Now that you know the basics of a Self-Directed IRA, let’s dive into some of the leading trends in Self-Directed Investing. With all of the stock market uncertainty, investing in notes has become increasingly attractive using tax-deferred funds in your IRA or retirement plan. Notes can be a great option because the payment streams come into your IRA and in the final analysis, on a first trust deed, the worst case is that you own the property. Best of all, discounted notes can be purchased for pennies on the dollar.
Investing in real estate and notes is just like any other transaction that uses a third-party entity as the owner. Here are some rules to keep in mind when considering note-buying with your Self-Directed IRA:
- The IRA owner cannot receive any benefit from the IRA or its assets. Specifically:
- No living on the property.
- No direct receipt of income related to the property. Income is only permissible when it is proportionate to the investment.
- The IRA cannot deal with you or any disqualified persons. This includes parents, spouses, children, and some business associates.
- Qualified plans assets, such as an office building invested in or by a plan, can have a certain part allocated to having you rent space for the purposes of the plan (we suggest consulting an attorney for more information).
How to get started buying notes with your self-directed IRA:
Once you’re ready to start investing, a direction of investment form must be completed when purchasing a real estate note. By utilizing an IRA administrator, you can guarantee your directions will be executed in a detailed and timely manner, assuring efficient transactions.
When a title or escrow company is involved, make sure that all instructions are provided for all documents in your account. Title or escrow companies may have additional requirements for your transactions than ours, so please be aware.
Your administrator must receive all loan documentation before funding can take place. Funding may not be initiated without a full loan package; this includes a trust deed and note, title insurance (if applicable), and appropriate vesting.
As your record keeper, your IRA administrator may receive payments directly from your payer as well as process loan payments. They also keep all original documentation for your convenience.
By investing in notes, you are investing in a tangible asset. By investing with your Self-Directed IRA, you are guaranteeing tax-free returns on those investments, making it a great alternative to the stock market. For more information on buying notes in your Self-Directed IRA, or any of the options available to you by Self-Directed investing, call us toll-free at 888-938-5872.
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