Private Lenders Learn to Loan — Individual Retirement Accounts
Most people think that an individual retirement account can only be used to purchase investments like stocks and mutual funds. Wrong! When individual retirement accounts were first introduced, the few companies that provided them were large brokerage firms that sold just stocks and mutual funds. When you chose to open an IRA with these companies, they provided you a variety of investment options to select from. The part they neglected to tell you was that all the options offered to you were investments that they sold and would make profit on. They left out all the other things that you are allowed to invest your retirement dollars in because they didn’t handle them and would not make any fees on that type of investments.
Enter the Self-Directed IRA. The IRS has set forth guidelines on what you are allowed to invest in with your IRA. You would be shocked at the wide range of options available to investors. From gold bullion, to tax liens, to real estate investments and real estate notes, IRA’s are much more powerful than many of us ever realized. Add to that the power of a Roth IRA, allowing you to enjoy your earnings tax-free, and you’ve got a fast road to retirement.
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Many of the lenders" href="http://cmyatescapital.com" target="_blank">private money lenders you meet with might have funds in an IRA account, but a lot of them may not realize that they can invest those funds, via a self-directed IRA, in real estate notes that are completely secured by a deed of Trust or Mortgage, and insured. Picture having a fixed, secured, insured, tax-free gain of 10% to 15% or greater annually, then compounded over the next couple of decades! That’s a powerful blend of safe, secure investments, with the high yields usually found only in very aggressive and risky investments.
Most people’s IRA accounts have seen a large decline in recent years which has forced them to either monitor their account statements nervously, or even transfer their funds to a money market account within their IRA yielding a lowly 1% interest. The return and safety that you can offer these investors right now will outshine any options they’ve seen elsewhere, so recruiting new lenders for your business will be far simpler than you think.
Most of your new private lenders will have IRA accounts, but not with a custodian allowing self-directed investments. Your lender will need to roll their current IRA account (or 401k from a previous employer) into a new account held by a custodian that offers a self-directed IRA. As the company losing the account will want to do anything they can to keep the business, the transfer process might take as little as a week, or as long as 1-2 months.
Once you’ve located a lender who has an individual retirement account and agrees to invest the funds with you, get them going with the account transfer process immediately. Since the funds could take some time to become available in their account, you are unable to count on their funds until the transfer is confirmed.
Talk to several self-directed IRA custodians yourself, check out their websites, and learn about their paperwork and procedures in advance. Your ability to guide your lenders through the application and transfer process will add to their confidence in you and confirms your professionalism and commitment to recognizing 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 easily.
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