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Building Cash Flow – Safely

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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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Image from Pixabay

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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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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Image from Pixabay

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!)

50 Years of Investing in Real Estate

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Image by Dewald Van Rensburg from Pixabay

By Mr. Land Trust, Randy Hughes

This is my 50th year of investing in real estate. It seems impossible, but it is true. I have invested in almost every type of real estate, but I have concentrated primarily on the Single-Family Home as a long-term store of value. I bought my first rental house in 1969. It was a two-bedroom, one-bath ranch with a one-car detached garage. I was in college and rented the house to other college students. Four of them lived in an 800 square foot box.

It took my life’s savings, $800 as the down payment. I assumed a Veteran’s fixed-rate, 30-year loan with 26 years left on the amortization. Back in that day, anyone could assume a VA loan for a $35 fee. By the time I graduated from college, I owned three rental houses. Upon graduation, I went to work for an insurance company that needed a small office to rent. I used the equity in the rental houses to fund the down payment for a small office building and rented it to the insurance company for which I worked.

Image by StockSnap from Pixabay

My wife and I married right out of college. We both had jobs to pay for our living expenses. This freed up the positive cash flow from the rental houses to accumulate another down payment to buy another rental house. We did this for 20 years before ever taking a dime out of our investments. Every dollar of positive cash flow was reinvested in more houses. Was that easy to do? NO! There were many temptations along the way. A new car would have been nice, maybe a motorcycle, or how about an expensive vacation?
We lived well and enjoyed those 20 years, raising two daughters. But we did not live beyond our means. We lived BELOW OUR MEANS.
Who does this in America today? Not many. It is a foreign concept to most Americans, but it really is true that if you live below your means and invest for the long term, your future will be bright. You do not have to be brilliant, cunning, dishonest, or a trust fund baby to be successful. All you must do is work hard, uphold your commitments, build an honest reputation, and keep your “nose to the grindstone.”

Image by Gerd Altmann from Pixabay

Think about it this way, when you are born you have three to four twenty-five-year amortizations ahead of you in your life. In a perfect world, you could borrow one million dollars on the day you are born and buy 5 to 10 rental houses (depending on where you live). When you turn 25 years old, you will be a millionaire! Your tenants paid the loans off for you! You could then borrow another one million dollars and do it again by age 50. And, upon retiring at 75, you would have another million dollars. So, set your goals! How many millions of dollars do you want in your future? Yes, I have seen booms and busts along the way, but I never ran scared and sold everything because of fear of “losing it all.” I reasoned that even if the houses did not appreciate, people would always need a place to live and many would pay rent to have a roof over their heads. Cash flow was my ultimate goal. After all, who wants to EVER sell a cash-cow?
So, does it matter what the cash-cow is worth? Not really, if the cow is producing. That is all that you should be concerned about. And, from a tax standpoint, you don’t EVER want to sell. The capital gains tax will kill you and deplete your earning power. The best tax plan is to die! Yes, you read that correctly . . . die! Your heirs will get a “step-up-in-basis” when they inherit your properties, and they will get to depreciate them all over again!! OMG, life doesn’t get any better!!!
I could go on and on about the wonderful world of real estate, but this article is supposed to be short and to-the-point. (You have better things to do than read too much and not be out looking for “Killer Deals.”)

Image by StockSnap from Pixabay

Therefore, I shall end this article with a few of my golden nuggets: 1. Always use a trust when buying ANY kind of real estate. 2. Do not own anything in your name personally. 3. Learn how to use options on real estate, they are almost risk-free. 4. Concentrate on getting Cash Flow FREE, not rich. 5. If it is not against the law, it must be legal. 6. Live a corporate “lifestyle.” 7. Avoid government employees at all costs. 8. Build a team with which to work (Lawyer, Title Co., Accountant, Insurance Agent, Banker) 9. Always use a P.O. Box address. (Or the street address of your Post Office.) 10. Best asset protection plan? Don’t get divorced!

Randy Hughes, Mr. Land Trust

I encourage you to learn more by going to my FREE online training at www.landtrustwebinar.com/411 and text “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!)

Land Trust Record Keeping

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Image by OpenClipart-Vectors from Pixabay

By Randy Hughes

All you need to create a Land Trust is two documents. A Deed to Trustee and a Trust Agreement. The heart of a Land Trust is the Trust Agreement (TA). So, what do you do when you can t find your TA?

Your first phone call should be to your Trustee. She/He/It should have a copy. But, sometimes things happen and even your Trustee can’t find a copy of your TA. Your frustration mounts when you can’t locate your TA because generally you went looking for it for a reason and you need it now! Multiple USB sticks
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Image by jacqueline macou from Pixabay

Why do you need your TA? Probably because you are getting ready to sell the property out of the Trust and you need to prove to a closing agent, title company or attorney that the Trust exists. Or, you need to make a change (amendment) to the TA (i.e. change of Beneficiary or change of Trustee). First, I would suggest that you learn your lesson so this never happens again. Make sure that you keep two copies of each TA in addition to the copy retained by the Trustee. Keep a hard copy in your property files filing cabinet and keep an electronic copy on a Memory Stick in your safe at home or in your safe deposit box at your bank. Now, back to the problem. A Trust Agreement is not like a Will. By statute, Wills can be revoked by destroying it. Therefore, if no one can produce a valid Will upon the death of the testator, there is a presumption that the will was revoked. Not the case with a Land Trust Agreement. If a TA cannot be found there is no presumption that the agreement was revoked. If a photo copy cannot be found of the original TA, the Beneficiary can Restate the TA by typing up a new one! All the Beneficiary needs to do to recreate the TA is the put at the top of page one of the newly formed TA, Amended and Restated Trust Agreement. Then in the body of the TA attest to the fact that the original TA could not be found and that the Beneficiary is certifying that the is a true and accurate restatement of the original TA. So, remember. Keep multiple copies of your TA (and any amendments) in different locations. But, if all else fails you know that you can always recreate the TA, if necessary. Remember to like me on Facebook, join me on LinkedIn, and please leave me a Google Review!
Randy-Hughes

Randy Hughes, Mr. Land Trust

I encourage you to learn more by going to my FREE online training at www.landtrustwebinar.com/411 and text “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!)

Always Think Safety

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Image by Free-Photos from Pixabay

By Randy Hughes

Sometimes I am questioned as to why I do not want to own property in my personal name. Am I trying to do something illegal, immoral, or fattening?

NO! I am just trying to protect my family’s assets from deadbeats and their contingency fee lawyers! Furthermore, I am trying to protect my family from crazy tenants. Can you imagine a tenant you are evicting getting mad enough to come to your home and confront you (or worse yet, your children who answered the door)? It happens, and sometimes worse. Case in point; In Hartford, Connecticut a tenant cut off the head of his landlord who was trying to evict him. Don’t be an “owner.” Be a property manager . . . you may live longer. It is YOUR responsibility to protect your family and its assets. Get busy, and use a trust. You will be glad you did!! Remember to like me on Facebook, join me on LinkedIn, and please leave me a Google Review!
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Randy Hughes, Mr. Land Trust

I encourage you to learn more by going to my FREE online training at www.landtrustwebinar.com/411 and text “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!)