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Land Trusts and Options | By: Randy Hughes

Land Trusts and Options

I speak to real estate clubs all over the United States and I always ask a lot of questions of my audience. It is important to “get to know” whom I am speaking to before I speak. One of the questions I ask is, “Is anyone in this room tonight buying, selling or pure optioning property?” The response is usually the same. Either no one is acquiring or selling property using options or maybe one or two people.

Options and lease-options are a smart way to do make money in the real estate business. Because most people are not doing these kinds of deals, there is little competition. Also, because most people are not familiar with options, it can be a challenge to talk people into using them. But, opportunities abound for the creative thinker in our business.

A pure option to purchase is the right to buy a property for a fixed price in the future. There are many variations on this method but for this article we will keep it basic. For example, I had a friend who was complaining that his utility bills were too high. I asked him why? He said, “Because I have old single pane metal framed windows and they let all my heat out.” I asked my friend how much new windows would cost him. He said, “$3,000 but I do not have that much money.” I told him I would pay for his windows if he would give me an option to buy his house in five years for today’s price. He agreed. Why? Because he received: 1) new windows with no immediate cash outlay for him 2) lower utility bills 3) free window financing using the future appreciation of his home 4) the esthetics of brand-new windows in his home 5) a wife who thought he was a genius!

What were the benefits to me? I received: 1) all the appreciation on my friend’s home for the next five years 2) no liability 3) no tenants 4) no maintenance 5) no bookkeeping or management responsibilities. What does all this have to do with using land trusts? Plenty. The easiest way to do the deal described above is to record an option to buy contract against the title of the home. I formed a land trust and recorded the option in the name of my trustee and trust. This gave me protection against my friend selling or refinancing his home and not telling me AND privacy (because no one knew I was the beneficiary of the land trust).

You can also use options with leases. This may be more familiar to you in that some landlord/owners will give a tenant an option to buy the home they are renting. This process usually involves a rental agreement (lease) and an option agreement. It is smart NOT to combine the lease and the option. In other words, don’t combine the lease and option in one contract.

The benefits to selling on a lease with an option contract are: 1) no sales commission, 2) no vacancy during the marketing period, 3) receiving a  full retail price, and 4) option consideration (what you charge the tenant for the option) is tax free until the option is either exercised or terminated. Life does not get much better!

I could go on and on about the many benefits of learning how to create wealth with options and land trusts, but space is limited here. If you have an interest in learning more about options, lease-options and land trusts, please go to my website: www.landtrustsmadesimple.com

I encourage you to learn more by going to my FREE online training at: www.landtrustwebinar.com and text “reasons” to 206-203-2005 for my free booklet, “Reasons to Use a Land Trust.” You can also reach me the old fashion way by calling me at 866-696-7347 (I actually answer my own phone unlike most other businesses in America).

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