It never ceases to amaze me how many investors buy real estate in their own name.

In today’s litigious society, this practice can prove to be an expensive mistake.

Out of the blue, you are served a summons from someone you don’t even know for a property you just bought cash at auction.  It happens more often than you think.

Here’s a likely scenario. A tenant files a frivolous lawsuit and his attorney is more than happy to work on contingency because the property is free and clear and the new owner (you) is easily identified. Oh, darn…you didn’t have time to get insurance coverage.

Frivolous or not, lawsuits are expensive to defend and you can get stuck with a judgment that will adversely affect your credit.

Enter the Land Trust.

A legal title holding entity in all fifty states, the name of the Trust and the Trustee is the only information required for recording. The Beneficiaries, who are the real owners of the Trust, are not disclosed.

The Trustee is similar to a Manager of a Limited Liability Company (LLC). The Beneficiaries can be compared to the Members of an LLC.

So, what’s so great about that? You might ask. Well, as far as privacy goes, it’s huge.

The disgruntled tenant that was trying to test your financial waters will change his mind when his attorney charges him by the hour if he wants to move forward.

This being the result of the privacy feature that permits the owners of the Trust (the Beneficiaries) to remain anonymous - unless a judge orders the Trustee to reveal their identity under a court order.

It becomes even more difficult for an eager attorney to sort things out if you use an LLC as the Trustee (instead of a person). Additional layers of protection are very effective shields that often result in a potential lawsuit never being filed.

HINT: The Trustee should never be a Beneficiary of your Land Trust. It creates a “merger of interest” issue that is outside the scope of this post.

Then there is the flexibility factor. The Land Trust Agreement can be prepared quickly and a different Trust can be created for each one of the properties you intend to bid at auction. All you need is your computer, there are no fees involved and the Agreement does not have to be recorded with the County Recorder’s Office.

And yes, the Land Trust is a perfectly valid entity you can use to take title to a property you buy at auction or for any other real estate transfer.

Compare this simple process with the work required to create multiple LLC’s, paying the filing fees, annual reports and having to prepare the tax returns at the end of the year.  And also Florida’s public records are very transparent and any information pertaining to an LLC is easily found with a quick online search.

The advantages of taking title to real estate in the name of a Land Trust instead of an LLC are clear.

Land Trusts are a great asset protection tool and a very effective first line of defense against ambulance chasers, overzealous creditors, judgments and potential liens.

Learn about these powerful title-holding entities and then add them to your arsenal of real estate strategies to build wealth and keep your name off the grid!

There are many risks associated with buying Tax Deeds in Florida. 

Government liens are among the most insidious. At all levels, federal, state, county and municipal, most government liens survive the Tax Auction. Meaning they either get paid off with the surplus proceeds, or the new owner of the property gets stuck with paying the bill.

Even knowledgeable investors think that by the virtue of the Tax Deed auction, all liens and title issues get wiped out.

That is not always true. Although private liens and judgments disappear, most government liens survive and can be disastrous for the investor new to Tax Deed auctions.

All private and institutional mortgages, IRS liens over 120 days old, HOA dues and private party judgments get wiped out. Memorandums of option, assignments, agreements, hospital bill liens are other examples of items that you need not worry about.

But watch out for most government liens and HOA special assessments that are voted before the Tax Sale and payments are due after the Tax Deed auction.

An IRS lien that is less than 120 days old, an SBA-guaranteed loan, a Department of Revenue lien for unpaid sales tax, a Code Enforcement lien on an abandoned property and unpaid water bills are all examples of items you need to keep into consideration when doing your due diligence.

If recorded, all these items can be found in the Public Records of the county where the property is located. The liens are filed against the property and they can be found by searching the name of the owner. Cross-check the property with the owner name in the Property Appraiser’s site.

Keep a tab of the total amount of the liens. If the amount of the surplus (any amount over the property taxes opening bid) is close or above the total amount of the surviving liens and you’re still getting a good deal, then go for it!

Bottom line, always do your homework on every property you’re going to bid at auction. A surviving lien could mean financial disaster.