Wednesday, January 28, 2009

You Can Do More with Your IRA than You Think

Hi Everyone,
One of the many ways we fund our real estate deals in through private money. We have talked to a lot of our family and friends about lending so we can purchase income properties. We get the same first answer: "I don't have $50,000 laying around to lend or I would" We understand, we don't either. The vast majority of people in America today don't. Oh but they do they just don't know about it. The rich have been using this tax saving advantage for years. It is called the Self-directed IRA.

Now I hear you out there saying "I have a self directed IRA already and that is where I buy my stocks and bonds. I can't lend it to you to purchase real estate" That is where you are mistaken. They are right; the average IRA account at Schwab or Fidelity is not set-up for lending on real estate. Why would they? They make money on trading stocks that is what they know. But Americas are allowed by the IRS to set-up a truly self-direct IRA that will allow them to lend money on real estate. The one catch is the account has to be set-up at a firm that has an approved IRS plan for the IRA, like Equity Trust Company. Here how it works.

You contact a company with a Self-Directed IRA plan. Transfer the funds you want in the account. You contact a real estate investor, like us, and let them know that you have funds that you would like to invest in real estate. You lend the money to purchase the property that is secured by a Deed of Trust on the property for a fix rate and term. The investors either makes payments into your IRA account monthly or at the end of the term (deferred). This way your money is secured by a hard asset, the property, earning a fixed rate, that is usually higher than a bank's CD.

Now a few warnings: you want to work with a reputable company that has been around for many years. There a several companies (Equity Trust Company & The Entrust Group) that can service your needs. Also you want to make sure you are dealing with reputable real estate investor. Contrary to the newspaper articles there are reputable real estate investors. Check to see that they have done this kind of funding before. Ask for references and other private lenders they have worked with. Ask how they do on payments? Are they on time? What documentation to they give the private lender? The real estate investor should never take the money from you directly. It should always go to a Title Company. When we use this form of funding, we never receive the money until the private lender has a Promissory Note, a Deed of Trust, Title Insurance & property insurance (with the private lender listed as an additional insured).

This is a fantastic way to invest money buy you need to do your homework on it before you lend your money. To learn more about this form of Self-Directed IRA you can go to Equity Trust Company website and sign-up for a free webinar called The Purpose of a Self-Directed IRA or get a free report titled Self-Directed IRAs Growing in Popularity. You can always drop us a question or comment.

See Ya,

1 comment: said...


Thought you might like to know about a great resource website for self-directed IRA's. The site is named IRAvestor and the url is IRAvestor is a business directory and its free to use. Check it out.