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Tax decuctible interest, unsecured note.

Home Forums General EHTrust/EHT Topics and Creative Real Estate Financing Tax decuctible interest, unsecured note.

This topic contains 21 replies, has 0 voices, and was last updated by Avatar of anonymous anonymous 15 years, 1 month ago.

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  • #7098
    Avatar of bill_gatten
    bill_gatten
    Participant

    a 3 year lease shielded by a 5 year trust can be referred to as a five year lease.

    #7099
    Avatar of smiley
    smiley
    Member

    Bill,
    Thanks for the reply. I am presuming that in Scotts example, the following would happen.
    1. Set up trust for 5 years
    2. Lease to RB for 2yr, 11mo, 29 days
    3. At the end of (3 yr) lease, agree to lease property on a day to day hold over until the trust expires (5 yrs)
    Now, The RB might be leary of doing something “day to day” for 2 yrs, fearing they might be evicted (screwed) at the whim of the other beneficiaries, however, this is how I`m understanding the process. (please correct me if I`m wrong).
    At the inception of the trust, All 3 co-beneficiaries would agree to the 5yr term of the trust, and to lease the property to one of the co-bens (RB) for 3yrs, and to a day to day hold over after the (3yr) lease expires for a total of 5yrs.
    The only way the RB could be evicted is if they broke a provision of the trust.
    Even if the other 2 co-bens wanted the RB out after the (3yr) lease was up, the only way this could happen is if the RB agreed (essentially evicting themselves).
    So, the original homeowner loves it because he gets top dollar for his house (no RE comms or give ups from negotiation).
    I love it because I get bigggggg $ where none existed (cash flow, equity split w/RB and equity buy down from SB).
    The RB loves it because they get all of the benefits of home ownership instead of renting (tax write offs, equity split w/IB, and pride in a home they could not get conventionally).
    They just have to agree to the 5yr term (or whatever term is specified).
    Is this it, or am I in need of a mental flogging?
    Eric :-)

    #7100
    Avatar of sserio
    sserio
    Member
    Quote:
    3. At the end of (3 yr) lease, agree to lease property on a day to day hold over until the trust expires (5 yrs)
    Now, The RB might be leary of doing something “day to day” for 2 yrs, fearing they might be evicted (screwed) at the whim of the other beneficiaries, however, this is how I`m understanding the process. (please correct me if I`m wrong).

    At the inception of the trust, All 3 co-beneficiaries would agree to the 5yr term of the trust, and to lease the property to one of the co-bens (RB) for 3yrs, and to a day to day hold over after the (3yr) lease expires for a total of 5yrs.

    The only way the RB could be evicted is if they broke a provision of the trust.

    Even if the other 2 co-bens wanted the RB out after the (3yr) lease was up, the only way this could happen is if the RB agreed (essentially evicting themselves).

    Eric,

    I think you answered your own question on #3.

    #7101
    Avatar of jimmonty
    jimmonty
    Member

    Great example. I appreciate everyone sharing as I am new and just trying to get started.

    #7102
    Avatar of scott_l._moyes
    scott_l._moyes
    Participant

    Thank you for the compliment. ?I have been posting for several years now but until lately I did not register. ?Stars by my name don’t mean a thing. It should be Little Houses.

    The script you are referring to is in all the Success Packs and in your Network Member Kits. ?You have heard Bill use it in every workshop and seminar he gives. ?I will not post it here as we don’t want Non-Members to get a hold of our secrets. ?However if you are having some difficulty finding it you may email me and I will tell you where to ?find it.

    Most of the deals I try to do now include the use of a 5 year or better trust agreement. ?The lease itself is always as you outlined above and of course can be terminated really at anytime the co-beneficiaries agree.

    I like the longest trust term I can get just in case the market tanks and needs a little more time to recover.

    #7103
    Avatar of anonymous
    anonymous
    Member

    Scott,

    Even if the trust is for three years and you wanted say two more years.

    #7104
    Avatar of scott_l._moyes
    scott_l._moyes
    Participant

    Well maybe Bill would have a better response but I will give it a try.

    If the trust has not be terminated in three years by the RB either selling or refinancing the place then I believe it would remain as a simple month to month NET Lease arrangement.

    I believe a new trust would be in order and a new Beneficiary and Occupancy Agreement would be needed.

    #7105
    Avatar of sandpiper
    sandpiper
    Member

    Perhaps, I’m missing something. It appears that both the trust’s term and the lease’s term can be extended without any difficulty. A 5 year trust can be amended to extend to say 15 years. (I don’t want to address the perpetuity issue).

    All Beneficiaries must agree to the Trust Amendment. It becomes in full force when the Trustee accepts this amendment.

    The extension of the lease could be extended on a month-to-month basis. However, some states require that leases with a term of one year or more be in writing. From a clarity point of view, I’d add a rider or write a new lease with the new terms and conditions detailed for everyones benefit and protection.

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