Creative Deal Structure Game — The Cancel Culture?

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  • This week’s game is a little different. Instead of a specific opportunity, let’s talk about how you might need to change your real estate business since we’re facing the cancel culture where a private contract can be canceled by the government.

    During the pandemic, some governments have canceled the private contract you had with your tenants that said they had to pay rent. And they have made it impossible for you to fulfill the terms of that private contract that says you can evict them if they don’t pay rent. This also applies to mortgage contracts that were canceled making it impossible for the note holder to foreclose for seller carry-back or bank-owned notes/mortgages.

    So, in this cancel culture, do you think it is still a good idea to own real estate? What can you do to protect yourself?

    Would it be better to do a master lease with a buyout clause in addition to rights to renew if you want to extend and maybe an option to capture some of the future appreciation if any?

    Maybe it’s time to change the way you do real estate!

    What do you think?

    Short of leaving real estate all together or going to the note buying business I am not sure there is a way to protect yourself AND stay in real estate. I don’t think any investor ever thought we would have a situation where the government could come in and cancel private contracts like they are doing here. I can only hope this will eventually make its way to the supreme court and get ruled unconstitutional for the future, which by the time this happens won’t do anyone any good right now.

    I have not personally had any issues with my rentals, but I figure I have just been lucky.

    Options are always my favor choice of vehicles when purchasing or selling.

    Given the situation in my state, I myself have not one but 2 homes that I have owned it for years with a greatly enhanced value and I am simply rolling those over and doing charitable remainder trusts using a net income charitable remainder unitrusts

    In both of the properties one of the properties the coronavirus took the occupant out and the unauthorized occupant’s are going to be ejected thanks to my contract writing back in 1998!

    On this particular property it was a rental and it was a property that I purchased from the owner lock stock and barrel and they were the only renter that I had until they both passed away.

    On my counsels advice, I gave them a one free month get out of rent free ticket and after that, they will be required to move in any unauthorized occupant’s who remain will be ejected even during the pandemic.

    FYI-on another property,

    The tenant has been a 10 year tenant and even with that renter, I am doing the charitable remainder trust,

    The upside and the benefits to me as a seller is there are no taxes, this tenant and occupant will be able to stay in the property, and the recipient will handle taking care of the occupant who is legal and legitimate, except for,

    Our state is one of the tightest states with all of the new rules for landlord-tenant law.

    So I will skate away using the laws of the charitable remainder trust and allow the charity to sell the property and I will receive the federal income tax deduction. The appreciation that is in the property. As well, as the annual or biannual payments from the charitable remainder trust. For the rest of my life and also one other when Neil descendents life in my family.

    Dan Butler

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