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Mr.Land Trust

Why I Avoid Using an LLC As a Land Trust’s Trustee

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By: Mr Land Trust

Many of my students have asked me the question: “Can I use my LLC as the Trustee of my Land Trust?” While it might seem convenient, in my view it creates more problems than it solves. Worse, it can be a fatal flaw in your Land Trust.

Here are a few reasons I avoid using an LLC as a Land Trust Trustee.

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Privacy Vanishes: The Public LLC Problem

One of the primary benefits of a Land Trust is anonymity. You shield yourself from frivolous lawsuits and unwanted attention by keeping your name out of public records.

That veil of secrecy is torn away if your LLC is registered in a state that publicly discloses member information and serves as the Trustee. Anyone can search the state’s business records and discover your connection to the property, defeating the purpose of the Land Trust. This is especially true in states with transparent LLC registries.

The Self-Dealing Dilemma: Contractual Limitations

In most jurisdictions, you cannot legally contract with yourself. This is because the legal concept of a contract requires two distinct parties. When your LLC, which is solely owned and controlled by you, acts as the Trustee, and you are the sole member of your LLC Beneficiary or the sole individual Beneficiary, you essentially create a situation where you’re contracting with yourself. This can lead to legal complications and challenges to the validity of your Land Trust. This obstacle creates a situation where the authority of the Trustee can be called into question.

Operating Agreement Exposure: Authority Challenges

At some point, your Trustee will likely need to demonstrate their authority to sign documents, whether for a sale, refinancing, or other transaction. If your LLC is the Trustee, expect to be asked for your LLC’s Operating Agreement. This document reveals the members, managers, and internal workings of your company, again compromising your privacy and potentially exposing sensitive business information. This is an unnecessary and avoidable disclosure.

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Side-stepping Another Potential Pitfall

Beyond privacy and contractual issues, when you avoid using an LLC as a Land Trust Trustee, you automatically avoid creating issues with title companies unfamiliar with this arrangement.

Why an Individual Trustee is Superior

Now, let’s explore the advantages of using an individual as your Trustee. First and foremost, you can choose someone you trust, like a family member, business associate, attorney, accountant or friend. They might even agree to serve for a nominal fee or for free, saving you significant costs.

Secondly, you can use creative naming strategies to allow one individual to serve as the Trustee for multiple Land Trusts, further simplifying your management. This method creates a layer of professional and organized anonymity that is difficult to replicate with an LLC.

An individual trustee offers flexibility, privacy, and simplicity. They are less likely to raise red flags during transactions and provide a more straightforward approach to managing your Land Trusts. And they can be available to act without regard to standard business hours

In Conclusion

While using your LLC as a Land Trust Trustee might seem like a shortcut, it’s a path riddled with potential problems. Protecting your privacy, maintaining contractual integrity, and avoiding unnecessary disclosures are paramount. When you opt for an individual Trustee and leverage creative naming strategies, you ensure your Land Trust remains a powerful tool for asset protection and privacy.

Mr Land Trust, Randy Hughes

I encourage you to learn more about the benefits of using a Trust to hold title to your real estate investments 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!)

Mistakes I Have Made (That You Don’t Have To)

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By Mr. Land Trust

As a young man, I never believed I would see 2025. I purchased my first rental house at age 19. While I had very little money to invest in real estate, I did have one very valuable asset…time. I majored in business administration and marketing in college. But I did not really learn anything of value until I met my mentor, Jack Miller. Driving down to St. Louis for a half-day seminar with two friends, my life was about to change forever (and my kids and grandchildren’s lives).

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My mentor taught me the value of time. He said, “If you want to become a millionaire, borrow a million dollars and have someone else pay the debt back.” He also taught me how to buy houses with little or no money down. This was a huge change in my conventional thinking. I was taught in college that you always needed 20% down payment and this frustrated my desire to buy many houses (I knew that I would never earn enough money to pay my living expenses AND buy many houses with 20% down). I did not have a lot of money, but I did have a lot of time. Things were looking up!

With my new-found knowledge, I began buying houses as fast as I could. It was the 70’s and houses were increasing in value 1% per month in my town. I could not buy them fast enough. Then came the 80’s and 90’s and I began to invest in other assets besides more houses. I bought partnership shares in a chain of catfish restaurants, apartment buildings, bank stock, network marketing company stock and commercial property. I soon found out that partnerships don’t work and don’t last (at least that was my experience). I made a little money with the apartment buildings but lost money on everything else (who loses money investing in bank stocks? Me!). Eventually, I got out of all other investments other than houses and one commercial property. It cost me a fortune to learn the lesson to stick with single family homes as my long-term investment strategy.

My mentor was THE first person to teach a seminar on buying houses as an investment. Even though Fannie Mae was formed in 1938 and could make 30-year loans, today’s most popular tool for home financing, the 30-year mortgage, wasn’t even approved by Congress until 1948 for new construction homes and even later — 1954 — for existing homes.

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Well into the 50’s and 60’s lenders were still making home loans with 5-year amortizations. This meant much higher monthly payments and very few people could afford to buy houses to rent out as an investment. Once the 30-year loan became popular, the value of homes began to rise.

By the 1970’s (when I graduated from college) inflation was in high gear and house prices began to rise significantly. You might remember the author, Robert Allen, and his book, “Nothing Down.” It was a best-selling book that made him famous (he learned his techniques from my mentor, Jack Miller, and wrote his book using those same concepts).

What is the moral of this story? Invest in what fits your personality. I like tenants who live in houses as opposed to apartments. I like long-term tenants that pay my house loans off for me. I like tenants with toolboxes that can fix things that break. I like tenants with families as they are more stable. I like houses because when I sell them the buyer doesn’t ask, “how much does this place rent for?” Instead, they pay full retail and do not determine value with rent multipliers.

Choose the investment vehicle that fits YOUR personality but stay away from partnerships. Be in control one hundred percent! You will be glad you did.

Mr. Land Trust

I encourage you to learn more about the benefits of using a Trust to hold title to your real estate investments 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!)

Are We Becoming a Nation of Renters? (Some People Might Hope So)

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By Mr. Land Trust

My mentor, Jack Miller, told me 20 years ago, “Eventually, our nation will become like the housing market in Europe where 90% of the population rents, and instead of passing down property to heirs, they pass down leases to their children.” I think we are headed quickly in that direction.

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I have been a landlord for 53 years and have NEVER seen a rental market like the one today. I realize all markets are different (and local), but my market (like most others) has changed dramatically. For 50 of my property management years, I had about 80% of my tenants renew each year and 20% move out. In recent years, since Covid, 95% have renewed their lease with me and only 5% have vacated at the end of their lease. This represents a drastic change in the market. Why did this happen?

The very low-interest rate climate of the early 2000s is partly the cause of this change in the rental market. Rental property owners could sell at a high price for cash to homeowners. This took the rental houses off the rental market permanently, which reduced inventory for those wanting to rent. The other factor in play is the shortage of housing nationwide. The US population is still increasing but not enough houses are being built to accommodate the need. Government regulations, building permit restrictions, and environmental limitations have made it time-consuming, and expensive to build. In that regard, to a certain degree, we are creating our own problems.

What does this mean for investors in single-family homes for rent? BUY NOW! Many investors buy for appreciation, and I like the benefits of my houses going up in value without me having to do anything in return (if I keep the properties adequately maintained and occupied). But appreciation is “gravy.” You cannot count on it.

Think about it. Would it be ok if your houses did not go up in value, but you could live off the positive cash flow? I think so. Money is money. Many real estate investors are “equity rich and cash flow poor.” The future rental market may be the solution to their problem.

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I graphed out my houses over a 40-year period. The trend lines were interesting. When the houses increased in value, the rents did not (or not very much). When the rents increased, the house values leveled off. Either way, I won. If my houses stopped increasing in value, but my rents tripled because of the “new American housing market” do you think I would complain that I was receiving no appreciation?

It is still important to negotiate when you are buying rental houses. Get the best deal you can but I can tell you from experience, that losing a good long-term rental house over a $5,000 (or less) price negotiation difference, is crazy. Those houses that I did not buy because of ego in the negotiation process, cost me hundreds of thousands of dollars in the long run (appreciation and cash flow).

Now go out and find a “Killer Deal.”

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 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!)