Land Trusts for Real Estate Investors Washington DC

provided by:

Despite the hype surrounding land trusts perpetuated by a lot of real estate investment “gurus,” the fact is that, for the vast majority of real estate investors, land trusts are simply not a viable or trustworthy vehicle in which to hold title to property.

Let’s take a quick look at land trusts. A land trust is a vehicle for holding title to real estate that exempts the real estate from probate. There are advantages and disadvantages to land trusts. The primary advantage is privacy. When a land trust is set up, an investor can purchase property in the land trust’s name. A public record search will only reveal that the property is held by “X” as trustee of the trust's name. Land trusts protect the identity of the true owner of the real estate, except in certain limited situations.

One disadvantage of land trusts is that state law usually requires that they be administered by commercial trustees, such as banks or trust companies. This means that an investor doesn't have total control over the trust. Another disadvantage is that, while an investor could purchase property in his or her own name and then convey the property to the land trust, that transfer defeats the privacy protection. It won’t take a rocket scientist to figure out what was done and who did it.

Despite the few disadvantages, land trusts are attractive. They offer privacy at a reasonable cost. Although investors must generally pay trust administration fees, the fees are not exorbitant. Best of all, the bank or trust company sets up the land trust for the investor and provides all of the necessary forms to ensure that they are legal. So, there’s no need to pay an attorney—or anybody else—to create the trust or to provide the documents.