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Dennis3456

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Reply with quote  #1 
In the past I have bought properties placing the deeds into a land trust, this was done primarily to allow for the 90 day seasoning period for FHA loans. Well I have now been stuck with a house that was finished after the bubble burst.
This place is not going to sell in this market, so now it is a rental.
My problem is the property is on an interest only line of credit. I need to get this into a fixed rate for 15 years.
I am being told by all non-commercial lenders that the property has to be removed from the trust to be refinanced. My question is this, will this trigger tax consequence?
In Philadelphia, PA we have a 4% city tax and a 1% State tax, with an additional 1% payment by the buyer as well. So even though the property will not change hands I am being told I will have to pay a 6% transfer tax, now that makes no sense at all.

Does anyone know if this is really considered a sale?

OHlandlord

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Reply with quote  #2 
Dennis, you need to go see your local accountant.  Without knowing how the local tax laws are written, we can't tell you if a transfer would be exempt from these taxes or not.

The reason banks are turning you down is that they don't want to lend to trusts, or any other incorporated business entity.  They want to loan to an individual that they can hold responsible for the loan payment.  They want that individual to have a vested interest in the property.  The title will have to be in your name to get the loan for almost any bank right now.  Even the few loan companies who do make commercial loans are doing the same.  After so many houses and properties going into foreclosure, banks are skittish about their loans and want every duck in a row before they will make a loan.  Please see your accountant about any tax implications this might have, AND your attorney for any legal implication it may have (liability, titles, etc.)

Dennis3456

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Reply with quote  #3 
Thanks for the reply. I found out today the call on the taxes is really up to the title company, and what they will require.

I don't plan on paying the taxes as when the trust was settled the taxes were paid.
The name of the trustee is on the deed as well as the name of the trust. The title company is going to remove the property from the trust, and I will sign the new note. I may not return this property to the trust, if I do not nothing as far as the tax consequences has changed, I will still be on the deed, just the trust will be dissolved. 

If I wanted to put my personal residence into a trust for financial planning purposes no tax would be due, just as if I changed my mind later and dissolved the trust I would not have to pay taxes and yet the deed would change.

Now if the property was owned by an LLC and then was transferred to me that would be a tax event as the property was treated differently for taxation  purposes in when it was in the LLC.

My problem was an uncooperative title company, which would not do the deal without me paying the tax. Today they were fired, I hired a new company who says the deal is a common one and no one ever has had to pay transfer tax.



OHlandlord

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Reply with quote  #4 
Excellent!  Glad you did your homework and found out it was all their problem, not yours.  Good move.
Dennis3456

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Reply with quote  #5 
Yes it was all just the title company being difficult or uneducated.
The basics of the land trust and taxes are as follows, if the settlor and the beneficiary are the same person there is no tax liability generated. If in the course of life of the trust  the beneficiary is changed, then as long as you have the original paper work to present you are ok, if not the existing beneficiary will have to assign their interest back to the original settlor of the trust, until the financing is in place.

Since all of my trusts are for the benefit of family, this will be no problem on my end.

I will say holding title in a trust is a little more trouble, but if I had bought this in an LLC I would not be able to refinance the house without going to a commercial loan, which would not have very favorable terms.

I have learned over the years that all the hype of forming multiple LLC's can be a costly idea that is not really needed in residential real estate investing.
I have a good friend who consoldated several properties with different LLC's into one 1031 exchange. Today he moans that the single new property is owned by three LLC's and needs three separate tax returns, costing him an extra two thousand dollars in accounting fees for tax returns.

At least with the properties in trusts, I could remove them and then do a 1031 exchange with not tax consequences. 

jaden

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Reply with quote  #6 
Hello,

Creative financing is a term used widely amongst real estate investors to refer to non-traditional means of real estate financing, or financing techniques not commonly used. The goal of creative financing is generally to purchase, or finance a property, with the buyer/investor using as little of his own money as possible, otherwise known as leveraging, OPM (Other People's Money). Using these techniques an investor may be able to purchase multiple properties using little, or none, of his "own money".

Thanks.......


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megkrause08

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Thanks for sharing.

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megkrause08

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Thanks for sharing.

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My father's marital affairs with women looking for men started from married dating.
sjhon

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There are few disasters that can occur in the home that are more heinous and hard to deal with than water damage in order to provide the most comprehensive support for your claim .




KylaS

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Reply with quote  #10 
Properties with more than one owner benefit greatly from a land trust. First, it isolates each owner from any liens, judgments or other public record filings from being attached to the property. It also allows for partners to readily and easily sell or transfer their interest to another investor.   They can also gift the property to a family member whenever they wish without tax or reassessment. With land trust ownership, it is possible to sell property for cash and avoid the reporting of the sale to governmental agencies, thereby postponing or avoiding entirely tax consequences. By having only one trustee acting for all of the owners, there is no need for all of the owners to sign necessary papers, documents and contracts, which may become necessary from time to time. This saves time and confusion when there are several owners.
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EmeraldSkylark

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It depends on the lender. I suspect conventional financing will require your credit. Private and hard money have their own criteria.

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shefajit

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Informative  knowledge




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Ajitallbey

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Reply with quote  #13 
A land trust is a revocable, living trust primarily used for privacy purposes in estate planning and asset protection.  It is used to take title to real estate to provide anonymity for the owner.  It can also be used with a trust assignment wherein the seller deeds the property to the trust, making himself the beneficiary.  The beneficial interest (ownership) of the trust is then assigned to a third party, such as an investor/buyer.  This is known as a “land trust assignment”.
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oliverB

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Reply with quote  #14 
Thanks for the post. Now I understand that Land trust is important.
Marvin

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Reply with quote  #15 
Great information above here.
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