Proportion of Equity to Prevent Foreclosure!14 Feb 2010
You are having a rough time with your rental property or even your private residence.
The problem is that your mortgage payments and/or other expenses are driving you into the poor house and you cannot sell or even refinance the property in this market.
You cannot keep up the mortgage payments or the negative cash flow much longer. You may not even be delinquent, but you know it is a matter of time before you will be.
You may also be upside down in the property, that is you owe more on the property than it is worth.
Is that your problem? We have the answer!
It is called Equity Sharing. The last time those words were uttered was a generation ago in the early 1980’s, when interest rates were in the 14-19% range and few people could afford mortgages at those rates.
People would ban together to purchase property as co-owners, sharing the equity.
There were many different models but most resulted in 1 party, the investor, putting up enough cash to allow his equity share partner to be able to afford the resulting smaller mortgage payments.
The other partner, the resident, moved into the property and maintained it while paying the mortgage and other operating expenses.
A second popular model was where an investor was brought in to cover or at least greatly reduce the negative cash flow resulting from the high mortgage payments which resulted in negative cash flow.
Whichever model was used, the result was often a lawsuit or worse.
In most cases, although there was a written agreement, both parties were on the title as co-owners.
That was the crux of the problem. What happened when one partner died, got divorced or was sued?
His portion of the house was in play. Perhaps creditors forced the property to be sold. Maybe it ended up in the litigation between divorcing parties.
Most commonly, a dispute would arise between the partners. One was not doing his job. Maybe one wanted to sell or refinance or wanted out or whatever.
The result was often a mess and equity sharing deservedly fell out of favor, also the interest rates came down and equity sharing, like seller financing, was no longer needed.
Now we are in an environment where the benefits of an equity share could be the salvation for someone over the barrel as we described above. No way out, foreclosure and disaster over the horizon.
Now, there is a way to have the advantages of the equity share model, while eliminating the downside!
The solution is to use a properly constructed Land Trust to hold title to the property.
This eliminates the possibility of the property becoming caught in the middle of a dispute between 2 or more owners.
While it is too complicated to go into here, suffice it to say that the land trust will give everyone the benefits they were looking for, ownership, tax advantages, equity, etc. while avoiding the hassles that can accompany joint ownership of real estate.
Should an equity share partner get sued or divorced, his portion of the ownership can be sold without the expense and turmoil of selling the whole property.
The biggest benefit of using a land trust is that no lawsuit or judgment creditor, not even the IRS can attach the title or take someone’s ownership of property in a properly constructed land trust! I
If Jim gets sued, they can take his other assets but they cannot take his interest in the land trust and the creditor can not affect the ownership of the property.
If you feel the confidence of the earth could be the answer you're looking for, make sure that you have written specially by someone experienced in Illinois land fund. There are many different types of funds and only version of Illinois will give you the benefits described in this article.