Hard and private money lenders are few and far between these days.  As an investor, you should be exploring all types of financing.  If you have an IRA, Roth or 401K you may want to visit the Entrust Booth the next time you go to an AZREIA meeting. Since 1975, Americans have had the ability to contribute to their IRA’s and now 36 years later we are flooded with interesting options for investing by way of a self directed IRA. Countless times, people have asked me to help them with their non-real estate related transactions; such as purchase of precious metals, interest in limited liability companies, private stock and the list goes on.  From a Title Companies point of view, we insure only on “real property” but companies like Entrust have been helping people with this alternative type of investing for years.

Let’s talk about real estate investing with a self directed IRA. When you purchase with a qualified plan and or a self directed IRA, the property will become an asset of your retirement plan or account.  You can buy the home with 100% self-directed IRA funds and the home would then become an asset to your investment account.  You can always be your own Private money lender and use a self-directed IRA, but the note must be non-recourse and the Custodian is the Borrower. Repayment is different when borrowing from an IRA so you need to be sure you are borrowing and repaying with experts to avoid a potential tax issue.  Companies like Entrust are all over the valley so be sure you interview them before you just hand over your accounts to them.  You also need to make sure you are working with an Escrow Officer that knows how to prepare the documents needed at close of escrow.  I suggest you check with the company that currently holds your funds to see if they are familiar with this type of investing.  If they are not, you may want to consider moving your accounts to someone that specializes in this type of funding.

There are rules and regulations when purchasing real estate with a self-directed IRA.  You can’t buy a property from yourself, your spouse or a family member.  Do not buy a property with a self-directed IRA and lease it back to your business.  Ask your expert before you do anything with the property to be sure you do not cause yourself a tax issue or risk having your entire IRA reclassified as personal money, then taxed, then the growth taxed, then the 10% penalty.  Ugly!  Lots of people shy away from this type of financing because of all the rules and regulations but do not be afraid to try any avenue – just be smart and get your experts in place to help you.  There are so many properties being bought and sold with alternative financing;  seller carry backs, private money, hard money and agreements for sale. We are in a market were alterative financing options are being explored because “conventional” funding can sometimes be a challenge for most investors.  Thank goodness our private money and hard money lenders had that vision and they did not think, “this is too risky” or “this is too confusing”.  They found their experts to assist them and went for it.  Keep an open mind, think outside the box and you will succeed.

Remember, Chicago Title is here to help with anything you need and we are just a phone call away!  We hope you have a phenomenal last quarter and a very Happy Holiday Season.

By: DiAnna Jackman

Senior Escrow Officer/Branch Manager

Chicago Title Agency