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Behold the Cockroach – It has survived and thrived

By Randy Hughes, Mr. Land Trust

Starting in the late 1970s and up through the 1990s pitchmen were all over television extolling the ease at which you could “become rich in your spare time” if you just followed their real estate investment “program.” After 52 years in the real estate investment business, I know of no one who became rich through real estate quickly (I am sure some investors got rich quickly through luck, but I have never met one).

I do know a lot of people who became rich using real estate as their vehicle. They all earned it by working hard and putting in years of devotion.

This article for Realty 411 is for all of you who have not yet become a millionaire in your “spare time.”


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What does all this have to do with cockroaches?

When it comes to being able to survive and expand its operations, nothing has ever surpassed the lowly cockroach. Despite chemical warfare, I often find them in my houses after tenants vacate. Some tenants seem to cohabitate with cockroaches intentionally (and quite well)!

In New York’s Museum of Natural History, they used to point tourists’ attention to a pickled roach between the toes of their biggest dinosaur to demonstrate that roaches have survived in the same form since the period before dinosaurs stalked the Earth.

This means that cockroaches lived on even after the mass extinction of the dinosaurs. For perspective, man has been on Earth during only 1% of the time that cockroaches have existed on the planet!

How have cockroaches survived?

How have cockroaches survived so successfully for millions of years? 1). It never challenges anything bigger than itself 2). It stays out of sight 3). It can survive for lengthy periods under adverse conditions or in a hostile environment 4). It is fast and elusive 5). It lives in the cracks of society never calling attention to itself 6). It reproduces quickly and with ease 7). It can make a meal out of about anything organic regardless of how unappetizing!


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What can we learn from the cockroach lifestyle?

We small investors must be adaptable, maintain a low profile, and be prepared to move quickly when either an opportunity or danger presents itself. We must be able to recognize opportunities, whether foreclosures, rehabs, discounted paper, single-family house opportunities, or value-added property prospects. We must also avoid hostile environments (and hostile tenants) which are high on risk and low on rewards.

You can skip “make a meal out of about anything organic”. I don’t recommend that.

About those Pitchmen

I knew a real estate guru once that bragged that he bought a property every month. He later confessed that he felt so obligated to follow through with that public statement that he would buy bad deals just to “keep up his image” as a monthly property buyer.

Be patient, be diligent, analyze, and then act. Some investors never succeed because they catch the “paralysis of analysis” fever. They buy books (sometimes they even read those books they buy), attend meetings, talk with other investors, analyze data, buy mentor programs, and never buy any real estate.

I encourage you to learn more by going to my FREE online training at www.landtrustwebinar.com/411 and text the word “reasons” to 206-203-2005 for my free booklet, Reasons to Use a Land Trust. You can also reach me the old-fashioned way by calling me at 217-355-1281. (I actually answer my own phone, unlike most other businesses in America today!)

Apply these lessons from a cockroach lifestyle and you WILL succeed!


Learn live and in real-time with Realty411. Be sure to register for our next virtual and in-person events. For all the details, please visit Realty411.com or our Eventbrite landing pageCLICK HERE.

What is a Trust?

By Randy Hughes, Mr. Land Trust

Has anyone asked you yet, “What is a Trust?” I am asked many times each month what a trust is and why someone should use a trust to hold title to their real estate investments. Oftentimes the person asking me these questions is a real estate investor or an attorney. Most attorneys are not familiar with Land Trusts, also known as title holding trusts, because most law professors do not teach about them in school. The result is that they typically do not recommend them to their clients. Many attorneys opt to suggest the use of an LLC to hold the title.


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You May Be in the Same Situation

If I am frequently encountering these questions, you may be too. Your current attorney may ask, “Why are you messing with all that unnecessary Land Trust stuff?” Or you could be interviewing a new attorney to work with, and they want to know why you are interested in trusts.

Perhaps a fellow member of the real estate investment club or association of which you are a member, or a real estate friend of yours asks, “Why bother with Land Trusts?” (By the way, if you are not a member of a real estate investment club, I encourage you to find one that suits your style and join. The benefits to you and your business are numerous.)

Let’s face it, the answers to these questions may not flow off your tongue. Since I’ve had more practice than you responding to these inquiries, I’ll share with you some of the points I make.

You know by now that there are many ways to hold title to real estate, whether it is a personal residence or an investment property. The title can be held in an individual’s name, joint tenancy, corporation, limited liability company, joint venture, partnership, limited partnership, association, or trust.

Each of these forms of holding the title carries benefits, detriments, tax, and asset protection implications. There is not space enough in this issue of my Land Trust University newsletter to compare and contrast all these consequences. We can concentrate on the Land Trust and its many advantages to the everyday real estate investor.

Start with the Basics

Let us start at the beginning. What is a trust? It is merely a few pieces of paper whereby one person or entity (the Trustee) holds the title for someone else (the Beneficiary). The Trust Agreement is a contract between the parties involved and as such, dictates the actions of all parties involved. There are many types of trusts available to use. As members of the Land Trust University, we typically deal with a Grantor Revocable Trust (GRT) to hold title to our real estate investments.

Technically, the IRS says that a GRT is NOT an entity but a “contractual arrangement.” The IRS does not require that a GRT has a tax ID number, and they don’t demand that a tax return be filed on behalf of the trust. All tax results from the property held inside the trust flow through to the Beneficiary who files a return. (See Revenue Ruling 92-105 and IRS Code Section 677.)

When combined with Corporations, LLCs, or other trusts, the Land Trust can be a formidable opponent to those who would like to inflict financial pain on the owner.


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Land Trusts were not designed to be asset protection tools on their own. Some practitioners perceive them as great estate planning tools that prevent the Beneficiaries (and Successor Beneficiaries) from experiencing probate.

However, I have found that the mere fact that a real estate investor does not own property in their personal name is a great benefit. And if the investor makes the Beneficiary of the Land Trust an LLC or Corporation, it yields the best of both worlds. Primarily, you receive the privacy of ownership afforded by the Land Trust (there is no “registry” for Land Trusts) and the asset protection benefits of the LLC/Corp as the Beneficiary.

Privacy Makes a Difference

Why is privacy of ownership important? I receive calls every month from people across the nation that think I am the trustee of a trust they are trying to investigate. (They find my phone number when they search the Internet for Land Trusts.) Typically, these inquiries are about a problem the caller is having with a tenant next door or across the street from them. They want to register a complaint or find out who to sue over their dissatisfaction with the adjacent property owner.

If your attorney or your real estate friend have not yet heard a war story from someone who was sued just because their name was on the deed, they will. You can also encourage them to read the testimonials and blog posts on my website. People whose lives were turned upside down because they were the defendant in a lawsuit contact me frequently.

These calls and the challenges people have lived through represent the top reason real estate investors use trusts. It is to stay out of the public purview. Trusts can help avoid frivolous problems. We have a highly litigious society in America today. If you make it easy for someone to sue you, they probably will. If it is difficult to sue you, or they can’t discover who you are, they probably will not . . . they will take someone else to court who is an easy target.

Many advanced Land Trust strategies can be employed in conjunction with other entities that can create dy-no-mite asset protection for the everyday real estate investor.

To learn more visit Randy’s FREE online training at www.landtrustwebinar.com/411 and text the word “reasons” to 206-203-2005 for his free booklet, Reasons to Use a Land Trust. Readers can also reach Randy the old-fashioned way by calling me at 217-355-1281. (He actually answers his own phone, unlike most other businesses in America today!)


I encourage you to learn more by going to my FREE online training at www.landtrustwebinar.com/411 and text the word “reasons” to 206-203-2005 for my free booklet, Reasons to Use a Land Trust. You can also reach me the old-fashioned way by calling me at 217-355-1281. (I actually answer my own phone, unlike most other businesses in America today!)


Learn live and in real-time with Realty411. Be sure to register for our next virtual and in-person events. For all the details, please visit Realty411.com or our Eventbrite landing page, CLICK HERE.

Multiple Properties in One Land Trust

Image from Pixabay

By Randy Hughes, Mr. Land Trust

Many investors think, “I’ll put multiple properties into one Land Trust! That should be easy.” They could assume that managing one trust will be a breeze compared to managing multiple Land Trusts. They may also think that there is no downside.

Investors who think like this have not thought their plan through. The reverse can be the case. Managing multiple properties in one Land Trust is a snap (especially when you use my exclusive Trust Tracker, included with my Basic Course). It’s having all your properties in one Land Trust, or one basket as I like to say, that things can get tough, very tough, fast.

Welcome to the New Year

Image from Pixabay

Before I continue, permit me to point out that I started writing about Trust Trusts twenty-two years ago. My students requested it. They wanted to learn more about the scores of benefits of using a trust to hold title to their properties.

When I speak in front of an audience or teach a Land Trusts Made Simple® class, the question of whether to hold multiple properties in one Land Trust is sure to come up. My basic answer is “you can hold multiple properties in one trust, but I do not suggest you do that.” Why not? Read on my fellow real estate investors.

Here’s Why Not

First, there is a basic principle to asset protection that says, “keep all assets separated.” This applies to all types of investments (cash, stocks, bonds, real estate, precious metals, etc.). The theory behind this is that if liability occurs against one of your assets, it will not directly affect all your other assets. For example, if you titled ten single-family rental houses in one LLC and you had an uninsured loss or legal claim against the property/owner, any lien or judgment against the owner/LLC would tie up ALL the properties inside the LLC. Dumb, huh?

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However, if you hold the title to each of those ten rental houses in separate Land Trusts and a contingency-fee attorney and their deadbeat client attack one of them, any potential judgment would be rendered against the property itself and there would be no effect on your nine other properties. Therefore, the smart real estate investor puts each property into its own separate Land Trust. I encourage investors to take asset protection a step further by making the Beneficiary of the trusts one or more LLCs.

Hunting Expedition

There’s another benefit to NOT putting multiple properties into one Land Trust. If a subpoena is issued to the Trustee in search of information about the trust and its assets, the subpoena would apply to ALL properties inside the trust (not just the property involved in the litigation)! Double dumb, huh?

Furthermore, any assignments of Beneficial Interest or contingent beneficiary provisions in your trust will apply to all properties held in that trust. This removes one of the best reasons to use a Land Trust. For example, if you wanted to sell one property on an installment contract, you could not do it effectively when holding more than one property in one trust.

It does not cost anything to form a trust. Therefore, it makes sense to always put each property into its own, separate trust.

I encourage you to learn more by going to my FREE online training at www.landtrustwebinar.com/411 and text the word “reasons” to 206-203-2005 for my free booklet, Reasons to Use a Land Trust. You can also reach me the old-fashioned way by calling me at 217-355-1281. (I actually answer my own phone, unlike most other businesses in America today!)


Learn live and in real-time with Realty411. Be sure to register for our next virtual and in-person events. For all the details, please visit Realty411.com or our Eventbrite landing page, CLICK HERE.

Building Cash Flow – Safely

Image from Pixabay

By Mr. Land Trust

There are many articles in this blog about “building cash flow” using rental real estate. This is a goal every real estate investor should strive for because if you want to build wealth AND support yourself with your investments, you need POSITIVE cash flow! The interesting thing about building cash flow is that it becomes consistent and typically increases annually. It is similar to compound interest paid on savings accounts or reinvesting stock dividends. Unlike rehabbing, flipping, and contract assignments (which are just “jobs” like any other JOB), cash flow increases over time and allows you to be “free” of the insecurities that most people experience when employed by others. It is truly a wonderful thing!

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The big question regarding how to build consistent, reliable, and safe cash flow relates to risk. I have discovered after 50 years in the rental business that there are two primary ways to create positive cash flow. The first is through rentals held long term. I prefer single-family homes for many reasons but primarily because the management of these properties fits my personality. I typically have only 15-20 % turnover each year which saves me a lot of cash flow from turnover expenses. Low turnovers also allow me to “have a life” and not be saddled with constant management (Many years ago I controlled apartments on a college campus with 100% turnover every year. I quickly learned that I did NOT want to live that kind of lifestyle).
If you maintain a long-term goal of keeping your rentals “forever,” you will wake up one day and the loans will be paid off. Your cash flow will increase by 500% or more in one day and you will realize that all your hard work and sacrifice was worth it! In addition, over time, your rents will increase due to inflation (I remember punching numbers into my HP12C calculator in 1985 and telling my wife, “Honey, can you believe that our $400.00 per month rentals will be bringing in $1,000 per month in ten years?” We were both amazed!
Regarding the subject of risk, I believe your risk is low with the above scenario (especially if you self-manage your own property). A way your risk can be reduced even further is by distancing your name from your rentals and keeping it off the deeds in the courthouse. Privacy of ownership is the cornerstone of financial security. How do you do these things? I hope I have made that obvious: Use a separate Land Trust for each of your rentals and real estate-related assets.
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Image from Pixabay

The second-best way to increase the cash flow is to “be the bank.” How do you think banks make so much money? They borrow from the Federal Reserve at a much lower rate of interest than what they charge their customers and profit from the spread. I like this model but the way the banks do it is too risky for me. If the borrower defaults, some type of foreclosure is required. Foreclosure is expensive, time-consuming, aggravating, and creates sleepless nights. I like sleeping. How do you “be the bank” and reduce the risk? Use a Land Trust! I like to buy houses and resell the Beneficial Interest in the Land Trust the same day on an installment contract. I buy at the best price I can negotiate, mark the price up to reflect my time, initial investment, and transaction costs, and sell to a user at 7% with a 25-year amortization and a five-year balloon. The number of Americans “out there” that would love to buy a house but need help getting into the market is tremendous. They cannot qualify for a loan now (and maybe never) because of a myriad of disqualifiers. I require at least 20% down and payments to me including principal, interest, and 1/12 the tax bill. They are required to buy their own insurance and make my trust the Additional Insured.
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The benefits to me are 1) Recovering my costs upfront through my markup 2) the security of $20,000 down (people will do everything possible to not lose that much money by defaulting on the contract) 3) 7% interest on my marked-up equity 4) 3.75% arbitrage (read, cash flow profit on the bank’s money) because I get a new first mortgage at 80% of the purchase price at 3.75%. My benefits are many, but you should always ask yourself when doing real estate deals, “where can this go wrong?” The answer is, “if the buyer defaults, you have to foreclose.” Foreclosure is a long legal battle that will cost you legal fees, lost cash flow, sleepless nights, and 6-12 months of making your mortgage payments without income. How can you avoid this risk? USE A LAND TRUST!
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Image from Pixabay

When I close on the purchase in the morning, I take the title directly from the seller into my Land Trust. Then, when I sell the Beneficial Interest on an installment contract later that same day . . . I sell the Beneficial Interest in the trust (which is personal property in a vast majority of states.) This is a private transaction that is not recorded and does not cause a “cloud on my title.” If the buyer defaults, I repossess the Beneficial Interest . . . I do NOT have to foreclose! Repossession takes about 30 days, and I can do it myself. If the buyer does not vacate voluntarily, I evict them under a month-to-month lease situation.
The Land Trust will serve you well in many ways. The methods described above are only two of many techniques to make money, create safe cash flow, and keep your name out of the public records using a Land Trust. Learn all you can about Land Trusts . . . they will make you tons of money!
I encourage you to learn more by going to my FREE online training at www.landtrustwebinar.com/411 and text the word “reasons” to 206-203-2005 for my free booklet, Reasons to Use a Land Trust. You can also reach me the old-fashioned way by calling me at 217-355-1281. (I actually answer my own phone, unlike most other businesses in America today!)