Summary:

As the elderly adult transitions to a retirement home, the two sons, deeply dedicated to the family trust created by their parents, assume the role of co-trustees.  Their unwavering commitment to the trust, now underscored by their newfound authority, provides a reassuring sense of continuity and responsibility.

The trust’s co-trustees have a clear objective: they need to borrow money to renovate a home for rental purposes. The property, which has not undergone any significant improvements in at least 30 years, requires a substantial upgrade.

Of the loan’s net proceeds, 70% will be allocated for construction or business purposes, while the remaining 30% will be used for consumer purposes.  This allocation of funds aligns with the Truth in Lending Act, Section 32.

This presents an excellent opportunity for private money lenders to provide short-term loans, addressing temporary financial needs and raising the necessary funds.

Article:

The mortgage broker says:

My client is elderly and has a family trust with substantial trust assets.  He was the beneficiary, Trustee, and trustee.  He has transferred the trustee capacity and responsibility to his two sons, who are now co-trustees and beneficiaries of the trust.  The older adult now lives in a lovely retirement home. He has almost enough income to cover his living expenses. As a mortgage broker, I assist in facilitating the loan process and ensuring all necessary documentation is in place.

Business purpose loans are made for 1 to 4 residential units, where the loan proceeds are used primarily for business purposes.  Mainly used for business is essential. This means that a portion of the loan proceeds, exceeding 50%, must be used for business purposes.  A percentage of the loan proceeds (less than 50%) may be for consumer purposes.

A consumer-purpose loan is one where loan proceeds are used primarily for personal, family, and household purposes.

The lender responds:

The lender’s review process is thorough and meticulous. It examines the trust agreement and any amendments, ensuring that the party with the authority to sign and encumber the property is correctly identified.  This, along with substantial documentation, confirms that the loan is for business purposes, providing a secure financial foundation for the trust’s decisions and instilling confidence in the trust’s economic management.

Is there a list of property upgrades with contractor estimates?  There is substantial equity, which refers to the difference between the market value of the property and the amount owed on the mortgage, that can be used to secure a first trust deed loan.  There will be no need to withhold the proceeds and place them into a licensed construction fund control trust account.

Results:

The co-trustee sons, being responsive, obtained the necessary documentation to satisfy the lender. The property was successfully renovated and rented out, generating a substantial net cash flow.  This successful outcome not only brings financial security but also instills a feeling of hope and possibility for the trust’s future and the potential for similar success in your own ventures.