Learn about Land Trusts with iMinds Money's insightful fast knowledge series.
A land trust is an agreement whereby one party, the trustee, agrees to hold ownership of a piece of real property for the benefit of another party, the beneficiary. Corporations set up land trusts as intermediaries that hold and manage property on behalf of investors in return for management fees. Being a trust, they are legal entities that separate ownership from control with investors being the 'beneficial owners' giving them property rights while the legal title is held in the trust's name. Land trusts are not only designed for investment purposes but can also be created as non-profit organisations for conservation or welfare pursuits.
Since growing in use from the early 1990s land trusts have become a popular investment option. This is due to them providing the security of investing in 'brick and mortar' whilst offering other additional advantages. Investing in land trusts makes it possible for investors to own small parts of properties if they do not have the finance or do not wish to purchase the property outright. The lower cost of purchasing just a portion of a property can allow investors to diversify into a larger number of properties. This diversification reduces exposure to market fluctuations in particular property markets. Investing in land trusts also allows the investor to separate themselves legally from their property assets.
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