The Land Geek Podcast #52

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Hey, it's Mark Podolski, the Land Geek. From your feet. Nicheland website, www.thelandgeek.com. and today I'm really excited. And it's because, selfishly, in a world where we can just say Google and Facebook and all these sites have taken away our privacy, I found Randy Hughes. Randy hughes, known as Mr. Land Trust. And I'm going to grill him today because I don't believe that there's any privacy. And what Randy has been doing is he's been a full time real estate investor and he bought his first rental house in 1969. And after investing for 10 years, Randy decided to learn more about how to protect his investments and not be a target for lawsuits. So we're going to talk about that now. Randy has used land trusts in his business for over 35 years and says he would not own real estate in his own personal name. And this issue actually comes up a lot because everybody asks me, should I have an llc? Should I have an llc? Should I have an llc? So please welcome America's number one expert on the use of land trusts for real estate investors, Randy Hughes. Mr. Land Trust. How you doing?

Pretty good, Mark, thanks a lot. Do you hear me all right?

I can hear you great. I can hear you great.

Good, good, good. Glad to be with you. I'm really excited to be on this podcast because I know it goes out to a lot of people that are real estate investors wondering, how do you use these land trusts? And as you mentioned, how do you, how do you use them in, with or in addition to LLCs?

Yeah, Randy, what's a land trust?

Well, land trust is really nothing more than just a few pieces of paper, Mark. It's really not as intimidating as a lot of people want to make it. To form a trust, you just need two documents, a trust agreement and a deed and trust.

Okay.

And that's all. That's all you need. And you create the trust agreement. First, it's not recorded anywhere on the planet. And then you record the deed in trust in the county, in which parts, that's what puts the property into the trust. So think of it this way. The house that you're in right now or the commercial Building that you might be in right now had to be built before they put the furniture inside, right?

Correct.

So we create the trust agreement first, and then we deed into the trust. That's the property. The real estate that goes into the trust is like putting the furniture in the house that you just built.

Yeah, but why am I doing all this? Why am I going through all this extra effort?

Well, you're doing it for a lot of reasons. In fact, I've been asked that question two times that I wrote a booklet called 50 Reasons to Use a Land Trust. And if any of your listeners would like that booklet for free, just have them send me an email. My email, Randylandtrust.net that's an abbreviation for randynisterlandtrust.net and I'll send him that booklet. But. So there are 50 reasons to use a land trust. But let's just look at it from a real estate investor's viewpoint. Just because you put your property into a land trust doesn't mean you don't have liability anymore.

Right?

The liability flows through the trust to the beneficiary. And most real estate investors will make the beneficiary to their land trust the LLC or corporation or perhaps another type of a trust. So the least expensive form of asset protection for a real estate investor is privacy of ownership.

Privacy of ownership.

Okay, Privacy of ownership. Because, Mark, if you put your name on the deed on any real estate, the average American's perception of you as a real estate investor is that you're rich. It doesn't matter if you're upside down. If you got negative cash flow, you're rich because you own real estate. And that makes us, as real estate investors, makes us a much bigger target than anybody else out there doing business. Right. So to mitigate and remove that, we don't tell the public that we own the property. We put it in trust. Our trust owns the property and we own the trust.

Our trust owns the property and we own the trust. Got it?

Right.

So I've got an llc.

Exactly right.

And I've got a trust. So I have two. I have two. I have two entities, two legal entities. I have an LLC and I have a trust. And the trust is one more barrier to someone coming after me personally. They have to go after the llc. Is that correct, or am I saying.

Well, yes, but even better than that, as you mentioned earlier, you know, why you like LLCs, and why do real estate people use LLCs? Well, LLCs do have better asset protection than land trusts, but land trusts have better privacy elements than the llc.

Okay.

So what I teach real estate investors how to do is to link those two entities together so they get the best of both worlds.

Ah, I see, I see. But Randy, come on, man. There's no privacy anymore.

Well, you know, it's a great point, Mark. The land trust is the last entity, right, that is not required to be registered anywhere on the planet. You know, your LLCs are, your corporations are. You have to have a registered agent. People can look up who the owners are. You can't do that with a land trust. There's no land trust registry. They don't have, they don't file tax returns, they don't get tax ID numbers. So if you form a land trust to buy, let's say, your next piece of ground that you're wanting to turn and make some profit off of and you take title of that in your land trust, right? Nobody knows that you're, you're the one in control behind the trust. All they see at the title level at the recorder's office in the county in which the property is located is the title holder, which is the trustee of the land trust, not you, the beneficiary of the trust. So you do.

Even if I have my LLC on the deed, that's not protecting me my privacy. They can look me up, find my ein number and go out four wheeling on my property, get hurt and sue me. Is that right?

Exactly right. That's exactly right. And that's why I don't hold title to real estate in an llc. I see. Now the other thing you need to be conscious of, Mark, is that as you know, some properties have more liability than others. And certainly anything that's not our personal residence is going to have more liability than just a personal residence. So as grandma taught us all, you don't put all your eggs in one basket. It's not smart to title all your real estate in one entity, whether it's one land trust, one LLC or one corporation. Because just think about it logically. Let's say you got 10 land deals, you put all 10 of them into one land trust or all 10 of them into one LLC, and then somebody does take their four wheeler out and they wreck it, they end up suing you. Well, you know, so maybe they get that one property, but if you got 10 properties in one entity, they're going to get all 10 properties.

I see.

So it just makes logical sense that you need to put each property into a separate trust, so each property is insulated from each other.

I see. I don't have to Do a separate llc, though, because now it's going to get expensive if I have to do a separate LLC for each property.

You don't have to do a separate llc. And there are a couple of ways you can deal with that. You can have one LLC as the beneficiary of, let's say two or three land trusts and then form another llc. If you've got more property than that. If you have a lot of property, you might look into what's called a series LLC. And that is a relatively new animal. The last 15 years on the real estate investing scene, where each cell within the same LLC is insulated from the other cells, which basically means that you can have one LLC that is the beneficiary of 100 land trusts.

Okay.

And if you set it up right and maintain it. Right. It's still not a nexus for a lawsuit. Everything is still separated at the LLC level just like it is at the land trust level.

Got it. Got it. Okay.

So if any of your listeners, if any of your listeners are interested in that, I would just suggest that they Google LLC and they'll find out a lot of information about that.

Yeah, that could be your tip of the week Series llc. That's something I would need because, you know, I'm buying hundreds of properties, you know, a month, and honestly, it would destroy my margins and my coaching students margins if we had to do a separate LLC for each transaction. We're doing volume because we're doing such. We're doing smaller transactions. It's not like, you know, we're doing homes for 100,000 to 200,000.

Yeah. Yeah. Well, it's interesting. I had a guy call me the other day that was interested in my home study course that teaches real estate investors how to create their own trust. And I said, what are you going to do with this course? And he said, I'm going to form 1500 land trusts. I said, what are you going to put in them? He said, I have 1500 different oil and gas leases, and some of these go well and some of them don't go so well. And so I want each one to go into a separate trust so they're all insulated from each other.

Got it.

So that gives you a good example of how you can structure this. And once you get the knowledge and the forms loaded on your computer, you can create all the trusts you want at no expense for the rest of your life.

You don't need to be an attorney to do this. I don't have to go to an attorney every Single time I need a former lam trust.

No. And if you do, it's going to be cost prohibitive and you'll end up not doing it and not getting the benefit of it. Whereas if you create your own lamb trust for nothing, no cost, you just hit print on your computer, then you're more apt to do it the right way, like, as I've explained.

That's unbelievable. So how did you get started in this? Because, you know, you're. You're a real estate investor first. But then how did you become Mr. Land Trust?

Well, I, as you said in the introduction, I probably had 10 or 15 houses before I realized just how stupid it was for me to own real estate in my own name. And so I started researching how can I hold title to this property not in my name? And I stumbled across the land trust. And of course, I stumbled into LLCs and corporations, all the other typical type of title holding methods. But what attracted me to the land trust was the privacy element and the ease of which to create and that lack of expense. So I started digging into that, which is really hard to do because it's hard to find anybody that understands this stuff. They don't teach it to lawyers in law school. Only if a lawyer takes it upon himself to learn after law school does he understand how to set up a land trust. So I started learning myself, and I used them in my business for probably 25 years before I had other real estate investors encourage me to start teaching them how to do the same thing. And about 15 years ago, I started teaching land trust courses, you know, live seminars, and then came out with a home study course for those people who could not attend the live seminars?

Right, right. Okay, so can you kind of walk me and the listeners through a typical transaction where you say, yeah, we've got to have a land trust for this and the steps involved.

Well, first off, I operate under the premise that every property should go into a separate land trust. I don't care if it's personal residence. Every property should be in a separate trust. So they're all insulated from the other properties. So the best way to do this, Mark, is to take title from the seller directly to your trust and never be in the chain of title yourself.

Okay.

You know, there are sometimes there are issues, especially with ground, the type of real estate you deal with. Sometimes there are EPA issues, environmental issues, and they can go back all the way to anybody and everybody that's been on title to go after them. So that's a great reason to not.

Ever take Title, my due diligence. There's no way we're buying an EPA problem. But don't worry about it.

That's sometimes accidentally. You didn't, you didn't know that little stream wandered through your piece of property that has black tar flowing through it or something?

Yeah, that's true.

It's. This is, you know, you never know. You know, if you, if you could give me some reasons why you should hold title in your name, I'd be glad to listen to say, to save money. But, but you're not saving any money.

I'm not.

Because it doesn't, it doesn't cost you anything to set up a land trust. So what money are you saving to take title in your name?

Okay, I. So I don't have to record? There's no extra recording fees, nothing?

No, you, the only thing that you're going to record is the deed and trust, and that's going to cost you the same amount as any other deed costs.

Right. Okay. So I, I sell you a piece of property, right? And instead of it being Frontier Equity Properties LLC to Mr. Land Trust, LLC. How would that read?

It would read the grantor on the deed would be your entity or the individual you're buying the property from. Whoever's on the deed now is going to be the grantor, and the grantee on the deed is going to be my trustee and my trust. So it would sound like this. The grantee on this deed would be John Jones, comma trustee for the Orange and Blue land Trust number 1234.

Got it, got it. Okay. Now, does a land trust differ from like, I have a family trust?

Yeah, what you probably have is a living trust.

Yeah, yeah, I have a living trust.

Yeah. A land trust is a type of living trust, but it's specific to real estate. Specific to real estate. It only holds real estate or real estate related assets like apartment building, a single family house, a commercial building, you know, a Kentucky Fried Chicken building, air rights, mineral rights, like we were talking about the guy who had 1500 trusts.

So.

Yeah, it is specific to real estate and allows only the holding of real estate assets in it. Now, whereas a typical living trust has no privacy and no asset protection. And you certainly don't want to title your real estate in your living trust along with your silver collection and your savings account and the snowmobile and anything else that you might have in a living trust, because then you're going to taint all those assets with the liability flowing through from that real estate.

I see, I see. I'm in Big trouble, I have to tell you. I got to set up a series LLC and then start doing this and then putting everything in trust.

Because you really, you really should, Mark.

Yeah, I mean, you know, you know the old saying in real estate, it's not a matter of when or if you're going to get sued. It's not a matter of if you're going to get sued, It's a matter of when. Right. Has that been your experience?

Well, it has, especially since, as I mentioned earlier, we as real estate investors are bigger targets. So we get sued more often than anybody else. And the very first thing that happens. Well, let's just walk through this, Mark. Let's talk about how a lawsuit starts and how the decisions are made to sue Mark or not. So Mark runs over Randy's dog, and Randy gets mad and says, you know, I'm going to sue that guy. And I go to my lawyer and I say, I want to sue Mark. And my lawyer says, okay, Mark, let's see, what's his last name? And we type in, the lawyer types into the computer your full name. And if that computer printer starts spitting up all these that are titled in your name.

Right.

My attorney's going to turn to me and he's going to say, hey, Randy, I think we got a good case here right now. Let's change the scenario a little bit, Mark. Let's say I go to my attorney. I say, I want to sue Mark. He ran over my dog. Let's sue him for a million dollars. My attorney says, what's his name? He types in your name. And the printer doesn't budge.

The printer doesn't. Yeah, because everything.

Trust. Right. There's nothing in your name. Now, attorneys aren't. They're not stupid. They didn't get through law school by being stupid. They realize there's a difference between suing and winning and collecting. You can sue all day long, but that doesn't mean you're going to get any money. You still got to have the ability to collect. And the perception of real estate investors is they have hard assets to collect upon the lawsuit.

Right?

So now if the printer doesn't print any assets that are in Mark's name now my attorney turns to me and he says, randy, you know, I'm not so sure we got a great case here. But I tell you what, I'll definitely sue Mark for you. All I need you to do is get your checkbook out, write a check for $10,000 to my escrow account, and I'm going to go after him. And I'll send you a statement every month saying how much money I've spent on this. And when I run out of the 10 grand, I'll ask for another 10 grand. Right, right. That. That's exactly how the American legal system works today, Mark. And now in that scenario, I got a decision to make that I didn't have to make before. Because before, if he's going to sue on a contingency fee basis, I don't have to write a check right now that he. I'm not going to sue on a contingency fee basis. I need you to write a check. Randy. I got a big decision to make. Just how bad do I want to sue, Mark? 10 grand worth, 20 grand worth. That's no guarantee I'm going to win either. That's just the starting dollar amount. So you can see how just by not owning this stuff in your name, you can dissipate and eliminate most of the frivolous lawsuits that might come at you over your investing lifetime.

Yeah, this is fantastic because I have to tell you, I've been operating the past 13 years, since 2001, in the dumbest way possible. I've got one LLC and I put everything in that one LLC and I'm just gambling, basically, Is what you're saying, that I'm never going to be sued now, you know, knock on wood. I haven't had any issues. But this. What I mean, if it doesn't cost me anything extra, why wouldn't I do that? It seems irresponsible.

It is irresponsible, especially when you relate it to your family, your children, their college education, a new house you might be able to buy for your family. All these things are at risk when you don't protect your assets. You know, so many of us real estate investors spend all of our life learning how to build wealth. We never learned how to protect that wealth. And many of us lose that wealth from frivolous lawsuits that come down the pike at us. And we didn't even see them coming. Let me give you, Mark, let me give you a real life example of how this works. Is that all right?

Yeah. Yeah. And my next question is going to be, am I too late? Can I go back and start re recording all my properties in trust?

Yes, you can and you should, because as I said, I'm going to give you 50 reasons to use these trusts. And one of them is just get it out of your name. But, yeah, get everything out of your name into trust. And oftentimes I have students say well, can't everybody figure that that's my trust? And don't they know I've put it in my own trust? No, because we don't know who the owner of the trust is, so we don't know. Did Mark put that in his own trust or did Randy buy it from Mark? And it went into Randy's trust.

Right.

You see what I mean? So you can't make the leap or the assumption that just because it went out of your name and into a trustee's name that you're the beneficiary of the trust.

Right. That's cloaked.

That's hidden. That is hidden. So first order of business, get everything out of your name. You'll sleep much better at night, I guarantee you.

Now, could I actually get your course, give it to a virtual assistant, tell them I own all these properties in all these different counties, Find out the process to do. Am I going to do a corrective deed or how am I going to do that? How do I deed the property out of my LLC into the trust?

Well, one of the forms that comes with my home study course is a deed in trust. It's a little bit different than a warranty deed or a quick claim deed. Just got a little bit different verbiage, but it creates the trust. And so you use a deed in trust, you have the grantor and the grantee, as I mentioned earlier, and you record that in the county in which the property is located.

Okay.

And that's it.

So the grantor is Frontier Equity Properties llc. The grantee is my trust.

Right. And that'd be your trustee and the name of your trust. So once you decided who your trustee was going to be, then you would set that up on all the, on your deeds, and you could have more than one trustee. In fact, one of the creative things I teach in my home study course is how you can create five different trustees out of one person. Because obviously, if you have 100 properties, you don't want one trustee showing up as the same trustee for 100 trusts.

Right.

So we have to get a little creative in our, in our use of trustees. But after using these things for 35, 40 years, I got a pretty good grip on how to use them and more importantly, how to teach you how to use them and other real estate investors how to use them so they can cut through the education part and go right to the use and doing part.

Right, Right. Well, I'm definitely ordering the kit and doing this or hiring my VA to do it, because I'm really exposed I'm really kind of, you know, it's crazy. So thank you.

Yeah, you're welcome.

Yeah, I've never. I've never, you know, all these years in real estate, I've never heard of it. That. That's something that you need to do. I've always heard llc. Llc. Llc. But because I've been doing so many smaller transactions, I thought, well, this is. I can't, you know, I'm not going to submit an LLC on a $500 land flip. Yeah, that's gonna take out all my margin.

Yeah. Yeah, it's a good point. And I think what the benefit here, Mark, is that I'm 62 years old. I've been in this business for 42 years. I've seen a lot. And I can transfer that knowledge back to a younger man like yourself and say, hey, don't let this happen to you. Because just because you've been in the business a few years doesn't mean bad things aren't going to happen in the future. So part of what we need to do is learn how to make money. But, yes, we also need to learn how to protect that money, because these threats come out of left field. And let me give you a real life example, if you don't mind. Sure. About 10 years ago, I sold piece of real estate out of a trust. It just so happened to be the house where my family lived. And six months after the closing, I got a letter in the mail from a lawyer saying the buyer had to put in a new air conditioner, had to fix some flooring, and had to replace all the toilets in the house. There were six toilets in the house. He replaced them all. And if I would just send them a check for $8,000, they would not sue me.

No kidding.

Yeah. I mean, where's that coming from?

Right.

Are you responsible for maintenance after closing? Right. Right. I don't think so. I sent him a letter back and I said, well, I'm sorry, but you should check your files before you send out a letter threatening to sue somebody. Did you see my name on anything? Was I the seller? Did I sign the deed? Did I sign the seller disclosure form? Did I sign the listing agreement? Did I sign the termite? Right. Did I sign anything? He sent me a letter back and said, well, my client told me that you were the owner because you were living there.

Right.

Well, excuse me. A lot of Americans live in houses they don't own. Right, sure. So I sent him a letter back and I said, no, I was not the owner. I believe the Owner was some kind of trust. I'm not quite sure how these things work, but it's some kind of a trust. I wish you a lot of luck. I hope you find the owner. And you know what? I never got a letter back.

Never got letter back.

What was going on there, Mark? In my estimation, what was happening in that scenario is it's called a shakedown. Sure. And that's what a lot of lawyers do. Just that they don't ever intend to ever get in court. They're just trying to get you to settle. They're trying to intimidate you into writing him a check for 8,000 bucks in that case.

Right.

And when he realized that I wasn't going to be a pushover, he went back to his client, said, well, wait a minute, Bob, this one's going to be a little tougher than our normal shakedown. Do you want to pursue that or not? And Bob decided to go sue some other sucker instead of spending money coming after my trust.

Right, right.

Yeah. So you see how that works?

I see exactly how that works. I'm doing this. I'm definitely going to do this. I hate feeling so exposed now. So thank you. Thank you. But now we're at that point in the podcast where I hate to do it to you, but I'm going to put you on the spot and ask you for your tip of the week. It can be a website, a resource, a book you read, something to help the listeners learn more.

Well, let me give you two, if you don't mind. One is a website, and it's a guy I've known for 25 or 30 years. Some of your listeners will know him and some won't. But it's called. He goes by Mr. Landlord.

Oh, okay, sure.

Jeffrey Taylor out of, I think, North Carolina. He's got a terrific website for landlords and real estate investors in general. Lots of good free content. Mr. Landlord, highly recommended. You can get on his email list, his newsletter for free via email. A lot of discussion boards for landlords. You know, there are all these tenant union organizations around the United States, and it's to our advantage to get together and talk, you know, what's good for us as landlords and property owners, too. And that's a great site. Mrlandlord.com Mristerlandlord.com okay, great.

And what's the other tip?

The other tip is I would suggest that your listeners, when they buy real estate, make sure they buy property that fits their personality, because not everything fits your personality. For example, early on in my career, I Got into the apartment business, and after a few years, I realized that this didn't really fit my personality. I didn't like 100% turnover every year because I'm in a college town and I own college rental property apartments and everybody move out every year. So what evolved in my investing career was the interest in single family houses. They fit my personality. I have standard 80% renewal rate, lease renewal rate every year, so there's only 20% turnover, and I like that. And houses are easy to manage, and I can leave town and not worry about them falling apart or having the police called for some problem at the apartment building, if you know what I mean.

Right, right. Yeah, exactly. All right, that's a great tip. That's a great tip. And my tip of the week is going to be go to Randy's webinar and learn more about land trusts in a lot more detail than what we've just discussed on the podcast, because there's a lot to it. And he explains it really, really clearly on that webinar. And then it'll take you to the home study course as well. So you're really informed. And it's crystal clear why this is so important to do and protect yourself and not be, like me, a complete open target for lawsuits. So if you're listening to this podcast now, I can guarantee by the time you listen to it, I will put everything into trust with Randy's help. So don't go looking for me and don't think you're gonna go, you know, quadding on my property and sue me, because it's not gonna happen. So, Randy Hughes, Mr. Land Trust, I can't thank you again. And thank you again. I can't thank you enough. I really appreciate it. It's been really enlightening, even though I'm embarrassed for myself about how exposed I am. But again, that's all going to be solved today and all the paperwork will be filed next week. Thank you, thank you, thank you. And I hope you come back on the podcast.

I will, anytime, Mark. Thanks a lot for having me.

All right, thanks, Randy. I'll talk to you. Anyways, if you guys want to learn more, of course, go to my site, www.belanegeek.com, download the passive income Blueprint, get the ebook how to Avoid the Three Fatal Land Buying Mistakes. And of course, get this always informative and engaging podcast delivered each week to your email inbox. And look, if you want to buy some raw land, it's going to be in trust now, but you can acquire it from me@frontierpropertiesusa.com and don't forget to go to Mr. Land Trust's webinar. There will be a link below Again. Randy, thanks again and we'll see everybody next time.

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