Private Lenders and IRA’s

Most people believe that an IRA can only be used to purchase investments like stocks and mutual funds. Not true! When IRA’s were first introduced, the only companies that offered them were large brokerage firms that sold only stocks and mutual funds. When you chose to open an IRA with them, they gave you a variety of investment options to choose from. What they didn’t tell you, however, was that all the options given to you were investments that they sold and would make commissions on. They left out all the other things that you are allowed to invest your retirement dollars in because they didn’t sell them and would not make any money on those investments.

Enter the Self-Directed IRA. The IRS has set forth guidelines on what you can and cannot invest in with your IRA. You would be shocked at the scope of options available to you. From gold bullion, to tax liens, to real estate investments and real estate notes, IRA’s are much more powerful than most people ever realized. Add to that the power of a Roth IRA which allows you to enjoy your earnings tax-free, and you’ve got a fast road to retirement.

Most of the private lenders you speak with will have funds in an IRA account, but many of them won’t be aware that they can invest those funds, via a self-directed IRA, in real estate Notes that are fully secured by a Deed of Trust or Mortgage, and insured. Imagine having a fixed, secured, insured, tax-free gain of 10% to 15% or more annually, then compounded over the next couple of decades! That’s a beautiful blend of safe, secure investments, with the high yields normally found only in more aggressive and risky investments.

Pros:
Most people’s IRA accounts have seen a large loss in recent times which has caused them to either watch their account statements nervously, or even move their funds to a money market account within their IRA yielding a mere 1% interest. The return and safety that you can offer these investors right now will knock the socks off any options they’ve seen lately, so recruiting new lenders for your business will much easier than you think.

Cons:
Most of your new private lenders will have IRA accounts, but not with a custodian that allows for self-directed investments. Your lender will need to roll their current IRA account (or 401k from a previous employer) into a new account with a custodian that offers a self-directed IRA. As the company losing the account will want to do anything they can to retain the business, the transfer process could take as little as a week, or as long as 1-2 months.

Strategy:
Once you’ve found a lender that has an IRA and wants to invest the funds with you, get them started with the account transfer process right away. Since the funds could take a while to become available in their account, you won’t be able to rely on their funds until the transfer is complete.

Talk to some self-directed IRA custodians yourself, review their websites, and learn about their paperwork and procedures in advance. Your ability to walk your lenders through the application and transfer process will add to their confidence in you and will show your professionalism and commitment to servicing their needs.

There are a dozen or more IRA custodians that offer self-directed options. Look for one that specializes in real estate notes to ensure that your transaction structures look familiar to the custodian company and your deals close smoothly.

Recommendations to begin with:

Equity Trust Company
http://www.trustetc.com/

Entrust
http://www.theentrustgroup.com/

Helpful Articles