Self-Directed IRA Real Estate Loans
If you've ever considered real estate for your retirement, but felt limited by your IRA size, then a Self-Directed IRAs and a non-recourse loan can be a powerful solution.
How Do Non-Recourse Loans Work?
1. Choose an Investment Property:
Research and identify a real estate property that aligns with your investment goals. Remember, most lenders prefer properties with strong rental income potential, like multi-unit buildings.
2. Establish a Self-Directed IRA:
Not all IRAs allow alternative investments like real estate. You'll need to open a Self-Directed IRA with a custodian who specializes in Real Estate IRAs. You will need to bring funds from another IRA or old 401(k) to your self-directed IRA. You can also make an annual contribution to get started.
3. Secure Non-Recourse Loan Approval:
Find a lender specializing in non-recourse IRA loans. They will assess the property and your IRA's eligibility for the loan and loan options. They will also determine the amount of money your IRA will need as a down payment.
Be prepared to provide detailed information about the property, your investment plan, and your IRA's holdings. Your credit history isn't a factor. The loan is made directly to your IRA, not to you.
4. Funding and Closing:
Once approved, your IRA custodian will handle the transaction and work with your loan provider.
Some of your IRA money will be used to make a down payment on the property. The non-recourse loan will cover the remaining purchase price.
5. Manage Your Investment Property:
The property's rental income is deposited into your Self-Directed IRA. This income helps with the mortgage payments of the non-recourse loan over time, building equity within your IRA.
All rental income and expenses (example property taxes) for the property flow through the IRA.
In the event of default or foreclosure on the non recourse loan, the lender cannot take legal action or go after the IRA owner’s other assets. The IRA account holder is not personally liable.
