IRA investors’ interest in real estate has increased dramatically recently, due to the volatility of the stock market. The sharp declines in the marketplace have prompted investors to look for ways to diversify their IRA investment risk.
The key to self-direction is the flexibility to place any legal investment in your IRA. Providing private mortgages allows you to invest outside the typical financial securities. More importantly, it allows real estate investors to invest in an asset they know and understand.
Any type of real estate investment can qualify for an IRA investment, including apartments, office buildings or motels. In hard money lending, the IRA funds are sent directly from the IRA custodial to the escrow shop. Payments are then made directly to the IRA custodial monthly. At payoff, monies are placed back into the IRA account, whereupon they can be designated to go back to securities or other real estate ventures.
Any real estate investment made with an IRA must be obtained by establishing a self-directed traditional or Roth IRA. These self directed IRA’s have a trustee in the form of an IRA custodian. As with all investments, be sure to check out the IRA custodian, either with the Better Business Bureau or the State Attorney General’s office.
Three companies that I have found to be competent and honorable are UDirect, The Entrust Group, and Pensco. All of these companies have websites that offer explanations of their services and their fees. If the sound of 10% for 3 years sounds better than a guess at the stock market, please consider diversifying your IRA into real estate lending.