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Use Options To Judgement-Proof Your Real Estate
and Credit Lines To Judgment-Proof Your Cash
   by Ray Como   

 One day a California doctor called. He'd heard about some of the corporation strategies I've created. He read about my judgement-proofing techniques. He knew of my real estate legerdemain. All that considered he figured I would be the best qualified to:

  1. Judgement-proof all his real estate properties and one million dollars in cash.
  2. Financially protect his wife, his kids and their family trust.
  3. Freeze his family estate to reduce (or eliminate estate taxes.)

 The challenge intrigued me. We negotiated a daily rate plus expenses. I jumped on the next plane to L.A. and we went to work. The following is my solution. I hope you like it, and more than that, I hope you do it. I hope you do it now because strategies like this serve you much better when you implement them years before you need to.

 The Real EstateóI advised the doctor in the following way:

"When you buy a property, sell to the trust (i.e. the wife and kids), a twenty year option to buy each property at the price you paid. This is not a taxable event. It does not get reported. In fact, option money paid or collected is never claimed as income, nor deducted as an expense until the option is exercised to allowed to expire. The IRS views an option as an incomplete transaction because it is literally impossible to ascertain gains or losses. Interesting? Please keep reading.

 We created an option transaction between the doctor and the trust. His wife is the trustee so she executed the following "iron-clad" option transaction in behalf of the trust.

 For $1 and other good and valuable consideration we sold an option to the trust. Then we created a mortgage (or trust deed) to secure the option. Don't get this confused with a mortgage-to-secure-a-note. See, the mortgage is not the evidence of a debt (that's called a note) it is the security or collateral for a debt. And uniquely, a mortgage can be recorded to secure the satisfactory performance of anything that requires performance. In this case the doctor's performance in the option.

 This Mortgage-To-Secure-Option serves to: #1. Protect the equity and thus the family's interest in the fee simple title to that real estate. #2, it places the transaction in the public records without revealing the terms. And #3, it creates an insurable interest.

 So now we have the option agreement and the mortgage to secure the option. Then we execute and place into escrow a set of escrow instructions along with all documents necessary to transfer title. Documents necessary to transfer title are:

  • Deed
  • Agreement of Sale specifying the terms of the sale,
  • Mortgage to secure the option
  • Quit Claim Deed in the event of default
  • Settlement Sheet with everything filled in but the prorated items.

 Now this transaction can literally be closed in ten minutes. It's kind-of like being prepared like "The Minutemen" were prepared during the American act in a momentís notice.

 They asked Jesse Owens..."The will to win Jesse, is that the most important thing in sports? How important is it for a champion to have the will to win?" He replied, "Itís important, but let me tell you whatís infinitely more important than the will to win. It's...THE WILL TO PREPARE!"

 The $1,000,000 in cash. Here is what I advised:

 Give each of his five a kids a pre-approved line of credit in the amount of $200,000. Have them execute a revolving-credit-line judgement note and record it. A "revolving-credit-line note" is like the ones banks use on their pre-approved lines of credit. You know, you get a checkbook and pre-approved check writing privileges.

 Now hold on! Do you think I'm nuts? I am not saying you should give your kids a checkbook with a million dollars in it, I'm just using this scenario as an illustration to show you that this same thing happens in the real world everyday.

 Now, anytime that million dollars comes under scrutiny, is a target due to a lawsuit or is at risk the kids will "activate" their line of credit, cash your check and meet you in Reno. The paper trail is instantly and legitimately broken! Reno is a great place to lose any amount of cashófast! Besides, once in Reno you'd only be thirty minutes from the world headquarters of Laughlin Associates in Carson City, and (800) 648-0966 might be the next best number to call for help as to what to do next.

 Get judgement-proof today...before you get sued, long before.

© MMI By Ray Como. All Rights Reserved

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Ray Como has created, produced, copyrighted and self-published 15 audio cassette programs and lots of other forms and tools for business, real estate, corporations, selling, marketing, finance, management and Entrepreneurship.
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