Cincinnati Realty Investments, LLC

1)    When lender provides money for borrower/s to buy house, borrower’s name/s are on deed; and the lender’s security is a mortgage and a promissory note. If borrower misses payments, lender legally forecloses to take ownership of house from borrower and sells to recoup money lent.

a)    If lender is a bank with deep financial pockets… the expense and time to transfer ownership into bank’s name usually takes one to three years in court, but the bank will be fine in the end.

b)    If lender is a private lender without deep financial pockets… the expense and time to transfer ownership into an individual’s name, usually takes one to three years in court; but the private lender will not be fine in the end. 

Most private lenders that lend money use a realty mortgage and promissory note like banks do; but with higher risks. Why? Because they are led to believe that the property has enough equity (LTV is normally 80% – 90% percent on average) to protect them if they have to foreclose and take ownership to recover their money. 

What is not known, and purposely avoided in conversation, is how brutal, expensive, and time-consuming a foreclosure really is (as stated above: it could take up to three years in judicial states; and in non- judicial states less time but almost as long.) 

Since 1984, CRI has worked hard at avoiding mistakes and risks that could create harsh consequences and sometimes almost fatal mistakes that could take years to recover, if ever.

So, when we needed money to secure good real estate deals using private money partners, we structured these investments in such a way that if we ever failed making payments, the private money partner would be able to take the property back without the need of a court intervention. 

How? By having the money partner’s (entity’s) name on the deed. Meaning the money partner or entity didn’t take a mortgage in exchange for the money supplied. Why? Because the money partner would own one hundred percent legal and equitable title of the property.

Therefore, if there was ever a breach in paying the private money lender under the terms agreed on, a simple written notice of default informing the real estate investor (borrower) he/she no longer had an interest in the property. No court or lawyers would need to be involved.

The vehicle we use is a Revocable Trust, which is approved in all fifty judicial and non-judicial states.

To be clear: when property is owned by a trust, the Trustee (private money partner) has one hundred percent legal and equity title; and, the Beneficiary (real estate investor) has one hundred percent interest in the trust. These two are separate from each other; in other words, the Trustee has the realty part, and the beneficiary has the personal property part.

Because the beneficiary gives a Security Agreement-Chattel Mortgage and a Promissory Note as collateral pledging his beneficial interest in the trust to the trustee. And, if not paid as agreed on, then the trustee notifies the beneficiary that he/she no longer has any interest in the trust. No court is involved.

Here are the documents we use:

1)     Joint Venture Agreement (not recorded; outlining each person’s obligation, etc.).
2)     Trust Agreement (not recorded; outlining the Trust terms and conditions and naming the money partner as  Trustee and Beneficiary).
3)     Assignment of the Beneficial Interest given to the real estate investor as new Beneficiary (who signs a Security Agreement-Chattel mortgage and a             promissory note as collateral pledging the beneficial interest in the trust to the trustee).
4)     Memorandum of Trust (recorded; announcing there is an unrecorded Trust Agreement).
5)     Warranty Deed to Trustee (recorded; showing money partner is owner of the trust).
6)     Memorandum of Title (recorded; protecting Beneficiary/s of an unannounced sale by Trustee). 
7)     Release of Memorandum of Title (held by Title company or attorney to be recorded at next closing or if Trustee takes back the beneficial interest).
8)     Limited Power-of-Attorney (pertaining to property only; Trustee authorizing real estate investor to get permits while rehabbing property).