In addition to funds in your bank account, you may be able to invest your IRA, family trust, or pension funds in Trust Deeds. Or, if you’re leaving an employer, you can roll your 401k retirement vehicle into a self-directed IRA, and invest that money in trust deeds.
We have several recommendations for self-directed IRA companies that can help guide you through the process on how to invest your funds in secured trust deed investments.
Buying real estate and trust deeds with your IRA has been an option since IRA’s were created over 30 years ago. Many financial professionals are unfamiliar with this strategy and continue to exclusively recommend bond and mutual funds for IRA investments. Or, perhaps these professionals are compensated for selling these instruments, and ignore other options. Sometimes, the better options are trust deed instruments!
To invest in trust deeds with your IRA funds, you must first transfer your account to a third party “custodian” which will act as your intermediary. We have clients that have had success with the Self-Directed IRA companies listed below, but there are many reputable choices. Make sure your custodian allows for trust deed and real estate purchases.
- U Direct Ira Services https://www.udirectira.com/
- The Entrust Group http://www.theentrustgroup.com/
- Pensco Self- Directed IRA http://www.pensco.com/
Once your account has been opened, you can then direct those funds to be used as capital to fund trust deed investments. In additional to IRA or SEP IRA funds, you can also transfer existing pension plans (e.g. 401k, 403b, ESOP or 457 plan) to a custodian.
Putting mortgages into retirement plans can be an excellent long-term strategy for a variety of reasons. Firstly, interest income is tax deferred, or in the case of Roth IRA’s, tax deferred. Savvy investors understand this, so they diversify by putting their high yield interest bearing investments into their pension programs, escaping paying the current taxes. Putting safe Trust Deed investments into a retirement plan and getting benefits of tax deferral or tax exemption is getting the best of both worlds.
Secondly, trust deeds are typically a fixed return. The mortgage interest rate stays constant throughout the term and the principal does not change. This consistent payment should be a staple of any portfolio; particularly with the volatility and uncertainty of the stock market.
Lastly, Trust Deeds offer a strong rate of return. Most mutual fund companies will show you graphs of their return on investments. Some will have a great year or three years, but their averages face the ebbs and tides of the ever changing and unpredictable economy. Trust Deeds or “private mortgage loans”, as they are commonly referred to, offer 8.5-12.99% returns that are fixed.
Directing your IRA funds to finance high rate short term mortgage loans backed by strong equity in California real estate is not a new concept, but it is a lesser used one. It should be a part of your retirement vehicle for the reasons stated here. We, at Cushner Capital, would be happy to walk you through the steps, as well as introduce you to awesome Trust Deed Opportunities for your portfolio.