Minor in Possession (of real estate) (LA 910)

Minor in Possession (of real estate) (LA 910)

Transcript:

Steven Butala:                   Steve and Jill here.

Jill DeWit:                            Hello.

Steven Butala:                   Welcome to the Land Academy Show, entertaining land investment talk. I’m Steven Jack Butala.

Jill DeWit:                            And I’m Jill DeWit broadcasting from sunny Southern California.

Steven Butala:                   Today, Jill and I talk about minor in possession of real estate. This is obviously a play on words for minor in possession. Like the show yesterday, it was inspired by an actual thing.

Jill DeWit:                            Exactly.

Steven Butala:                   An actual comment.

Jill DeWit:                            I love it.

Steven Butala:                   The real question is this, can a minor own real estate? The real short is answer is yes, and we’ll talk about it because it gets tricky. Before we get into it, let’s take a question posted by one of our members on the LandInvestors.com online community. It’s free.

Jill DeWit:                            Matt asks, “I have the opportunity to buy four half acre lots, two on one side of the street and two on the other side. Everything looked good at first with asphalt roads, curb and gutter, all the utilities and an agreed purchase price less than half the value of comps in the area. The agreed purchase price is $20,000.00 per lot, and the lowest priced comp is $50,000.00. But once I looked on Google Earth, I discovered that the road had been raised to meet a grade of perpendicular road it T’s into-”

Steven Butala:                   Great due diligence.

Jill DeWit:                            “As a result, the road for these four lots’ front is about 10 to 15 feet-”

Steven Butala:                   Oh, feet?

Jill DeWit:                            “Higher than the lots, with about a one to one slope.” So the road’s up-

Steven Butala:                   Not inches?

Jill DeWit:                            The lots are down 10 or 15 feet-

Steven Butala:                   I hope that’s a-

Jill DeWit:                            And then a one to one slope down from the road.

Steven Butala:                   I hope that’s a misprint.

Jill DeWit:                            Right?

Steven Butala:                   I hope it’s 10-15 inches.

Jill DeWit:                            “Do you have any-” it does say feet, I don’t know, “Do any of you with building experience think that these lots still have value close to the comparable lots that don’t have any of this type of topography? If these lots are devalued due to the situation, do you have any idea how much they would be devalued, or are they not worth hardly anything because of the cost to raise the grade of these lots? Any insight would be greatly appreciated. Thanks in advance.”

Steven Butala:                   I mean, my hat’s off to you for figuring this out very quickly on the Internet without spending any money. I mean, I can tell … I don’t know if you’re new at this or what, but you’re going to be good at it. First, you had what it takes to find the lots in the first place, and they’re undervalued so you got 85% of the way there. You asked all the right questions, are they devalued? What should I do? What do I do next? I don’t have any experience.

All these questions are great. We’re not the people to ask them. I can tell you what Jill would do, she would call a local real estate agent. She would call the owner of a tire changing shop that’s close by … I’ve seen her do all of these actual things. She would call the clerk at a-

Jill DeWit:                            I’d talk to the county.

Steven Butala:                   7-Eleven that’s close to the place.

Jill DeWit:                            I’d call the county too, and talk to them about it.

Steven Butala:                   Called multiple people at the county, and just say, “What the heck is the deal with the grade on these streets?”

Jill DeWit:                            Mm-hmm (affirmative).

Steven Butala:                   You know? Then you’ll get some version of this, “Oh yeah, yeah. Don’t worry about. Everybody who built there, they raised their stuff up. There’s a grading guy. They just out there and do it.” Or, “Yeah, it’s a really big issue here. It’s in the local paper all the time. We can’t get past it and there’s nothing we can do about it, and the state sucks.”

You’ve got to really dig in there and do some investigative stuff and find out.

Jill DeWit:                            Right. An Info Report would help too.

Steven Butala:                   Yeah, I don’t think an Info Report’s going to smoke this out, quite honestly.

Jill DeWit:                            You don’t think it’s going to figure out the build ability? I think it will. Or what’s needed to improve the lot to build on it right now today.

Steven Butala:                   Yeah, maybe it’ll get a two instead of a three.

Jill DeWit:                            Mm-hmm (affirmative). Maybe a one.

Steven Butala:                   But grading-

Jill DeWit:                            You might get a one instead of a three.

Steven Butala:                   Grading, at 15 feet I’ll tell you move on.

Jill DeWit:                            Mm-hmm (affirmative).

Steven Butala:                   I hope it’s 15 inches.

Jill DeWit:                            Right.

Steven Butala:                   Which is, you know, a little more than a foot.

Jill DeWit:                            Exactly.

Steven Butala:                   15 feet, that’s like rezoning. 15 feet, you can’t fill 15 in.

Jill DeWit:                            I’m hoping it’s inches and it just got in there wrong, so yeah.

Steven Butala:                   You know how railroads always are above ground because water goes down, that’s not 15 feet usually.

Jill DeWit:                            Exactly. That’s like two.

Steven Butala:                   That’s like two feet, or three feet. Yeah.

Jill DeWit:                            Maybe.

Steven Butala:                   It’s a great question.

Jill DeWit:                            Yep.

Steven Butala:                   When I got out of it, [inaudible] you’re going to do great. Today’s topic, minor in possession of real estate. This is the meat of the show. What does that mean, Jill? How many times has this come up in our career a lot?

Jill DeWit:                            A lot. Like wait a minute, “This guy wants to give it to his son, and his son’s 10. Can he do that?” Or, “I’m trying to buy from someone and it’s in the son’s name. How the heck did that happen?”

Steven Butala:                   Here’s the whole thing legally, and then we’ll talk about the fun part.

Jill DeWit:                            Okay.

Steven Butala:                   We give properties to our friends’ kids all the time for like birthdays and stuff.

Jill DeWit:                            The kids don’t like it. The parents do.

Steven Butala:                   A minor-

Jill DeWit:                            We think it’s funny.

Steven Butala:                   A minor cannot enter into a contract. That’s just how it is. They can’t legally enter into a contract. They can sign all they want. I don’t even know if they can legally have their signature notarized. Anyway, but the catcher is, a Deed’s not a contract. There’s only one signature on the Deed, and it’s the Conveyor. It’s the person who’s conveying the property to the new guy-

Jill DeWit:                            Right.

Steven Butala:                   The new owner, and you don’t even have to have his consent. There’s not two signature spots on there. I could convey property to Jill while she’s sleeping and record it, and she’s just going to wake up the next day a little more wealthy than she was yesterday.

Jill DeWit:                            Thanks.

Steven Butala:                   There’s no issues with that. I can convey property to my buddy’s minor for his birthday.

Jill DeWit:                            Right.

Steven Butala:                   That’s the end of the show.

Jill DeWit:                            Well, that’s it. Thanks for listening. I think it’s funny that people … it’s one of those things that they don’t know, and I understand that, and that’s why we’re here to help you. That’s one of the things that … and this minor in possession of real estate is one of those things that people got wrong. I don’t know how to say that. Another one that I’ve heard people that they didn’t know was being a citizen.

Steven Butala:                   Yeah.

Jill DeWit:                            You do not have to be a citizen of the United States to own property, and a lot of people don’t know that.

Steven Butala:                   That surprises me.

Jill DeWit:                            I know. You could be from any country, it doesn’t matter. You can own property here in the United States. You can a property. You could sell property. You don’t have to be a citizen.

Steven Butala:                   That’s as an individual. There’s this whole world of LLCs and trusts, and all kinds of-

Jill DeWit:                            Right.

Steven Butala:                   Legal entities that can legally hold property.

Jill DeWit:                            Right.

Steven Butala:                   Kids are named in trusts all the time. That’s how you-

Jill DeWit:                            That’s why you make the trust.

Steven Butala:                   Take advantage of intelligent tax filing, and all of that.

Jill DeWit:                            Right.

Steven Butala:                   That’s why you make a trust, that’s right.

Jill DeWit:                            Exactly, that’s the whole point.

Steven Butala:                   They could certainly own real estate that way.

Jill DeWit:                            Totally.

Steven Butala:                   None of this stuff, if you’re brand new, you should worry about. But when you get a little further on in your career and you start to accumulate real estate, some of it you keep, some of it you don’t, some of it … the people who buy it from you, want you to convey it into a trust, so it’s a little bit different. I don’t want you to worry about it-

Jill DeWit:                            Right.

Steven Butala:                   If you’re new because Title Agents are fantastic at this.

Jill DeWit:                            Right.

Steven Butala:                   Look, if there’s one thing that you need to remember about this, it’s all to your advantage. All this property ownership and landlord business, and real estate ownership is all to your advantage. It’s not to anyone else’s advantage. People who walk around this planet choosing not to own real estate, and that’s their choice because it takes a couple hundred bucks in a lot of cases just to buy a piece of property. They’re missing out.

Jill DeWit:                            Thank you. Is there anything special that anyone needs to do buying or selling property when there’s a minor involved?

Steven Butala:                   No.

Jill DeWit:                            Thank you.

Steven Butala:                   What I would do, and what we do, is we Deed it to the parent and the child so that they own it together. Then they can always-

Jill DeWit:                            JTROS.

Steven Butala:                   Yeah, the child can always … the way that the Deed gets signed, the way that I’ve seen Deeds get signed is dad signing on behalf of minor son as a Conveyor.

Jill DeWit:                            Yeah, but you don’t have to do that.

Steven Butala:                   That’s right.

Jill DeWit:                            You really can put it just in the child’s name.

Steven Butala:                   No, what I mean, if they want to sell it.

Jill DeWit:                            Oh yeah.

Steven Butala:                   Let’s say they get a property from us that’s worth $5 grand and three years later hopefully it’s worth $25. The kid’s still a minor. He can’t convey the property. I don’t think his signature can get notarized.

Jill DeWit:                            Right.

Steven Butala:                   The way I’ve done it in the past is, at that point, I do it through Title. So you know what? I don’t even actually know the-

Jill DeWit:                            Just to be on the safe side, especially when we’re talking that much money.

Steven Butala:                   Yeah. Exactly.

Jill DeWit:                            That’s the best way to do it. I love it. What else do you want to share about this? This is an easy quick topic today.

Steven Butala:                   I don’t know, you have a bunch of note there.

Jill DeWit:                            No, we covered them all.

Steven Butala:                   Wow. That’s no fun. They want to hear from you, Jill, not me.

Jill DeWit:                            I’m trying to think of why would I do this? You know what, like we do it for gifts, just stuff you want to leave, keep it in the family. There’s nothing with grandma … you know what, this would be a good thing. Why would somebody do this? Grandma is getting older and we want to put it in the kid’s name right because we know it’s going to stay in the family. It doesn’t have to go from grandma to dad, to dad to son.

Steven Butala:                   That’s a perfect example.

Jill DeWit:                            Grandma can put it right into son’s name. That’s who might do it.

Steven Butala:                   Grandma’s getting older. She lives in a house. She owns like three houses on the block-

Jill DeWit:                            Yeah.

Steven Butala:                   I say this all the time. Instead of filing tax return and estate and all that, all she has to do have her kids or a lawyer, or even a Title Agent, just convey that actual property into grandma’s name and her son’s name, or her children’s name.

Jill DeWit:                            Do the grandson.

Steven Butala:                   Or the grandson.

Jill DeWit:                            [crosstalk] put it right in the grandson’s name.

Steven Butala:                   Yeah, and as joint [crosstalk] tenants if something happens to grandma-

Jill DeWit:                            Yeah.

Steven Butala:                   It’s a non-event.

Jill DeWit:                            That’s right.

Steven Butala:                   That person now owns that property.

Jill DeWit:                            Exactly, meaning when grandma passes-

Steven Butala:                   Right.

Jill DeWit:                            It’s a non-event to claim the property. When we say JTROS, it’s Joint Tenants with Rights of Survivorship. I tell my team now, “If you have a husband and wife don’t even ask. Just do it that way.” You’re saving them some time and some headaches and hassles-

Steven Butala:                   Well a tremendous amount of estate planning.

Jill DeWit:                            If anything happens down the road to one of them, it’s just an automatic non-event.

Steven Butala:                   You can do the same thing with bank accounts and-

Jill DeWit:                            And you don’t have to be married.

Steven Butala:                   Wall Street base accounts.

Jill DeWit:                            It could be two brothers. They don’t have to be related. It could be two best friends-

Steven Butala:                   Yep.

Jill DeWit:                            Buying property together. JTROS. If something happens, then it goes to the other one.

Steven Butala:                   I always hear everybody really dogging the system. I hear it a lot from people, “Well that’s not fair. I got charged this. I got-” if you really think about it, and sit down and think about it and plan it, all this stuff is to your advantage. There are rules that can really make it financially beneficial for you and the people in your world.

Jill DeWit:                            Exactly. I love it.

Steven Butala:                   Well you’ve done it again. You’ve spent another 15 minutes or so listening to The Land Academy Show. Join us next time for Sellers Need to Trust You. For a deal to happen, the sellers need to trust you [inaudible] Jill.

Jill DeWit:                            Exactly. And we answer your questions posted on our online community, LandInvestors.com. It’s free.

Steven Butala:                   You are not alone in your real estate ambition.

Jill DeWit:                            Cool. Cool.

Steven Butala:                   Cool.

Jill DeWit:                            I think we covered it. That’s one of those topics that I don’t have a lot to say-

Steven Butala:                   Clearly.

Jill DeWit:                            Well no … come on, do you?

Steven Butala:                   I guess not.

Jill DeWit:                            Seriously, we covered it. Yes, it’s allowed. It’s important, and we talked about it. It is all good. Listen to you. Hey, wherever you’re listening or watching, please subscribe and rate us there.

Steve & Jill:                         We are Steve and Jill.

Steven Butala:                   Information.

Jill DeWit:                            And inspiration.

Steven Butala:                   To buy undervalued property.

Jill DeWit:                            Picking on me.

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