only in the mind of the hopeful are never goals at all. They’re just random electronic impulses left over from unfulfilled desires—nothing more.  It’s only when hopes and dreams begin the physical transformation from potential (‘that which is yet to exist, but which hangs eternally in wait for you to call upon it) through the process of writing down what Wants and wishes you’d like to convert to Needs, so that these thoughts can begin to take physical form as they metamorphose into honesty  versus day-dreaming.

As has been said many times by hundreds of “motivators,” handwriting your goals is always preferable to typing them out in your word processor. The more arduous and physical the mind-to-hand transference exercise is, the more likely and more immediately the transformation will take place (i.e., ‘the moving of a conceptualization from the ethereal realm of pure ‘potential’ into our world of material reality).

Although I don’t believe that viewing your goals daily and repeating them aloud to the bathroom mirror, or moaning a mantra is ever necessary, ‘it is none-the-less a good idea to keep these written objectives in a safe and secret place, and review and modify them every few months.  Simply write a letter toyu inner=-self listing want you want and when and why you need it, and how you care for it and what you’ll do with it when it manifests.  Then then fold your letter and place it in a safe and private place AND FORGET ABOUT IT.  The real God doesn’t have to be beseeched or reminded about what you need: ‘it knows with certainty, because it is that part of you that has always answered all of your worthy prayers and brought all of your honest needs to fruition.

Forty years ago, I was dissatisfied living on only $326 per-month (before deductions); although with that income in those days I could comfortably (sort of) cover a $60.00 per-month rent payment; a $49.00 per month payment on my brand new Ford Falcon; I could buy gasoline for 29 cents a gallon (‘full tank for $6.00); J.C. Penny’s clothing; and all the groceries we needed, for about $15.00 per week. And…after the bills were paid we often had enough leftover to take in drive-in movie with two 19 cent Mac Donald hamburgers (with fries).  Oh, ‘and water was free back then (‘in those days we didn’t know it had to come in plastic containers and cost more per-gallon than jet fuel).

Interestingly though, most of my close friends at the time who made even less than I did could somehow always afford to buy a case of beer and a carton of cigarettes along with their groceries every week. I often wondered how they managed to do that, when we seldom had that much left over, especially for fun stuff. I once asked my buddy Bob about it and he jokingly replied…”Hey man, it’s because beer’s a number one staple in my diet and I’d die without it.”

I didn’t get it at the time, but forty years later I began to appreciate Bob’s philosophy. The fact is that I only “wanted” a case of beer, but didn’t need it, ‘so I couldn’t afford it. But ol’ Bob needed it…’and it manifested for him…every week.

If it’s not a Need, ‘then it’s only a self-perceived, presumably undeserved passing fancy.

In those days we associated with friends who couldn’t afford even as much as we could (‘much less ol’ Bob): but I felt somehow looked-down-upon by those with life plans, whom I most wanted to impress and associate with, such as my high school acquaintances who were coming out of college as doctors, lawyers, engineers, dentists; local civic activists; politicians, etc.). But 40 years later, because of learning to Need versus simply dreaming, hoping, praying, beseeching and wishing…’and constantly asking “How” (Versus Why: “Why me God?”),  I found myself earning as much or more than most of them.

Q: What do you suppose it was that I did any differently then than I had            done forty years earlier?

A: Absolutely nothing, except for adopting and following a mental                    process that converted my idle wishing into Needing.  T fit into my                idealized self, I had to create a realized self that was at least equal to my     peers.

Could I live without the extras that my life now brings?  Certainly! At least a part of me could; but the other part would die a little, ‘and that scares that part enough to “Need’ to avoid the loss.

Am I wealthier because of these things? No! Not at all!  ‘Figuratively richer perhaps, but by no means wealthier. But, I do choose to defend and steward what I have?

Would I gladly and freely give away any extra that I’ve been given or earned? You bet!

It’s weird…’but I’ve discovered that the more I give of what I have, the less I need to have, and the more I am given, ‘for some inexplicable reason.

This “reason” for success and wealth, by the way, is fully covered in the religious writings of the world.  What it boils down to is simply that the Universe abhors a vacuum.  And therefore, our deigning to create a void by giving something away can only result in the instantaneous refilling of the space resulting from the absence of that which originally occupied the space.

If something is missing in your life…’stop hoping for it to magically appear and begin needing it and making it manifest.

If you have more of anything than you need: ‘give it away and the void left by its removal, will fill up faster than you can prepare for it:

  • Give [it away] and you shall receive [more of it].”
  • “Seek and you will find [abundance]” ‘when it is truly needed and not just idly hoped-for.” This is the uncompromising universal law and promise of abundance!
  • Prayers are always answered for Seekers and Doers: ‘but never for Dreamers and Wishers.
  • Knock… ‘and the door will open [i.e. ‘when you figure out whichis the proper door on which toknock, ‘which door, by the way, exists solely within you…’not somewhere in outer space or in another extra-local dimension.”

In the face of any dilemma or quandary, ‘remember always to begin any imploration or supplication (“prayer”) with the word “How” and never “Why” (‘i.e., ‘instead of “Why me, Lord,” ask yourself instead, “How, Lord, can I resolve or overcome this obstacle?”  Then wait for the answer that has been lingering patiently in your subconscious waiting for the question?)

“Re-read Napoleon Hill’s, ‘Think and Grow Rich,’ and you’ll discover “The Secret” that he talks about ‘but never explains…’fully expecting you, the reader, to figure it out for yourself.

We all dance in a ring and suppose
While the “Secret” sits in the middle…’and knows.

 Robert Frost

 

Speak to him thou, for he hears,
‘and spirit with spirit can meet.
Closer is he than breathing
and nearer than hands and feet.

Alfred Tennyson

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Oh yeah, ‘and long-live the marvelous third-party trustee, co-beneficiary, inter vivos title-holding land trust transfer (the ©Equity Holding Corp. Trust Transfer System™) that has been making millionaires and waiting patiently for you…’for the past thirty-years…

Bill Gatten
800 409 3444

 

 Let Your Buyer Do the Hard Stuff

Confidentially: Patching a nail-hole in the wall of an income property with toothpaste  (‘i.e., where a small picture might have once hung) is excessive refurbishing for me.

The average abandoned & distressed-property investor approaches the rehab and resale process pretty much the same way:

  1. They find a Don’t-Wanter” property owner
  2. They inspect the property
  3. They calculate all costs associated with rehabbing and remarketing
  4. They lineup their contractors
  5. They commence the work on the property
  6. Upon completion, they plant a “For Sale” sign in the front yard
  7. They sell the property
  8. They smile triumphantly at a job well-done while counting their money
  9. They then pay back their bank loan and all of their contractors (‘if they haven’t already done so)
  10. Then they get sued by someone…’the new buyer, or a contractor who feels that he/she is owed more money…’or a neighbor that is ticked-off about the rubble left by the contractors, or because a broken sprinkler head is spraying water into their bedroom window. etc..

If you’re following this model, you are no-doubt already succeeding in your real estate investment business: very definitely an enviable position in which to be.  But did you know that by shaking up the order of things, especially if you’re at all cash-challenged, you can dramatically increase the number of rehab projects you complete in a year – ‘and at the same time, be able to reach your goal of financial independence much sooner, whether you are brand new in the business or a weathered and worn Old Salt.

While you can’t do much about these steps as you continue following the same program used by so many successful investors, a few of the steps can be altered a bit – ‘which, over the course of an investing career, could mean earning a lot more money than will any investor solidly married to the traditional model.

It’s easier than you think and may sound a bit corny at first…’but do give the following some serious thought

The first thing you do once the don’t-wanter seller is found and convinced, is plant a large “For Sale” sign in the front yard.  While you obviously want to ensure that your telephone number is on the sign, you can actually modify in order to generate calls from potentially interested, non-traditional, buyers, sellers and other investors.

Here’s an example of language that could be placed on your sign, in order to get your phone ringing early (and steadily):

FOR SALE — SOON, 3BR, 2BA;
1650 sq ft…’Under renovation.

Call now & Choose Paint, Carpet
Cabinet Style & More

Priced to Sell Fast… 803 432-1234

Now, before beginning any interior work, consider just tidying up the front yard, ‘tossing any trash and unsightly detritus ‘into the back yard ‘out of view (for now).  While you may think that the interior of the property is the most important part of a rehab project, I want to tell you that what the outside looks like from the street is what creates “curb appeal” and is that which lures potential retail homeowners in for a better look later.

By creating a Faux Curb Appeal (‘think “movie set”) you have a real opportunity to generate all the cash you need, without incurring debt in the process.

Here’s a simple, easy-to-follow blueprint for success (‘taken directly from a couple of my own experiences in the San Fernando Valley, California, among several other in other cities and states):

  • Clean up the exterior in front of the property (i.e., ‘front-yard only) and make it look as close to an immediately livable property as possible. Anything you do on the outside in front needn’t be extensive or expensive.
  • Put up your For Sale sign near the street.
  • Decide what simple, inexpensive and attractive bushes will maximize the appeal of the property for passer’s by…’(again) for the least expense.
  • Next, paint the front of the house a medium gray color (‘i.e., ‘but not the back of the house or the sides…’just the front for now)
  • Then frame all visible doors and windows (i.e. visible from the street) with bright white 1″x6″  Pine strips.
  • Now paint the front door a dark red (with the same white door frame)

Unless there is already a nice, or restorable, lawn, roto-till the yard (‘front only) and plant a few colorful, full-body shrubs a few feet apart in parallel rows leading from the street to the front door, and along both sides and across the front of the yard.

It’s truly amazing how much curb appeal a property can be given by simply tidying-up and roto-tilling the front yard; ‘sprinkling some wood chips around any trees and the bushes (‘in the front yard).

In addition, don’t ignore the appearance of the house itself. If it has shutters, simply replacing them or painting them bright what (against the medium gray) can instantly double a property’s appeal – and can get people interested in seeing what coming changes you have in mind for the interior.

When tidying up the exterior of the house, ‘you can touch up the paint on the wood trim and do other little things to give the house a fresh, welcoming look. There’s an added benefit to doing things in this order: It is actually possible to sell the property before completing these exterior renovations.

Your “For Sale” sign – ‘combined with the interest-generating landscaping – will likely generate calls from several interested parties (‘and nosey neighbors). When they do call, you can offer to show the property to them as it is now.  And by giving any potentially interested taker the opportunity to pick out the color of carpet, interior paint, etc., you’ll generate tremendous interest because the average homebuyer either makes minor changes immediately after buying a house or makes a mental note to make some changes not long after buying it.

This strategy can be a real winner (‘As it has proven to be for me over the years), and pay huge dividends…

If a potential buyer gets to decide what color they want the carpet and paint to be, they will automatically have more interest in buying than they might if they wait until the renovations have been completed. If they like what they see, and choose to do so, you can place the house under contract t that time and collect an earnest money deposit, or a full Contingency Fund with which you can pay for renovations.

There’s another possible way of selling before completing your rehab, when you willing to “carry the paper” ‘as it were.

Some buyers will ask (or you can offer it) if you would be willing to let them make the repairs themselves, whereby you’d offer them a significant discount for doing so.

Under this scenario your rehab estimate of $20,000 could be converted to a discount for your ambitious buyer of, say, $10,000 or $15,000 (making you five or ten thousand in extra cash in the process).  However, doing it this way is best served by your having the ability to fully control the transaction and being able to allow your buyer into the property without him/her needing standard mortgage financing, ‘a particular down payment amount and/or perhaps without standard credit qualifying. In that the EHTransfer™ system allows for such quick and easy eviction, the posting of a sizeable Contingency Fund can provide quite valuable risk protection, as well as being an excellent deterrent to payment or other contract violation.

In this regard, you would acquire the property by a legitimate mortgage payment take-over, via having the seller place the property into the EHTransfer™, and making you his “Investor Co-Director Beneficiary.”

It’s at this point that you begin locating and installing a third (Resident) Co-Beneficiary in the trust and in the property, who will be contracted to handle all costs of ownership and paying you your desired profit up front (‘without having expended any refurbishment costs out of your own pocket).

Note here that in addition to the upfront amount you receive from your Resident Co-Beneficiary, you can also agree to share a proportionate percentage of beneficiary interest in the trust, which percentage correlates with each beneficiary’s percentage of net-profit that is designated to be shared upon the trust’s termination and resale or refinancing of the property.  I.e., in reference to future profits derived from appreciation and loan principal reduction (‘such profits can be agreed to be distributed in stipulated ratios of  25:75, 40:60, 50:50 or 60:40 percent).

Many buyer prospects with limited cash or credit are quite handy and more than willing to put some sweat equity into the property, particularly if they can save money in the process of becoming “home owners.”.

While you won’t be able to handle every property you buy in this manner, ‘before getting too deeply into your renovation work, these opportunities do come about fairly regularly, ‘allowing cash to flow more quickly into your bank account – and providing a quicker transition to your next profitable investment.

If you would like to do so, you can continue waiting until your renovations have been completed before selling the property, but by following the EHTransfer™ system, you’ll be able to buy more properties…more often…with more asset protection and more “qualified” buyers (‘i.e., in that all down payment and credit-qualification parameters are dictated 100% by you alone.

Moreover, ‘even though a good contract-abiding Resident Co-Beneficiary receives virtually 100% of all Fee-Simple homeownership benefits  (including tax deductions), ‘should any one of  them default in their contractual provision, there is never a need for a long and drawn-out foreclosure action to force dispossession.  A defaulting Resident Co-beneficiary in the EHTransfer™ is removed from the property by means of regular eviction, ‘the same as would be any defaulting rental tenant (‘i.e., ‘without an opportunity to claim holding an equitable interest  in the property (‘that’s held by the trustee)  in order to thwart eviction and attain free rent for months-to-come by forcing a time-draining and costly foreclosure action).

Always Keep the Long Term Hold in Mind.

Over the course of a 20 or 30 year real estate investing career, the EHTransfer™ system can mean that one can quite possibly buy and sell several more properties per-year than might happen otherwise…without money out of pocket; without needing to count on you or any other participant’s needing get new mortgage financing..

Thinking outside the box in this manner and defying anticipated norms is just one way you can blast into increased real estate profitability. ‘Although singularly the best way of all is one’s continuing to learn additional real estate tips, tricks and tactics. That is how you acquire that edge on the competition.

Continuing to learn, can quickly turn an ordinary investing career into a special one that makes you rich beyond your wildest dreams, because of your ability to handle any scenario that others simply don’t have enough knowledge to be able to do.

In case you’re already thinking about it…the EHTransfer™ does not, in any manner, violate any lender’s Due-on-Sale Clause, or compromise any part of the Dodd-Frank Consumer Financial Protection ACT re. Seller-financing (i.e., ‘a party’s ownership of interest in a title-holding trust is personalty (personal property) and not realty (real property), ‘and therefore not an issue intended to be addressed by legislation initiated by senators, Christopher Dodd, Barney Frank, Jake Garn or Ferdinand St. Germain).

SHOULD YOU WEAR SUSPENDERS WITH YOUR BELT?

ASSET PROTECTION VIA THE CONTEMPORANEOUS USE OF THE LAND TRUST…’AND THE LIMITED LIABILITY COMPANY (‘UM…’FOR THOSE IN RIO LINDA, “CONTEMPORANEOUS” MEANS: HAPPENING AT THE SAME TIME)

Having been in the land trust transfer and facilitation business for nearly thirty years now, we get frequent questions from our clients and students around the country regarding comparing the (Illinois-type) land trust with the limited liability company (the LLC) as which might be the preferred asset protection device with regard to real estate holdings.  My response is always the same: An LLC will protect YOU; the land trust will protect YOUR PROPERTY, and when used together the protections of both are enhanced and your real estate holdings can be virtually “armor-plated.”

But irrespective of what the answer might be, never forget that:  “In today’s litigious society, holding real estate in your own name is tantamount to walking down “Starving Lawyer Boulevard” with a bullseye on your back above  the words: ‘I dare you! Sue me! I’m worth it! I own real estate, ‘so I must be really, really rich.”

THE LLC:

The LLC is a limited liability company (‘not a corporation) that combines many of the features of a corporation, but which is more akin to a sole proprietorship or partnership, depending upon the number of members. In comparison, the LLC, as a pass-through tax entity affords its members simplicity in tax accounting and reporting.

Beyond those features, however, the LLC’s primary purpose is that of shielding its member-owners from any litigation that would befall the company and its assets. In other words, were an LLC to be established for the purpose of operating a packing plant and someone were to slip and fall into a meat-grinder and loose a couple legs, the claimant’s legal recourse (.e.g., ‘were he to have “a leg to stand on”) would be limited to the assets of the company, and not to any other assets owned by its operators (“members”) outside the company. Even is the business were to be taken over, or closed down and liquidated by a victorious claimant, ‘the owner’s home, golf club memberships, automobiles, furniture and private bank accounts would remain  beyond of the reach of the lawsuit.

Relative to the article you’re reading now, bear in mind that any company in operation could, ‘should it so choose, hold as its only asset, a single house, condominium, townhouse or apartment building…of several of them. In any of these vehicles: an LLC, LP (limited partnership) or FLP (family limited partnership)…all of which protect their members (owners) from claims against themselves personally…’and are considered by many to be the most ideal forms of small business ownership.

[For additional info. re. limited liability entities, go to: www.corpnet.com]

AND NOW, ‘THE TITLE-HOLDING (“ILLINOIS-TYPE”)  LAND TRUST:

Much has been written in the last twenty or thirty years about the feasibility, functionality and versatility (‘and safety) of the “Illinois-type” Title-Holding Land Trust as an alternative means for owning, dealing in and protecting real estate.  Be that as it may, however, there continues to exist a major lack of knowledge as to what a land trust is, its uniqueness, and any real understanding by the legal profession i.e., of all that it can do for property owners.

For example, very few attorneys are aware of, and will argue in ignorance against, the fact that when a property is placed into such an entity, its real property ownership becomes solely that of the third-party trustee nominee, and the beneficiary/ies’ ownership is equitably converted to ownership of personal property [see the Doctrine of Equitable Conversion].  By this process both the property’s legal title and equitable title are vested in the appointed trustee, leaving the grantor/beneficiary with only a personal property interest in the trust, without ownership of the property itself: however…’be tht as it may the settlor retains the equivalent of fee-simple ownership none-the-less, ‘along with complete directive-control over the actions of the trustee.

Once vested in the land trust trustee, the property’s true legal and equitable title ownership is solely that of the trustee (‘one’s careful selection of trustees being crucial).

In such “equitable conversion,” the properly structured land trust provides its beneficiaries with all the protection that the law affords both real property owners AND personal property owners (‘i.e., limited partition rights by outside judgement creditors; anonymity of ownership; inability of judgment creditors (including the IRS) to reach the co-beneficiary land trust in order to lien its corpus (‘the property); the avoidance of a lender’s due-on-sale admonitions upon fractional transfers of beneficial interest (‘assuming that the borrower/transferor is a “natural person” under the law…i.e., ‘not a commercial enterprise (i.e., a corporation) to whom the loan was made and by which entity it is guaranteed).

Also note that inasmuch as one’s ownership in a title-holding trust is personalty and not realty there is no compromise of recent Dodd-Frank prohibitions regarding owner-financing of real estate (‘i.e., re. the Wall Street Consumer Financial Protection Act).

It is also too infrequently realized by attorneys (‘even real estate specialists) that land trusts per se are legal in all states, ‘although officially recognized only as “Use in Land” versus “Uses in Trust” in Louisiana and Tennessee.  What this means is that in these two states, landtrust are not illegal,but that ownership of beneficiary interest in a land trust is seen as equivalent to ownership of the real estate, and any errant tenant co-beneficiary would have to be judicially foreclosed upon, rather than being evicted (‘as is the case in other jurisdictions), ‘i.e., in order to rectify a contract violation (‘such as, say, a payment default).

By use of the land trust model described here, one can, by a simple assignment of beneficiary interest, easily transfer all or a portion of a property’s ownership benefits (‘i.e., w/r to four or fewer units) to another party with one brief assignment document.  I.e., without (necessarily) any  need for a new loan, specific down payment or credit requirements, escrow, new title insurance, credit approval, underwriting…or other lender involvement.

When a property’s title is held by a trustee-nominee for a third-party, co-beneficiary land trust, the property is, throughout the trust’s term, essentially in a state of “escrow,” meaning that during the trust’s stipulated term no single beneficiary can act unilaterally (‘i.e., ‘without the unanimous consent and direction of all beneficiaries acting in concert).

As well, (and where we come in) a co-beneficiary in a bona fide land trust can in-fact be appointed to lease the property from the trustee, and when given at least a ten-percent beneficiary interest in the trust, receive full tax treatment by the IRS as a homeowner regarding all income tax deduction benefits of mortgage interest and property tax deductions (IRC §163(h)4(D) & IRR #92-105), along with §1031 tax exchange and §121 exemption and exclusion benefits remaining fully intact.

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Now…’couldn’t a person (yourself, for instance) armed with this information advocate placing its real property into a land trust and naming his/her LLC as a co-beneficiary in order, not only to shield it from public view, but also to hold it beyond the reach of potential judgment creditors (‘including the IRS), and to avoid transfer tax?

In effect, the title-holding land trust which is the basis for the proprietary Equity Holding Corp. Title-Holding Land Trust Transfer™ shields the property,while  the LLC shields the beneficiaries…’i.e., from litigation and the leering eyes of hungry lawyers and the spittle-dripping fangs of irascible judgement-seeking creditors. (Sorry…’got carried away there.  I love creditors..’but only when I am one).

Frequent Question: Which is better?  An LLC or a Land Trust for Holding Income-Producing Real Estate?

  • Unlike an LLC or a corporation, ‘vesting a property in the trustee for a land trust does not trigger the imposition of reassessment for property tax, nor does doing so incur transfer tax or tax stamps in any state. Neither does the land trust violate the lender’s due-on-sale admonitions, or compromise the recent Dodd-Frank legislation re. seller-financing restrictions.
  • Unlike as is the case with an LLC, the beneficiary of a title holding (land) trust receives the benefits of an IRS §1031 tax-deferred exchange, and/or the section §121 home sale exclusion, without regard to a particular “Continuity of Transfer” requirement (See below)

As noted earlier, an LLC, may be (‘should be when practical) made a beneficiary of the land trust or specifically, the Equity Holding Trust Transfer™: ‘i.e., ‘with the managing member of the LLC, holding the Power of Direction over the trustee (‘e.g., holding the power alone, or sharing it with co-beneficiaries).  The reason for structuring the transaction in this manner is that when the transaction’s primary goal is protection for beneficiaries from tort liability, the “naked” land trust alone can be made more effective and protective when coupled with the LLC as a co-beneficiary,  which LLC is funded  by the personal property beneficiary interest in the trust, rather than real estate.

And here’s why: 

Due to a gap in knowledge on the part of many beginning, and some seasoned, investors (‘and their too-often naïve legal advisors), ‘they are either oblivious to this important tool, ‘or they tend to set it up incorrectly.   Unfortunately, the trouble arising from the lack of experience and knowledge probably won’t present itself until much later (‘more often than not…’too much’ later).

Consider the case of Attorney Herkimer Phlurm (‘maybe not his real name) who sought to help an investor client protect his rental property from the risk of liability claims.   The investor asked the attorney, how he might best protect a recent purchase of an income property from threats of litigation.

Short on knowledge of trusts, ‘but long on experience in structuring corporations, partnerships and Limited Liability Companies (LLC’s), ‘the attorney created a nice little LLC for his client in which to hold title to his new property.  Following creation of the entity, and after recording the property’s deed, ‘both, Attorney Phlurm and his client, Rupert Schlitzberg (probably not his real name either), were pleased with the arrangement…’for a while (‘…but any ecstasy was short-lived).

In another year, Mr. Schlitzberg (“Rupert” to his friends) was shocked when he received an excise (transfer) tax bill from the county tax assessor’s office.  Surprise!

As attorney Phlurm might have anticipated and informed his client, ‘the vesting of his property in the LLC triggered a transfer-tax ($2-3,000), ‘in that the property was security for a mortgage at te time, and…’what’s more…‘the transfer to the LLC constituted a clear breach of the lender’s Due-on-Sale Clause (12 USC 1701-j-3), ‘thereupon opening the door for foreclosure on the mortgage ‘should the lender opt to do so (…at any time at all in the future…’obviously leaving the Schlitzbergers on “tenterhooks,”* as it were).

*Tenterhooks,” the expression comes from a tent maker’s extreme stretching of newly woven canvass over a square frame with heavy hooks lining all four sides and then wetting, shrinking then drying the material before coating it with waterproofing (‘See how much you can learn by hanging out with us?)

And…‘not only that… (‘Wait! there’s more), ‘the change of ownership also constituted full justification for reassessment by the county tax collector and quite likely, an even larger tax bill next year.

In one fell swoop there was: 1) taxation on the transfer; 2) violation of the lender’s due on sale clause; 3) triggering of county reassessment, and 4) imposition of restrictions regarding IRC §1031 exchange provisions (re. Continuity of Transfer).

The major error in this scenario was simply the lawyer’s being unfamiliar with the uses, benefits, features, advantages and nuances of land trusts ‘within the jurisdiction where the property was located.  In this case, the attorney’s oversight not only cost the client thousands of dollars, as well as jeopardizing other aspect of the real estate transaction: it also, as well cost the attorney a client.  While Mr. Phlurm sits scratching his head, wondering what happened, his client is out seeking a new and better informed lawyer.

MORE ON DISADVANTAGES OF THE LLC WHEN USED ALONE: 

Self-Employment Taxes:

LLCs are usually subject to self-employment taxes. This means that the profits of the LLC won’t be taxed at the corporate level, but will pass through to its members who will account for those profits on their personal federal tax returns. Oftentimes, these taxes are higher than they would be at the corporate level. Individual LLC members will pay for federal items like Medicare and Social Security.

Frequent Confusion With Company Roles:

Whereas corporations have specific roles (like directors, managers, and employees), LLCs generally do not. This makes it difficult for the company and especially investors to know who’s in charge, who can sign certain contracts and who can bitch at, or fire, whom.

Although reasonably compensated-for in a properly drafted Operating Agreement, in many jurisdictions, if an LLC member leaves the company—unlike as is the case with a corporation (or a land trust whose identity is unaffected by the comings and goings of “shareholders”) the company structure and its liability protection cease to exist.

In most (if not all) jurisdictions, as we have pointed out, the transfer of a mortgaged property into such a “business based” entity (i.e., corporation, LLC, LP, Business Trust or partnership) is fully taxable.

In any jurisdiction, ‘when someone opts to take advantage of the liability protection afforded by the LLC (re. limiting one’s personal liability), an ideal alternative is to fund the LLC with something other than real estate (‘mortgaged or not).  In other words, one can vest the property first in a trustee for a land trust: ‘then vest the trust’s personal property beneficiary interest—‘in the LLC (i.e., make the LLC “a” beneficiary).  Ergo, the property is now protected by the trust, and the owner is personally protected from liability by the LLC (‘not unlike wearing suspenders and a belt together)…’and…there is no call for reassessment, transfer tax or any other negatives that can be applied to the LLC.

The “Due on Sale Clause”:

Over our thirty years in business, we’ve received numerous letters from clients who reported that their lenders had “discovered the title transfer” (‘i.e., to the land trust trustee), and were claiming their due-on-sale admonitions had been skirted; ‘and that the mortgage was about to be called immediately due and payable (‘…and that mandatory retirement of the loan was imminent if foreclosure was to be avoided).

However, regarding such lender’s demands, ‘in each such case, a registered letter was sent to the lender’s Loss Mitigation and Legal Departments, suggesting simply that they review Title 12 of the US Code of Law, §1701-j-3.  In this particular code section it is clearly stated (‘in Law) that a mortgagor (home owner) transferring his/her property to a trustee for a fully revocable, inter vivos (“living”) trust is excluded from recourse provisions under the Federal Depository Institutions Regulations Act of 1982 (i.e. the Garn-St. Germaine Act): therefore, when the borrower remains “a” beneficiary of  the trust, ‘and wherein the trust document itself does not convey occupancy right to another (i.e., ‘such occupancy rights may, however, be granted by a separate lease document, so long as the lease is not for a term of more than three-years or contains a purchase option)–there has been no due-on-sale violation!

DUE-ON-SALE CLAUSE: The clause (Para. #17) in virtually all mortgage loans, that permits a secured mortgage lender (federal, state or private) to call the entire unpaid loan balance Due and Payable immediately should the property securing the loan be sold, transferred, traded, gifted or otherwise disposed of without the lender’s prior written consent (‘and without the borrower’s giving them the opportunity to charge more money or say “No” to the transfer).

Despite the due-on-sale clause and its implications in the creative real estate financing business, it is quite possible for one to take over the payment stream on a non-assumable mortgage loan without needing to fear, or even to be concerned with, a DOSC Violation…’and without violating it.

In order to effect such a take-over without there being an unauthorized transfer, one need simply assure that the property is, in-fact, NOT being sold, traded, hypothe-cated or transferred in any ‘unauthorized’  manner (‘i.e., one’s placing his/her own real estate into his/her own inter vivos trust is not considered an unauthorized transfer as per Title 12 of the US Code §1701j-3)).

In this regard, since placement of real estate in the borrower’s revocable living trust for “asset protection” purposes is fully allowable under the law (ibid); and since appointment of a co-beneficiary as Remainder Agent is a prudent thing to do when creating any kind of inter vivos trust: a would-be “seller (“owner of record”) need merely vest its real estate in bona fide corporate trustee for such a trust, and thereupon deal with the ownership interest in the trust, ‘rather than dealing with the title ownership in the property.

At this point, the buyer (‘i.e., ‘of beneficiary interest: versus interest in real estate) gains virtually 100% of the same incidents and benefits of Fee-Simple Real Estate ownership that any traditional buyer might in a traditional transfer of the property’s title, i.e.: income tax deduction for mortgage interest and property tax, use, occupancy, quiet enjoyment, littoral and riparian water rights, salability, and the right to ‘quiet enjoyment.”

The only caveat here is that the “living (inter vivos)” trust being utilized for this purpose must be an “Illinois-type,” title-holding [Land] Trust, and be fully revocable and be an inter-vivos trust (‘i.e., ‘in effect during one’s lifetime).   However, the land trust is, by its nature, wholly directed by its beneficiaries and ‘not by its trustee, as is the case with other inter vivos trust structure (‘such as, say, a “fully funded inter vivos family trust).  As well, ‘in the land trust, the legal title to the corpus (‘the property) as well as all “equitable” title, is vested in the trustee, who becomes the true (‘albeit, temporary) owner of the real estate during the trust’s stipulated term of agreement.

As a result of of the total vesting of title in the trustee, the beneficiaries themselves, hold only a personal property interest in the trust, versus owning real estate per sé; however, in this type of trust, the beneficiaries are none-the-less treated as property owners for income tax purposes (IRR §92-105).

The term of the trust is decided-upon by mutual-agreement of the beneficiaries, and can last up to 21 years beyond the “life-in-being” of any primary beneficiary (i.e., this rule is to prevent a Contract in Perpetuity).

The rule against perpetuity is often stated as follows: “No interest is good unless it unconditionally must vest, if at all, not later than twenty-one years after the death of some life in being at the creation of the interest.”

*When a part of a grant or will violates the Rule against Perpetuity, only that portion of the grant or devise is removed. All other parts that do not violate the rule are still valid. The perpetuities period under the common law rule is not a fixed term of years. By its terms, the rule limits the term of the contract to no more than 21 years following the death of the last identifiable individual living at the time the interest was created (i.e., the “life in being”).

Such terms generally run for from 1 to 20 years, with the understanding that, at the end of that time, the trust will be terminated and the seller’s interest (as little as 10%) will be forfeited to the co-beneficiary (buyer).  Such forfeiture merely needs to be in consideration of some future act by the buyer (e.g., prompt payments; strict adher-ence to contract terms; a share in appreciation or overall profit; etc.).

Often times, however, beneficiaries might mutually agree to share profits at
termination in proportion to their respective beneficiary interests (50:50, 90:10; 75:25, etc.).  n tis regard, it is most important understand here that the verbiage of a lender’s Due-on-Sale clause doesn’t always convey exactly what we or our attorneys THINK it does, or what the lender expects us to believe it does ( little trickery here)…irrespective of whether a lender’s exercising its rights under a DOS clause are “real,” “false” or indifferent.

What the DOS does infer is: “UNLESS PROHIBITED BY APPLICABLE LAW…” the lender has a right to foreclose, if the title to its security is transferred into a trust, and if a beneficiary interest in that trust is sold or transferred.”
Well…make no mistakes about it! Such action ‘IS’ indeed prohibited by “applicable law.” The Law (The Federal Depository Institutions Regulations Act of 1982) strictly prohibits ANY lender from taking exception to a borrower’s placing its property into its own inter-vivos (living) trust (such as a Title-Holding Land Trust), and appointing a 2nd party to function as a remainder agent co-beneficiary.  Tjs is so because the directors of this type of trust are the beneficiaries, ‘not the trustee.  Ergo, the person to take over in the event of the demise of the director would be another beneficiary: not another trustee.

Further, there is nothing to prevent the same co-beneficiaries from leasing the property out to any one they may choose…’say, to the trust’s 2nd co-beneficiary, for example.

Overall, the process described here creates what is tantamount to a legally constructed, and very safe and well-shielded ‘Wrap-Around Seller-Carry’ device.

Since the original owner of the property has named the second party as a beneficiary in the trust and leased the property to him/her under a triple-net lease (i.e., net, net, net lease, wherein the tenant pays mortgage interest, property tax and handles all maintenance), the resident beneficiary (or investor co-beneficiary) has obtained all the benefits of a standard sale… ‘without there actually having been one.

When proposing that a seller remain on the existing loan for you: if you really want to be assured of ‘getting the deal,’ its important that you make it sound so good for the seller that he can’t refuse.  In order to do that, you’d suggest that for his own safety and peace of mind, you’ll pay to put the property into a neutral trust (‘if he prefers), and that he need never transfer the property’s title to you at all… until you’ve proven yourself, by eventually refinancing or selling the property and paying off
his mortgage.

In this scenario, you’d explain that you’ll consent to merely becoming a co-bene-ficiary in the trust until the loan is fully retired in, say, 6 months (or 3, 4, 5 or 20 years…or more).

Note that this arrangement (i.e., a “Equity Holding Trust Transfer™”) gives you, as the buyer, 100% of the tax write-off (See IRC § 163(h)4(D)); 100% of the use, occupancy, possession; 100% of the equity build-up (from principal reduction); full rights to all rents; and other profits upon the sale or other disposition of the property.

Note as well, that you also have any and all other rights ordinarily only available under the so-called “Bundle of Rights” in any form of Fee-Simple Real Estate
ownership.

In the Equity Holding Transfer™,  the seller needn’t ever take any chances with you; and you don’t have to take any chances with the seller either. By virtue of the structure of the Equity Holding Transfer™, the trust property is protected from liens, suits judgments, divorce actions or claims, bankruptcies or anything else you can think of…’on both sides…’including state and/or IRS tax liens. Moreover, the due-on-sale clause becomes pretty much a non-issue in that the property has not been sold; the title has not been transferred (other than to the borrower’s authorized trust); and there is no consideration for a ‘purchase of real estate’ per se.

In addition, the commodity being transferred (beneficiary interest in a trust) is characterized as Personalty (personal property), and not Realty (real estate), and therefore is not subject to the same creditor rights as would be real estate.  And…the transaction has not infringed upon the lender’s foreclosure rights, or compromised its security interest).

In closing, do note that for maximum safety, it recommended that at least 10% of the trust’s Beneficiary Interest and 50% of the beneficiary’s Power of Direction should be retained by the settlor (seller), with an agreement to forfeit that interest to you upon disposition of the property at the trust’s termination. However, also note that the Settlor Beneficiary’s fifty percent Power of Direction can be given to you by means of either an Assignment of Power of Direction, or by a Revocable, Limited, Power of Attorney.

The reason for the seller’s retaining a percentage of beneficial interest is to satisfy the requirement that if the seller places his property into a revocable trust, he must be and remain a beneficiary of that trust. The reason for keeping the 50% Power of Direction intact, is that most county jurisdictions will not re-assess the property for
property taxes, or require transfer fees, when one transfers its property to a bona fide living trust, so long as no more than 50% of the “voting rights” are being conveyed by the transaction.

CAN AN EQUITY HOLDING  LAND TRUST TRANSFER™ (EQUITY HOLDING TRUST TRANSFER™) AVOID THE PERILS INHERENT IN INNOVATIVE REAL ESTATE FINANCING AND ACQUISITION 

Much has been said and written about the ©Equity Holding Corp  Trust Transfer™ concept (i.e.,, the EHTransfer™) and it appears that a select few are finally beginning “to get it.” However, probably because the so effectively replaces the need for other creative financing schemes and dreams, it often falls under attack by its detractors (especially by certain lawyers who make their livings by doing that which they more fully understand; and by those who tout and teach older, less protective, concepts such as wrap-arounds, contracts-for-deed, equity shares and lease options).

In actuality EHTransfer™ supports the objectives of each of those seller-carry vehicles, while offering a much sturdier platform for protecting the property, and therefore the principals, from the myriad risks and downsides of owner-carry financing. Few proponents of subject-to financing wouldn’t agree that there are numerous risks inherent in one’s agreeing to share a property’s title or mortgage loan obligations with another.

The EHTransfer™: A property is vested with a land trust trustee, and instead of conveying title interest; a PARTIAL beneficiary interest in the trust is assigned to a would-be buyer. That party, once named as Successor Beneficiary in the trust, and a Net Lessee in the trust property becomes entitled to all the benefits of homeowner ownership, including income tax deductions for mortgage interest and property tax.

STUFF TO AVOID WHEN YOU CAN 

Let’s look into a few potentially risky shortcomings pertinent to creative real estate financing, which downsides can be avoided by use of the multi-faceted title holding land trust transfer. The objective for anyone acquiring real estate ownership should always be minimum risk and maximum protection, without sacrificing income or capital gain potential.

Violation of the Lender’s Due-On-Sale Clause: 

Whether deemed a real “threat” by certain “gurus” or not (i.e., those who claim that banks just don’t care about unauthorized transfer), a DOSC call can be disastrous for someone who cannot afford to refinance when a lender calls its loan due because of an unauthorized title transfer (We hold letters from major national lenders clearly altering their stance on such transfers, stating that the EHTransfer™ model does not create a compromise of their alienation admonitions). 

The Threat of Either Party’s Legal Actions Creating an Attachment or Charging Order upon the Property: 

In any so-called Wrap, Contract for Deed, Lease Purchase or Equity Share arrangement, multiple parties are involved, and each one has either a valuable financial interest in the property, or has a primary payment obligation relative to its mortgage. As a result, there is always a real danger that either party’s liens, lawsuits, marital disputes, bankruptcy or probate proceedings could seriously cloud title to the subject property, thereby creating a grave predicament for the other party. This threat is virtually eliminated by use of the co-beneficiary, third-party trustee, title-holding land trust, in that a beneficiary’s ownership in such as trust is purely of personalty (personal property) rather than of realty (real estate) and cannot be partitioned by judgment creditors (legal opinion letters on file).

Difficulty in Dispossessing an Errant Tenant/Buyer.

When an equitable interest in real property (real estate) is conveyed to someone with a possessory interest in that same property, such party is no longer subject to eviction for damage or non-payment.  Instead, dispossession of an “owner” must take the form of foreclosure, and may also require ejectment action and quiet-title action in order to regain possession, entry and salability of the property.  In this regard, one would be well advised to employ an Equity Holding Trust Transfer™ for conveyance of the property to a prospective buyer. Such an arrangement might remain in effect until such time as the tenant/beneficiary sells the property, or refinances and purchased it outright at the trust’s termination.

In the Equity Holding Transfer™, a corporate trustee holds the property’s legal and equitable title while the tenant/beneficiary remains under the threat of simple eviction (rather than foreclosure), while concurrently enjoying all the benefits of ownership, but without title ownership of the real estate itself.

STUFF YOU CAN DO WITH THE ©EQUITY HOLDING TRUST TRANSFER™ 

To effect the objectives of a Lease Option (i.e., a unilateral agreement to sell), the land trust property can be leased with a contractual understanding that the tenant may purchase the property or a future interest in the trust itself at some later date. Such purchase can be set at full Fair Market Value, less any monies owned to the tenant by the trust. And instead of an Option fee, the tenant can post the some predetermined amount in the trust‘s required Contingency Fund. The monthly lease obligation then becomes an aggregate payment including mortgage principal and interest, the property tax, the insurance, a monthly trustee’s holding fee and an overage that becomes the settlor’s (or investor’s) positive cash flow. [Note that any contract verbiage connoting an option to purchase constitutes a due-on-sale violation (re. 12USC1701-j-3)] 

To effect the objectives of a Lease-Purchase (‘a bilateral agreement to sell and acquire) 

In the Equity Holding Corp’s land trust transfer system, the anchoring land trust’s tenant- beneficiary can be assigned as little as a 10% beneficiary interest in the trust with a promise to convey the remainder upon that party’s  tenant/buyer’s outright acquisition of the property at the trust’s termination.  All benefits of ownership including tax write-off, appreciation, principal reduction and pride of ownership are available to the tenant throughout the transaction.

To effect the objectives of a Wrap-Around Mortgage or Contract for Deed 

The would-be buyer/”vendee” is made a successor beneficiary in the anchoring land trust and given, say, 10% or more beneficiary interest in the trust, to hold until a new loan would be obtained and the property be purchased outright.

To effect the objectives of an Equity Share 

The land trust’s tenant/beneficiary is given a 50% interest in the land trust, and a corresponding 50% share in net profits when the property sells or is refinanced at termination…’by the tenant (‘following a return of the seller’s or investor’s initial equity at inception).

The Equity Holding Tax Lease 

A tenant/beneficiary is given, say, a 10% beneficiary interest in the land trust, along with the full burdens of ownership, along with an agreement to relinquish its interest in the trust at termination. In order to be entitled to the income tax deductions for interest and property tax, the tenant need only qualify under IRC 163 (re. “Qualified Residence” parameters), being paying all taxes, insurance, monthly payments, and hold at least a 10% beneficiary interest in the underlying title holding land trust.  I.e., at termination the trust and the triple-net lease terminate and the tenant-beneficiary is free to move-on or negotiate for an extended term of years.

LET’S GET SERIOUS ABOUT THIS BUSINESS OF OURS!

NO ONE NEEDS PILES OF CASH OR GREAT CREDIT
IN ORDER TO MAKE A LOT OF MONEY IN
“CREATIVE” REAL ESTATE INVESTING!

Can you acquire investment real estate and get wealthy, despite starting off with ‘No Credit,’ ‘Marginal Credit’ or even ‘Bad’ Credit?  ‘And how about making money in this business when your perceived short-comings include — ‘having no cash either?

Wait! Let’s make it even worse.  Let’s presume you’re sans (i.e., without) cash and credit, but you also have no experience, no professional contacts…’and you’re ugly.

[Were any of these factors really to matter, regarding success in this business, ‘especially that last one-I’d still be slopping pigs and plucking chickens for a living (…’not meaning to disparage any chicken-pluckers or pig slop slingers out there, by the way; ‘but I do find accumulating and counting money and real estate titles is a far more rewarding enterprise)..

Regarding the first question (i.e., “Can you…”), the answer is a resounding “YES”! But that’s true only if you have lots of other stuff too, ‘such as a self-starting ability, determination, sincerity, maturity and at least a modicum of salesability… and–above all– ‘a Burning Desire to Achieve!

Do you need every one of these qualities in order to be financially successful?  No! But if you are missing any one of them, your maximal chance of success is reduced proportionately with each missing element…’with special attention to the “Burning Desire” part.

With no disrespect for those who have sacrificed, scrimped, and saved to maintain perfect credit, I’d like to say that I couldn’t adequately express the respect (‘and no small degree of jealousy) that I have for you and your achievement. Personally, however, I have never been blessed with a lot of money and good credit at the same time.

Throughout the many phases of my own personal development (‘beginning somewhere around the Cenozoic Epoch), I’ve had both…’just never simultaneously.

Nevertheless, even without an abundance of cash and/or credit at any one time, I’ve managed to accumulate several million dollars’ worth real estate at various times over the years; ‘with almost none of it acquired with, or because of, credit (or cash).

And although, to some extent, the cash and credit parts of life-in general have improved a bit for me, I still prefer to acquire property silently and secretly without a cent out of my own pocket, and without a new mortgage loan or monthly payments.

Real estate is virtually free for me, given the way I do it, ‘in as much as my resident-beneficiary tenant-partners make the payments, handle all repairs and upkeep, and cover any upfront fees when I put them in the properties).

For anyone whose credit has been damaged: ‘know for sure that reestablishing it is a prudent thing to do; however, don’t forget that one’s not “using” their credit (the American Stoic approach) is far worse than one’s not having it.  Although, millions of us do just fine without it for long stretches of time…because we can get it.

Here’s my logic: If people with great credit don’t use it, and get rich anyway, ‘why would someone else without any need to worry about not having it?

And that’s where I come in.  In my own case, I filed a business BK in 1989, and gave away, and spent, everything I had ever owned in my life (‘everything!) in order to pay off my creditors. It took a while, but I did it, and I didn’t suffer much in the process, because within a month of having gone through the ordeal, I acquired a beautiful $520,000 home without a penny out of my pocket and without any need for credit. I even gave the seller (‘Mr. and Mrs. Gil Burrell of Granada Hills, California) my full credit report along with all the information leading up to my bankruptcy.

I got the property based solely upon my pleasant demeanor, decent “selling skills” and my plausible explanation for the BK and bad credit. Because of the sincerity I portrayed along with my offer to provide my plan for correcting the problems (and the “expensive looking” suit that I was wearing), the idea of credit per se became a non-issue for getting that property…’and another fifty more over the next couple years.

After that period in our lives, unfortunately the Burrell house was shaken apart by the 1994 Northridge Earthquake, reducing its value overnight by $300,000, leaving an over-encumbrance of $200,000 plus: ‘at which time I just walked-away; ‘and by the same techniques, acquired another home  a mile or two distant, and carried-on with our business (i.e., ‘no down, no credit, no new mortgage real estate acquisition), whereby my resident co-beneficiaries in the trusts that held titles to those properties, paid all the bills and handled all maintenance and general expenses for me (‘payments, taxes, insurance, HOA dues and a reasonable positive cash-flow to me)…’in exchange for use, occupancy, full tax-deductions, loan principal reduction, hoped-for appreciation and Pride of Ownership.  [Neither I nor they were on title, or on the loans, but with the EHTrust™ transfer system that we teach, that doesn’t matter.]

So…’about the time I began to feel secure, successful and cocky again re. my exquisite home-buying skills, and making better than average money by teaching hundreds of others how to do what I knew how to do so well, ‘the 2007 Subprime Crisis swooped in, hit hard and gained momentum clear up to, and well-beyond, 2010 (‘and is still haunting hundreds of thousands of the “totally screwed” throughout the country today.

In 2007 and the early part of 2008, I was fortunate enough to see the proverbial “writing on the wall,” and successfully sold-off several of our properties…the one’s with real equity in them (‘in which I had pure profit due to having no real money invested in them).

However, as is the often the case …‘When the Student is ready…the Teacher…’swoops down from out of the sky and beats the living crap out of the poor student…’in order to cure him of his hubris and wholly unearned cockiness.

Overall, in the melee I lost 53 properties due to the crisis, and managed to use up the profit I’d gotten from my earlier sales in attempting to salvage the rest…’all to no avail, while the economy continued on its path from “really bad” to atomically super-shitty (‘pardon the expression…’it’s an ancient Druid term derived from an amalgam of the ancient Druid words – “Shingle,” and the abbreviation for “Teletype”: I.e.: Shi[ngle]+TTY).

Since that time, we’ve survived, and we do reasonably well in having silently acquired a modest number of other properties by precisely the same methods…’i.e., ‘wholly without credit or cash, but with being more picky about our tenants and how much up front cash they come in with.  We now make sure they don’t have bullet holes in their cars, and that their pants are not lowered below their buttoxes ‘so as to display their gang colors on their drawers or any “vertical hemispheric demarcation (‘as it were).”

I wouldn’t say we’ve recovered completely…yet, ‘but we’re getting there, and we do eat pretty regularly, and are reasonably well-protected from the elements (wind and rain) ‘as long as the next storm doesn’t blow the canvass off our makeshift tent poles. (‘No…’actually we have a very nice home in Henderson Nevada and thank God for giving us the prime-rate crisis as a reason for permanently putting California in our rear view mirror (‘no offense to Californians…’its just that your taxes are too high and your politicians are too crooked…’and all of them are certifiably goofy).

Without ANY apparent “credit worthiness” we’ve managed to acquire credit cards (secured and unsecured), and to finance several nice automobiles. ‘Over the years, I must say, that we just haven’t suffered much, even in view of losing 53 properties and a couple million in equity: due largely to having very little invested: ‘as the properties were all acquired without down payments, without new mortgages; and our resident beneficiaries paid all the bills (‘i.e., until they couldn’t do so any more… ‘at which time the properties went back to their original owners, for their decision as to whether they wanted them back, or preferred to let them go to foreclosure (‘virtually all went the foreclosure route, but there were no loans in my name and I was not on single title…’my corporate trustee was and was beyond all responsibility and recourse).

The upside of it all is…’well…’what all losers say when they finally get back on their feet after a losing streak:  “Aha!  Now I know what to do the next time this happens (‘although, providence will probably figure out another prank with which to punch me in the gut until I get the point).”

And that point is a simple one: The prudent person should do everything in his or her power to get their credit in order; but in the meantime, ‘never let the absence of credit negatively interfere with, or affect, their investment pursuits.  One simply does not need cash OR credit in order to be a successful real estate entrepreneur… ‘assuming a good grasp of their intentions, and a good escape plan, when starting…’and assuming you have a solid source of information, education, know-how, mentoring and coaching, and a source for sound and dependable advice and encouragement.

Following–‘in the order of their overall importance–are the tools you need in the No Down, No New Loan, real estate investing business:

  1.  An honest dissatisfaction with the status quo
  2.  A burning desire to achieve
  3. An honest NEED for increased abundance. I.e., ‘if you DON’T NEED it…’you won’t get it!  ‘Without needing (‘having a burning desire for it) you only have wishing, hoping and dreaming to depend on, ‘which are each on par with horse-racing and crap-shooting as far as attaining is concerned).
  4. Tenacity: I.e., ‘the undaunted ability to stick-to-it, no matter what!
  5. Resiliency: I.e., the ability to shrug off a failure (‘or several of them in a row) and move on with undiminished zeal
  6. Selling skills: Learned and/or natural sales-ability (‘i.e., the ability to listen and think at the same time; always listening more than talking; remaining 100% honest and forthright while staying unattached to the outcome)
  7. A professional and business-like demeanor re. your personal grooming and attire. E.g., a misplaced body-piercing or ornamentation can cost you millions in lost opportunities in just a few years…’without your ever even knowing that it happened, ‘much less Why
  8. A solid understanding of Real Estate and Real Estate Finance
  9. A source of available cash…or someone to call-upon who has it… or a way to avoid its necessity
  10. A real comfort in product knowledge, allowing one to “go commando” in this business.)   *Comando: No cash, no credit, No experience and perhaps Limited sobriety

In this business, without at least the first five elements in the above list, you are likely destined for failure (‘in this business).  However, with #1 through #5, ‘along with any one of #6 through #10, your chances of success are good.

With all of, say, 9 out of 10, your success is unavoidable, and abundance is already yours, and just patiently waiting for you to reach for it and demand it into you life.

The best advice anyone will ever give you: ‘Find that Self-Serving Need in your life that is feeding upon your financial deficiency and destiny…’and eliminate it ‘once and for all.  Know that anything pleasurable that you decide you can live without will always (invariably) be immediately replaced by something else that is better for you and you life’s aspirations.

OVER ENCUMBERED PROPERTIES

BIG PROFITS WITHOUT COMPETITION
Bill Gatten

Consider this:

If you could know with confidence that a particular stock (‘say, “Peachy Computers”) is selling for $550 per-share today, and that it will more than double in value over the next two months, ‘would you be willing to pay $600 per-share for it (i.e., $50.00 per-share more than it’s worth)?

Gosh, I hope so, but now consider the same scenarios where you have a “cash partner” who will put up the $50 for you for half of the $50 in a couple months (‘a 50% ROI in two months?  ‘Not a bad deal for you and your benefactor Gosh, I hope so, but now consider the same scenarios where you have a “cash partner” who will put up the $50 and who will be satisfied with just half of the $50 in a couple months (‘a 50% ROI in two months?  ‘Not a bad deal for the partner and a super-dooper deal for you: ‘i.e. a ten-billion-plus percent ROI (which would be about the same ROI if you’d invested 10 cents).

Or (‘now a little closer to home), ‘let’s say you find a house with a value of $225,000, and you learn that the property is securing a loan of $250,000.  ‘Would/could this be a good deal for you IF, say, you knew for sure than the property would be worth $300,000 in three years, ‘i.e., given reasonable appreciation projections?

In your computations here, now consider the same house not appreciating at all over the next three years, ‘during which time you have a tenant-buyer (“partner”) living in it, making all the payments, and who posted a $10,000 Contingency Fund up front in order to get in without a full down payment or needing to qualify for a mortgage, ‘and who is also paying you $150-$200  per-month in positive cash-flow, while personally 100% of all maintenance, repairs, taxes and insurance along with the underlying loan’s principal and interest.

Would the forgoing opportunity be a good deal?

Considering this deal (never use the term “deal” in any conversation with a client  or prospect), remember that you got the house for nothing down and merely assumed and passed-on the existing recurring costs your tenant-buyer.

You had no standard credit qualifying process; and you’re holding $10,000 in a Contingency Fund…’all without a violation of the underlying lender’s \Due-on-Sale admonitions, or compromise of any federal regulation concerning restriction re. Owner-financing of real estate (Dodd-Frank)?  Also consider doing a transaction like this perhaps once or twice a month with others of the millions of over-encumbered properties across the US (‘i.e., by a method that very few others have the slightest idea of how to handle).

Alternatively, let’s now say that you are given an opportunity to take-over a $250,000 clean 3-bedroom, 2-bath, 1800 sq. ft. home in a nice area – i.e., ‘one on which you need make no payments (‘your partner will do that), on which you receive a positive cash flow of, say, $100 or $200 per month…’and all of this, without the necessity of a down-payment, new financing or credit qualifying.

Would you take it? 

Wait!  What?  No payments?   Before you decide on this one, remember that this fictional property, like the fictional stock purchase above, has no equity (‘i.e., its market value is $250,000 and the loan-payoff is $275,000).  I.e. ‘not only is there NO equity, but the “equity” is NEGATIVE by $25,000).  ‘Still interested?

Before you decide, note that should you accept the property as offered, you’ll have no maintenance costs or management or repair expenses.  Moreover, ‘it’s not you who is on the loan and who will be primarily responsible for making payments or paying for property taxes, insurance (‘or any HOA dues or assessments)…’and your name will not appear on the mortgage, ‘nor will it appear in the public recording of the property’s deed (title).

OK, Now decide:  ‘Pipe Dream, or Dream-Come-True?  Or… ‘is it one of those too-good-to-be-true scams that pop-up so frequently in our business?

I’m hoping (trusting) that your response to the questions above (i.e., “Would you do it?”) will be the same as mine would be, ‘which is, “Buddy, you can bet those hagfish-skin cowboy boots, I would!”

“But why on Earth,” ‘some might say, “would anyone choose to take on the responsibility of an overpriced, over-encumbered property with negative equity?”  [Analogous side-question posed as a rhetorical didactic statement] ‘Why do people keep buying stocks and bonds when their value at inception is exactly equivalent to their purchase price…i.e…’no equity?].

The real issue here is that Equity in real estate is wonderful when you have it; but it has never been the “Be-All and End-All” when it comes to real estate acquisition; and those who think otherwise are missing the point and some significant opportunities involving millions of dollars in potential income, profit and a highly satisfying life of financial security—and here’s why:

There are, after all, myriad readily salable benefits of real property ownership, aside from Equity, ‘some of which include:

  1. Income Tax Write-Off for mortgage interest and property tax (‘and its “transferability” for profit);
  2. Equity build-up from mortgage-principal reduction;
  3. Equity build-up from economic appreciation;
  4. Use as collateral for other real estate acquisitions or unrelated business opportunities;
  5. Rental, Lease and Purchase-Option income potential;
  6. Time-sharing potential in certain types of properties;
  7. Re-salability (marketability) i.e., packaging for early re-sale to other investors;
  8. Land Use, beyond residential occupancy;
  9. Profits derived from “flipping” and/or discounting one’s ownership or acquisition rights to another party;
  10. Pride of Ownership– ‘singularly the most sought-after, salable and coveted aspect of homeownership).

It should be clear in perusing the foregoing list that one needs only a few of these benefits (‘maybe even just one or two) to make money in the business of real estate acquisition.  For example, ‘consider how you might fare in your own real estate investing endeavors were you to have, say, only items  #3, #2 and #8; or perhaps only items #2 and #3; or #4, #7, #8 and #9 (…or maybe 9 out of 10).

The point is, ‘who needs “Equity” when all these other profit centers are so clearly abundant and so simply and easily at your disposal?

THINK, IF YOU WILL, ABOUT…

A serious “Don’t-Wanter” homeowner who is straddled with a $250,000 property earing a loan balance of $350,000 (i.e., ‘upside down by $100,000), and an aggregate PITI payment (‘i.e., principal, interest, taxes and insurance) of $2,530 per-month. [i.e., P&I = $1,880 + T = $525 + I = $125].

  1. Consider that any traditional home buyer acquiring a similarly valued home would need to take out a loan for $250,000 at, say, 4.5% interest if 100% financing were indeed available to such a buyer with perfect credit.  In this case, the aggregate PITI payment (i.e., principal, interest, tax and insurance) would be $1,750 (Est) per-month for 30 years (i.e., P&I = $1,390 + T = $260 + I = $100).
  1. Therefore, quite obviously, a seller of this over-encumbered property (i.e., $250K value with a $350K loan) can’t sell by traditional means without paying his bank $100,000 in cash and covering closing costs of about another $20,000 and paying all maintenance and management costs on top of that (i.e., ‘converting the over encumbrance to $120,000.  He/she is, instead, forced to rent or lease the property out for around $1,500per-month: i.e., leaving him/her with a negative cash flow of over $2-300 per-month: plus rental property management (‘not an enviable position in which to find oneself).
  1. ..’in view of ‘a’ & ‘b’ above, what might such a property owner say to your offer to take the property over and reduce his/her negative cash-flow down from to, say, $500 or $600 per-month to a lot less, while you simultaneously relieve him/her of 100% of all management, maintenance, taxes and insurance expenses…AND…’the $120,000 over-encumbrance?

Moreover, when/if you offer to take this burden off the owner’s hands, are you not essentially handing him/her a hypothetical check for $120,000 in non-taxable  debt-relief …after having calculated about how long it will take for economic appreciation and mortgage principal reduction to sufficiently to neutralize the overage (‘a simple process with any business calculator)?  And what if no appreciation ever takes place?  How much did you lose, given your right to walk-away at the transaction termination, either relinquishing title back to the owner-of-record or negotiating an extension of the original terms?

Realistically, if any reasonable person in this predicament would object to paying you, say, $5,000, $10,000 or $15,000 upfront, ‘or, say, $500 per-month for 60 months, for doing this for them, they are not thinking clearly at all?  After all, your fee is far less than closing costs and real estate commissions would be (‘even if a Realtor® would take the listing…’which they won’t) in a traditional sale if such a sale were possible.

  1. ‘By the same token, ‘what might a potential homebuyer with marginal credit and minimal down payment say to paying you a bit more than Fair Market Rent, in exchange for 100% the income tax write-off for property tax and mortgage interest, along with all (100%) of the benefits inherent in Fee Simple real estate ownership?  ‘All without a down payment or loan-qualifying,
  1. Think about it… ‘for someone in a one-third income tax-bracket, ‘the after-tax cost of renting for $1,700 per-month is actually $2,550 per month

(I.e., ‘after earning that amount and giving 1/3rd of it to the government for taxes, 2/3rds of the $2,550 is left-over to pay the $1,700 rent.  This obviously then means that the actual after-tax cost of renting in this case (or any other) is really $850 per-month more than the $1,700 rent (‘as a matter-of-fact, the renter is paying 50% of his/her rent ‘in income tax” (‘i.e., 1/3rd of what’s he/she earns, but 1/2 of what’s paid…(’that’s the unwritten, sort’a  secret and tricky rule of the IRS).  I.e.: “OK you want to spend a dollar? Well, then, but you’d better earn a dollar-and-a-half, so that when we take out our 1/3rd for tax, you’ll still have a dollar left to spend: we want half of what you spend, which is one-third of what you earn…’Like it or not, we are your 50:50 partner, Pal.”

Question:  Which is less expensive — ‘the after-tax cost of $1,700 per-month rent ($1,700 + $850 = $2,550), or an aggregate mortgage payment of $2,200 per-month with a tax deduction?

Answer:  Because of the tax deduction benefit, the $2,200 house payment turns out to be significantly less than renting the same house.

  1. Now—‘stop for another quiet moment and seriously consider how much a tenant-buyer might pay YOU upfront (‘or per-month, ‘over and above the “mortgage” payment) in exchange for your putting him/her into their “dream home” for what is tantamount to 100% fee-simple home ownership, without a down payment or any more credit-qualifying than you, yourself, might require.
  1. With $500 from the seller and $2,200 from the buyer per-month, you have a positive cash-flow, in addition to the upfront money (‘or the no-interest monthly installments paid to you for it).

Also…’in any such arrangement, your “seller,” your “buyer” and YOU, are well-shielded by the type of trust in which the property is vested: i.e., ‘protected against threatened litigation involving the property—by virtue of the Equity Holding Trust Transfer® in whose third-party bonded, licensed, non-profit corporate trustee, the property’s legal and equitable title are vested for an agreed-upon term.

Find a better system that this for dealing with otherwise wholly untenable investment real estate, and we’ll buy you soup taco (‘as flimsy a thing as one surely must be).

A tough question posed recently by a would-be investor in the East: 

“Where I live there hasn’t been any appreciation in real estate for several years now. If I truly want to pursue being a real estate investor, should I move elsewhere, or wait for the market to turn?

To some this might seem a reasonable question; however, my response was: “Stay put! Empowering such bogus rationale is what keeps the millionaire ranks as low in number as they are.”

The key to creative real estate investing is to have a plan that adapts quickly to ANY market…it doesn’t matter which direction market dynamics flow, the force is still there: water flows east with the same strength as when it runs west. In a “down” market, there are few willing buyers; but obtainable properties abound, and they’re all for sale at the best prices.

In an “Up” market there may be fewer “easily” obtainable properties: but there are more buyers, and they’ll do just about anything you want them to in order to get in on the action.

The fact is that market dynamics in creative real estate have always required “thinking outside the box.” The true creative entrepreneur lives with, copes with, and makes his/her living with…’that fact always in mind.

Think about it…a fisherman who goes fishing armed only with catfish bait, most probably won’t catch trout. All he can expect to bring home is catfish…’if they’re biting that day. If the catfish aren’t hungry, the fisherman will be.

On the other hand, the serious and well-studied angler, carries a “full” tackle box, so that when the catfish aren’t biting, he can hook up for trout, bass, walleye…or a sperm whale, if he wants to…’at a moment’s notice.

Understand that when real estate appreciation trends are up, a seller’s market prevails: sellers set high prices and hang in there till they get them. On the other hand, when appreciation is down or stagnant, that’s a buyer’s market: fewer of those kinds of properties may be available, and their sales are sparse.  It’s during these downtimes that most folks are counting pennies and digging in for a long winter, rather than looking for a new home.

In other words, a seller’s market pushes prices and circumstances toward the seller’s benefit; whereas a buyer’s market pulls everything down to suit more buyers’ needs.  But none of this should be a concern of the well-studied CRE investor. In an up market you sell, in a down market you buy and hold.

During our last major downturn, a common cry was: “Help!  Houses are a dime a dozen, but I can’t find any buyers.” But now that the market has turned, the current entreaty is, “Help! Buyers are everywhere, but I can’t find any houses!” And (for the most part) who do you suppose these two disparate plaintive moans are coming from?

Right! Exactly the same people: ‘those who choose to blame their own shortcomings on market condition, having failed to plan to “bend with the trend (as it were).”

To excel in any market, we need education…and dependable tools that work in all circumstances. In a seller’s market, we must be able to attract and serve buyers who would love to climb on the home-buying bandwagon, but who haven’t yet saved up the cash or garnered the credit to do so. In a buyer’s market, that knowledge and those same tools must attract sellers of no, low, or negative equity properties; fixer-uppers; distress sales; NOD filings; and “hard-to-moves”…while simultaneously wedging us, the creative investor, into the middle.
This is where Equity Holding Corp’s Equity Holding Trust Transfer™ comes in.

The Equity Holding Trust Transfer™  is, in essence, a third-party title-holding (land) trust system (“on steroids”) , which works virtual wonders for investors, buyers and sellers in any market.

With this remarkable tool, the existing mortgage stays in place—without a due-on-sale compromise; as full income tax write-off is transferred to the tenant-buyer  (‘i.e., in exchange for higher payments than rent can provide a landlord; but significantly lower payments for the tenant-buyer (due to the many ownership benefits including full income tax deductions for mortgage interest and property tax, as well as profit sharing).

By virtue of the anonymity of ownership, the Transfer™ property is well shielded from creditor judgements, tax liens, lawsuits, bankruptcy action and marital disputes. Think of it:  No down payment; No bank qualifying; No payments; No expenses; No recourse; No eviction (dispossession) problems; and No tenants, toilets, trash and trouble.

THIS is creative real estate investing!

Imagine telling a seller who may be reticent about “carrying,” that he needn’t transfer the title to you until you opt to sell or refinance in the future. Or that he needn’t worry about liens, suits, judgements or personal problems ever compromising the property’s title… while he remains on the loan (‘nor do you need to worry about such occurrences on his behalf).

The Equity Holding Trust Transfer™ gives your tenant full tax write-off in exchange for paying (your) full mortgage payment, property tax and insurance (and HOA?). For a share in future appreciation potential, they’ll gladly pay 100% of the (your) maintenance, repair and management costs. In other words: “Mr. Buyer, if you can afford the payments (which include a few hundred in positive cash-flow for me) and a few thousand dollars in closing costs (most of which goes into my fuzzy little pocket)… I’ll give you the property.  The only thing I want out of it is to have you refinance it in yur own name, or sell it, in a few years, and at that time, ‘if there’s been any appreciation, we can just split it.”  In the meantime you have 100% of the house, 100% of the tax write and 100% of all fee-simple real estate ownership benefits…’ and of course…’full pride of ownership.