By Randy Hughes
I have been a landlord for 43 years and I have always threatened to write a book of my experiences. Perhaps one day I will write a “tell all” book about the crazy and unique tenant situations that I have found myself in, but for now, I will limit this article to those experiences that relate to using a Land Trust.
Most rental real estate is owned by mom and pop operations that have no separation between the “owner” and the “tenant.” The relationship that develops is one of an adversarial nature. The tenant knows that he/she is dealing directly with the owner of the property and therefore has an advantage when negotiating lease and maintenance issues.
For example, when it comes time to renew a lease it is difficult for the owner of a property to drive up in his/her Mercedes to demand a rent increase. Not that the owner doesn’t deserve an increase, but the perception from the tenant’s point of view is that the owner does not “need” an increase.
Unfortunately, most tenants in America today think that the owner of their property is rich and has no cares in the world! It is a common misconception that people who own rental real estate are wealthy. So, when it comes time to renegotiate a lease the owner is at a distinct disadvantage.
Most savvy real estate investors will hold title to their property in a Land Trust with perhaps the beneficiary being a Limited Liability Company (LLC) or Corporation. This structure gives the investor the anonymity of ownership from a Land Trust and the asset protection benefits of the LLC.
When a Land Trust owns title to real estate held inside the trust, the Beneficiary is NOT the owner. The Trustee is the full legal and equitable title holder. This means that as the Beneficiary you can honestly state (to everyone including tenants) that you are not the owner. This puts the Beneficiary in a much better negotiating position with tenants.
As the property manager you only have certain powers bestowed upon you by the owner. Beyond those powers your hands are tied and it becomes a take it or leave it proposition. For example, when a property manager presents a rent increase to a tenant it is from instruction from the owner of the property. It is not up to the property manager to negotiate, just deliver the message. Negotiations become much more matter of fact when handled in this manner. The property manager is just “doing her job.”
There are other distinct benefits to not being the “owner” of rental real estate. When I was a younger landlord (with two young daughters) the last thing I wanted was an irate tenant (who was being evicted by the “owner.”) to come knocking on my door where I lived to seek retribution. With the easy access to courthouse records that the internet provides looking up the owner of a property is easier than ever.
Many of the benefits to holding title in a Land Trust relate to personal safety like the example above. Another personal story to drive home this point was the landlady in Florida who called me and wanted to know how quickly she could put her property into Trust (and get the title out of her name). Seems that one of her male tenants was taking an interest in her. The tenant had looked her up online and found eight properties that she owned in her own name. Armed with this information the tenant was going to each property and knocking on the door looking for her. It never occurred to me before she called that titling your property in a Land Trust could help avoid a stalker!
Being a property manager and not an owner is a MUCH better position to be in when dealing with tenants. It puts you in a different light. One with less authority and less ability to change things. It is similar to actors having agents to negotiate their movie contracts. Actors are good at what they do, but not necessarily good at negotiating on their own behalf. Furthermore, it takes confrontation out of the equation and always allows the agent/manager the ability to say, “The owner will not let me do that” or “I will talk to the owner about your request and get back to you.” This lets you back off and think about the tenant’s request with a clear head and a lack of emotion.
I could give many more examples of how beneficial it is to hold title to your investment real estate in a Land Trust, but space limits me and I think you are getting the gist of my point anyway. So, do yourself a favor and DON’T OWN REAL ESTATE IN YOUR OWN NAME. There are NO advantages to owning real estate personally…only disadvantages!
Randy Hughes, aka, Mr. Land Trust™
It is difficult to convey all of the benefits of using a Land Trust in a short article like this. I have been using (and writing about) Land Trusts for the last 40 years. If you would like to learn more about how to create your own Land Trusts, for FREE training go to: www.landtrustwebinar.com/411 or email me at: email@example.com for my FREE booklet, “50 Reasons to Use a Land Trust” or contact me the old fashioned way by calling 866-696-7347 (I actually answer my own phone!) Randy Hughes, aka, Mr. Land Trust™