|The PACTrust another angle on things in general
Contrary to what you might hear from those who are uninitiated in these kinds of areas, buying
real estate with nothing out of pocket, nothing per month, no payments, no management, no
maintenance, no repairs or upkeep and no credit risk is a pretty damned good gamble. This is true
even in those areas where appreciation "might" be perceived potentially less than in others.
When someone supposes there isn't as much appreciation in the inner cities, then I suppose that
would mean one could buy a virtual mansion there for $50,000. Obviously you and I know this
isn't true. The values in the so-called inner cities rise and fall proportionately with the rest
of the world. This is because houses there are made from the same lumber, concrete, cement,
glass and Union labor that Valley and Seaside houses are. And, as well, they are responsive to,
and subject to, the same economic influences. Obviously if one is referring the Ghettos or slums,
then that doesn't relate to your question about investing in the "city (Watts, Compton,
With all that aside, let me answer your questions: We've facilitated well over 1,000
PACTrusts™ since 1993. So far we have a 25% slow pay rate; a 15% default rate; a 5% eviction
rate; three favorable Unlawful Detainer Actions to our credit. Further, we have never experienced a
single lawsuit, lis pendens or legal action of any type against the company; a participating broker,
agent, investor or any other principal).
The PACTrust(tm) works this way:
A. A property is placed in a land trust for myriad reasons (here are just a few of them):
- For privacy, estate planning, probate avoidance and assets protection
- To enable one to convey all tax benefits to any party in the transaction that he/she would
choose...without title transfer...in order to command 150% higher rents and eliminate all costs
of vacancies, management, maintenance, etc.
- To avoid Due on sale compromise in the underlying financing relative to owner financed
- To shield the property from virtually all legal threats and potentialities: from marital
disputes and creditor judgements to BK's and tax liens
- To make your purchase by payment-assumption simpler and easier, since the seller can be so
well protected while staying on the loan, and never have to worry about you or the collection and
disbursement of payments. And neither does he ever have to put your name on title… until you're
ready to sell or Re-Fi
- To make your selling (or other disposition) easier, since the buyer can be so well protected
while assuming payments on existing financing... without a Down (if you so choose) and without bank
financing and stringent credit requirements
- To make "sandwiching" easier, since the investor in a two-tier PACTrust(tm) needn't ever be
concerned about the potential for untoward or illegal actions by, or personal problems of, the
person remaining on the loan: or of the person living in the property and making the payments
- To make eviction faster and easier, since no defaulting party can not claim "equity" to thwart
or forestall Foreclosure, eviction or Unlawful Detainer
- To shield the buyer against illegal or illicit Foreclosure or Unlawful Detainer by the Settlor
or Non-Resident Beneficiary without just and appropriate cause
- To allow for the collection of as high a security deposit as you want without being restricted
by legislation to just a "first and last"...a PACTrust(tm) Contingency Fund can hold one payment or
twenty payments, if you want
- To shield the investor from unfair and highly biased and restrictive Landlord/Tenant laws and
B. NEXT, a Beneficiary Interest in the trust is assigned (sold by the owner... the Settlor Beneficiary)
to an Investor (the Non-Resident Co-Beneficiary).
C. THEN the Non-Resident Co-Beneficiary Leases the property from the trust on "Triple Net" lease
basis (i.e., contracts to pay all costs of ownership and possession).
D. FINALLY the Non-Resident Beneficiary advertises for a Resident Beneficiary who will live in the
property, take care of it and make all payments and handle all costs for 100% of all benefits of
homeownership (including income tax deductions). Depending upon the amount of payment relative to
FMV, the appreciation and principal reduction can be shared between Resident and Non-Resident
In this scenario, the Investor can relax and buy more property, while expecting to receive profit
by means of: 1) a share in equity build-up 2) by principal reduction, 3) appreciation, 4) a return
of all equity held at start, 5) a positive cash flow throughout the term, and 6) the passive tax
write-off (Depreciation) throughout the term.
Resident Beneficiary will either sell or refinance the property, and pay the investor off out of
the proceeds of such disposition at that time. The sale price for the property termination is agreed
upon in advance, and is whatever the FMV may be determined to be at the time by a mutually acceptable
appraisal...LESS any monies owed by the trust to the acquiring party (from profits, credits and
That's about as concise as I can make it.
Call if you need us. We provide all client consultation (we'll even sell the deal for you by
teleconferencing with your clients and prospects); we guide you through every phase; we do all
documentation, provide the trustee, the collection and disbursement service, client consultation,
Escrow, legal review and endorsement, and post Escrow follow-up.
Quick Start Success Pack by Bill Gatten
Bill Gatten, www.landtrust.net
is an accomplished Real Estate Investor, Author, Lecturer and
Sales Trainer. With over 40 years experience in banking, equipment
financing and leasing, and real estate investing, Bill is considered among
the top Creative Real Estate trainers in the U.S. today. His book, No Down!
No New Loan! is now in its second printing. A new book for investors is
due out in 2002: 'Making it BIG in Creative Real Estate...for the Cash,
Credit, Income and Experience Challenged.'
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