Individual Retirement Accounts (IRAs) are at the center of an overall retirement plan for most investors. Staying involved in your IRA investments will help accelerate growth. You can get real control over your IRA with a self-directed IRA. With this type of account, you can invest in alternative assets like Hard Money Loans, gold, oil, and real estate. Real estate is a great investment partly because you can finance it. You can control millions of dollars in assets for a fraction of the cost because of real estate loans. Borrowing from your IRA can be tricky but now you have a way to get it done.
What Is A Non-Recourse IRA Rehab Loan?
IRS rules prohibit IRA owners from taking on personal liability for loans to the IRA. As the IRA account owner, if you receive a loan in your IRA, you will have no personal liability to pay that loan back. The only recourse for a default is to the IRA itself. These are called non-recourse loans because there is no personal recourse allowed.
The Purpose Of Non-Recourse IRA Rehab Loans
Non-recourse loans are nothing new. Many business loans are non-recourse to owners because owners can be stock investors and should not be liable for debt taken on by a company they have no control over. The difference between a business non-recourse loan and an IRA non-recourse loan is that the lender is required to make a loan to an IRA non-recourse. That is the only way to borrow money in your IRA and stay compliant.
The Importance Of Having A Self-Directed IRA
No one would argue that having an IRA as part of your retirement plan is a wise thing to do. What some would argue though, is what you should be investing in. Most IRA custodians require you to invest in their securities, like mutual funds that they offer and manage. Almost all these brokerage houses that offer IRAs stick to investments in assets like stocks and bonds.
A truly self-directed IRA allows you to invest in almost anything. There are some exceptions to this but real estate flipping, or rentals is not one of the exceptions. You can absolutely own real estate in your IRA if you have your IRA set up as a truly self-directed IRA, which is why it is so powerful.
Finding Someone To Help
There are several great IRA administrators and custodians out there. If you do a simple search for “self-directed IRA” or “real estate IRA” you will see the sheer number of options available to you. For the most part, they are all very similar, offering the self-directed IRA service for a fee. Here are two that many of our clients use to help them with their IRAs.
Our IRA Loans
The Non-Recourse IRA Rehab Loan is for investors wishing to build wealth by investing in real estate through their IRA. By using a Non-Recourse IRA loan, you have the ability to leverage into one or more properties while using a tax shelter to avoid paying taxes on gains (please consult your tax adviser). This loan is a short-term bridge loan typically used to buy and rehab properties inside your IRA.
This is a highly specialized loan. The Non-Recourse IRA Loan is more of a commercial loan than a residential loan, meaning the property is considered more important than the borrower. Because this loan is so specialized, we encourage you to call with your questions or to get more information.
- We will loan 90% of your purchase and 90% of your repairs – The requirement of just 10% of your costs into a deal means you have less cash into each deal helping you get started or helping you buy more houses inside your IRA.
- 9-month term – Plenty of time to buy and rehab a house for you to flip or refinance and keep.
- We escrow the repair money and can pay your contractor directly – Stay safe with the IRS by never touching the money. We are happy to manage all the draws on your construction project so you keep your required separation with your IRA.
- Easy to qualify – Because there is no recourse to you, qualifying is quick and easy. The IRA just needs the money to do the deal and meet the reserve requirement and you are good to go.
- We can close in as little as two weeks – We are normally ready to close our Non-Recourse IRA loan before the seller is. We are able to move quickly so you can close on time!
- No minimum loan amount – Just need a little help with the purchase or rehab? No problem. We do not require you to borrow more than you need.
- 65% max LTV based on the after repaired value
- Minimum IRA reserves required (15 percent of the loan amount)
- Available in Colorado, Minnesota, and Wisconsin
- No income or assets requirements but we do pull a personal credit report