Let's take a couple of Trust assets free and clear from any mortgage payment requirement.
One property estimated to be worth $375,000.00 and the other estimated to be worth $250,000.00.
For the sake of argument let's make the combined estimated value of the Trust real estate - two homes -- $500,000.00.
The estimated fair market rent on the first home is $1,800.00 per month and $1,500.00 per month on the second. Combined the two homes could potentially generate $3,300.00 per month or for the sake of argument $2,700.00 per month.
In the first instance - $500.00 per month could be set aside in an escrow account to pay property taxes, property insurance and property management fees. The remaining revenue generated by the property, $1,300.00 per month could then be distributed to the Trust beneficiaries.
The first property would generate $21,600.00 per year in the first scenario at $1,800.00 per month or for the sake of argument $18,000.00 per year.
In the second instance - $300.00 per month could be set aside in the escrow account to pay property taxes, insurance and management fees. The remaining revenue generated by the Trust asset, $1,200.00 per month could then be distributed to the Trust beneficiaries.
Again, for the sake of argument $1,500.00 per month generated by the first Trust asset; $1,200.00 per month generated by the second Trust asset.
The second property would generate $18,000.00 per year at $1,500.00 per month or for the sake of argument $14,400.00 per year.
Now, let's say that the Trust is in debt for $100,000.00 or one or more of the Trust real estate assets is in need of repair -- the Trustee or the Successor Trustee could borrow money i.e. take out a loan against one of the Trust assets and pay off the Trust debt and or make repairs to the Trust real estate assets and use a portion of the revenue generated by the Trust real estate assets to pay off the debt i.e. loan against the Trust real estate asset. The debt of the Trust would be paid off and the homes would have been improved.
In the first scenario the Trust real estate assets generate $39,600.00 per year. In the second scenario the Trust real estate assets generate $32,400.00 per year. 'TIL THE COWS COME HOME!
The figures noted above can be adjusted to fit the real world scenario.
Still not confused?
Sell everything below fair market value!!!
Los Angeles County Superior Court Cases
BP099211, BP118616, BP122665, BP135381