Re: PAC Trusts and lease options. What gives? - Posted by Bill Gatten
Posted by Bill Gatten on December 01, 1999 at 20:12:55:
Want a confession? OK, when I wrote the book, my intentions was to point out the inherent dangers in creative financing in general (Lease Option, Wraps, Contract, Equity Shares, etc. and how virtually all of them can be overcome by using a combination the Land Trust, Assignment, Beneficiary Agreement, Triple Net Lease, Power of Attorney, etc.). And? to show how the PACTrust™ itself would help to ameliorate some (if not all) of the problems that do exist with them. I honestly never mean to “bash” anyone’s product…in all candor, at the time, I had never heard of Bill Bronchik, Ron Le Grand, Joe Kaiser, Claude Diamond, AD Kessler, etc. (to name some good ones). However, since becoming acquainted with these people to some degree here on CRE, and hearing from proponents of L/O’s (Piper, Branstetter, Crouch, Garcia, and the like) I have developed a true respect for their ideas and their integrity ('don’t know Le Grand as well as the others, but I’m sure he’s a “good guy” too).
So let me say that if any of the following items create a problem (of if you care one way or the other), they can be mitigated or eliminated through the use of the combination of documents (“system”) known as the NARS PACTrust(tm. Don’t men to be haughty or know-it-all, 'ner none of that:
Seller won’t budge for fear of the Due-on-Sale Clause, a buyer wont budge for the same reason.
Due-on-Sale concerns you, as an investor, irrespective of how benign some might insist it is (or how benign it may be).
Fear of putting someone else on title is costing you a property in a seller-carry opportunity (or a buyer in a sandwich opportunity)
Fear of your optionor’s liens, suits, judgements, BKs, marital disputes, tax liens or probate proceedings is preventing you from entering an option agreement (or perhaps a fear by the optionor that the optionee might create a cloud on his title by virtue of the option being a an asset that could become a part of someone’s personal, legal or tax problems)
The rents are not high enough to voer the nut, without being able to “sell” or “trade” the income tax deduction to the tenant (an you thank of another way to sell or trade income tax write-off to someone who is not on the loan or on the title?)
You as an optionor are concerned about 1031 tax-exchange consequences of missing your 180 window by creating a constructive Sales Contract (re. Lease “Purchase” Agreement.
You would like a way to create more income and a higher sale price and more cash up front that an option would likely provide (one I did a year or so ago for a client netted the “optionor (resident beneficiary)” $280,000 cash up front (on a $900K property that would normally have old for $800 or less).
There are dozen more of these, as you know Emmitt, but they are legitimate benefits, features and/or advantages only if you are concerned about them relative to the way you do business. No offense to anyone?honestly.
In the 60’s, a popular (in some circles) was: “A Citroen is definitely not as attractive as a Cadillac, but it will straddle more humps and climb more hills and lift its own wheel up to help you change a tire.” (There’s a connection there somewhere?though you may have to think about it for a while). .