I was exploring our new real estate data app this weekend (email us if you want to be part of the beta) and noticed that many homes were titled “XYZ Trust” or “ABC Living Trust.” This was a surprise to me. I have heard about the idea of entitling your house in a trust in order to prevent your assets going through probate court as well as protecting the estate from the costs of a nursing home, I just didn’t realize how prevalent it was.
As I understand it, if you want to protect your estate from being depleted when paying for a nursing home you can form a trust, but you need to be sure that you form the right kind of trust.
Revocable Trusts: These are trusts that you form, move your assets into and act as the trustee. The big key here is that you can revoke your assets from the trust if you change your mind. The means if you need to pay for a nursing home, you will be required to deplete these assets before qualifying for Medicaid, the government insurance program that helps pay for long-term care.
Irrevocable Trusts: As the name suggests, once the assets have been placed into the trust, they cannot be revoked and you name someone else as the trustee. Because you no longer own the assets personally, the nursing home cannot expect you to use these assets to pay for the care. You can still, however, get paid the income that the assets in the trust produce. There is a catch here though. There is a 5-year look-back period whereby they can look back at your assets for 5 years to determine if you qualify for Medicaid.
As always when dealing with serious items like this, you should consult an attorney.
When evaluating financials from a listing, be sure you always do your own underwriting and cross-check the numbers. I won’t share the full OM in order to protect the seller/broker, but I was evaluating a mobile home park the other day and while running my own analysis, which you can find here, I found that my cash-flow was significantly less than what was in the OM. After scouring each rent and expense line item and evaluating their debt calculation, I came across the following line in the OM “Principal Reduction.”
The broker was then adding this “PRINCIPAL REDUCTION” number back to the cash flow after debt line to get to “TOTAL PRE-TAX CASH FLOW.” This number is quite deceiving, as it gives the impression that the buyer would be receiving $12,016 in actual cash-flow when in fact it would be closer to $5,273. Apparently, this is common practice in marketing packages and something that you should be aware of.
At the end of the day your loan principal is being reduced each month, but this does not hit your bank account each month, which is what I consider CASH FLOW to be. Moreover, this principle reduction number is going into increasing your equity which you will receive the benefit of during the sale.
I am not sure if you watched the Democratic debates over the past 2 nights, but I heard a lot about “Medicare For All.” While you may or may not agree with that, here at TermSheet we have our take on Medicare For All, called Docusign For All. We recently integrated Docusign into deal documents. To use this feature within your deal go to “Files” then next to each .doc, .docx and .pdf documents you will see a “signature” icon.
Once you click on that icon, a popup will show asking you who you want to sign.
From there it will push the document to Docusign and open a new window where you can properly place the Signature tab and any other elements that require filling in.
I am happy to say that I am currently in the process of purchasing my first mobile home park. I am also proud to say that this transaction is being completely managed through TermSheet. From underwriting, sharing documents with both the seller and broker, managing 3rd party vendors, running down lenders, etc. We have learned a lot in the process, but all of it has gone into improving the product so that it can become the hub for your real estate transaction. I will share some details on the park and how things are progressing in a later post.
Do you have questions about the real estate industry and market as a whole? Questions about a specific deal? Questions on a particular market? With the release of our beta, we will hold an Ask Me Anything session shortly thereafter. Stay tuned for details.
I am sure we all found ourselves in this situation. You’ve found a deal, done your underwriting, reviewed the market and determined that this looks like a good deal, but you want a second opinion. Who do you go to? If it is your market you might reach out to some colleagues or friends. If it is in another market maybe you reach out to a broker in the market who will want a cut of the deal. TermSheet can be your second opinion. Backed by our team of professional real estate investors and data from around the country, we are offering professional deal reviews within the application. Simple click “Request Professional Review” and someone from our team will review your deal, any related documents and setup a call to discuss.
After a lot of hard work, we are excited to announce that we are close to our private beta. We have received a lot of interest on our upcoming release. If you haven’t signed up for a beta invite yet head over to termsheet.com to sign up.