We are due to mention that we refer to the term IRA rather loosely in this article. In this article we include in term IRA any retirement accounts, such as a standard IRA, Roth and SEP-IRAs, 401(k) and Defined Benefit Plans. All these retirement accounts legally defer from each other, however, for purposes of hard money and private money lending we will unite them under term IRA for ease of reference. Also, we generically refer to “mortgage” or “note”, which include mortgage, trust deeds, promissory notes and/or lending contracts, due to difference of use of security investments by different states.
Unfortunately, a lot of investors mistakenly believe that their IRA funds are limited to investing in stocks and bonds. Do not be misled by this information. Your IRA accounts have far more investing options then you might think, including private placement, mortgages, limited partnerships, real estate and many more other investing alternatives. In order to take advantage of these investing alternatives you simply need to work with a special custodian, which will help you properly manage your accounts.
Please call (844) 522-3863 to set up a free private consultation to speak with a trust deed expert to discuss the details of your investment options and to learn how we can help you. You may also visit our homepage.
So, how does investing in hard money loan with your IRA works?
Investing in hard money loan with your IRA does not differ much from originating a mortgage from your traditional checking account. There are six standard steps to follow:
Step 1: Opening a self-directed IRA account.
It is a common practice to approach large brokerage firms as custodians for your retirement accounts. However, such firms limit their clients to invest in publicly traded securities, such as stocks and bonds, making personal loans unavailable. Do not hesitate to turn to smaller companies, which specialize in alternative investments through your self-directed accounts.
Step 2: Vesting a deed
When investing with self-directed IRA account the deed is vested on a name and number of your account and should reference the custodian. Here is an example:
XYZ Custodian Company, FBO “Your Name IRA Account #654321”
In comparison with traditional transaction, the vesting of a deed with self-directed IRA investment is more detailed and contains a bit more paperwork.
Step 3: Authorize the custodian to release funds.
At this point you will need to sign an agreement with custodian authorizing the release of your funds. We will provide you with a check list you can follow to make sure that all agreements signed and the loan is originated.
Step 4: Close the deal.
With a help of an escrow company or an attorney your deal will be finalized at this step.
Step 5: Provide a custodian with a copy of your security agreement.
Like a brokerage firm holding your stock certificate, the custodian will hold actual promissory note and deed of trust once the deed is funded.
Step 6: Set up a payment route.
It is a common practice to hire a loan officer who will collect payments from the borrower and send it to the custodian. There will be a special agreement signed between the officer and the custodian specifying the route of payments.
Described steps may seem rather confusing and overwhelming; however, with help of a professional custodian, the process will go smoothly. Here at LBC Capital Income Fund, LLC we strive to service our clients and provide excellent customer service in order ensure positive investing experience.