068: Protecting Your Real Estate Assets Using Land Trusts with Randy Hughes
Randy Hughes is my guest on this weeks episode of the InvestFourMore Real Estate Podcast. Randy grew up poor, but found real estate when he was in college. He began investing in single family rental homes and has since bought over 200 houses. Randy learned about the best ways to protect his real estate assets along the way using land trusts. In fact, some call Randy Mr. Land Trust because of his vast knowledge on the subject. Not only does Randy teach his techniques online, but he has taught classes at colleges and is licensed to teach with the Illinois Association of Realtors. On this episode Randy gives us a lot of information on why land trusts are such a great tool for real estate investors as well as many other tips to protect investors.
How did Randy get started with real estate investing?
Randy grew up very poor with an alcoholic father. He worked hard to attend college and was the first person in his family to graduate from college. While in college Randy started to learn about real estate investing and rental properties. He was actually able to buy his first property when he was 19 by assuming a loan and putting $800 down (at the time his life savings). By the time he was done with college he owned three rental properties and was ready to move on in his real estate investing ventures. He started to invest in commercial real estate by purchasing office buildings.
As Randy’s portfolio grew, he realized all of his properties were in his name, he had no privacy, and was an easy target for litigation. When this was happening a few decades ago, LLC’s had not been invented yet. Randy discovered land trusts and how they could protect his properties.
How do land trusts help protect your real estate assets?
I have all of my rental properties in a separate LLC. I am in Colorado where LLC’s are very cheap and easy to set up. LLC’s help with liability and protect you from some liability, but nothing is bullet proof. In some states it can cost hundreds of dollars a year to maintain LLC’s. It is also pretty easy to look up the owner of a LLC if you are worried about privacy. Land trusts are usually much cheaper to set up than a LLC and you do not have to register them with the state. It is much harder to find the owner of a land trust and you can set up land trusts in conjunction with LLC’s in multiple states to provide the ultimate protection.
How can a land trust save you from bad partners?
Randy tells a story on this podcast about a chopping center he bought with a friend many years ago. The friend did very well financially until the real estate crash, where he lost millions. The friend had millions of dollars of debt he could not pay. Because Randy and the friend had their commercial property in a land trust, the liens could not attach to that property.
Land trusts can also make the estate planning process much easier. Instead of an estate going through probate, land trusts will allow property to pass directly to the heirs.
How can you learn more about land trusts?
Randy has put together coaching programs and live seminars to teach others how to use land trusts. There is much more information on how to protect yourself in this podcast so make sure you listen to it or read the transcript. He also talks about why you should always use a P.O. box and should own properties individually with your spouse instead of together.