Some clients have money in their self directed retirement accounts but do not have enough to buy a property outright. This means that their Individual Retirement Arrangements (IRA) need loans. Some lenders will make a loan based on a income producing property to self directed IRA on a non recourse basis. But what is a non recourse loan? It is where non recourse IRA loans are liable for repayment. If foreclosure occurred, the lender can only get repayment from the property and cannot go after the other assets that are owned by the non recourse IRA loans account holder. The tip to acquiring property on a non recourse basis is a down payment. Usually, lenders like to see 30% down from non recourse IRA loans. They also want to make sure that the IRA non recourse loan can meet the payments and pay the expenses of the investment property that is being purchased.
But what is an IRA? It is a form of individual retirement plan that is provided by financial institutions. It offers tax advantages for retirement savings. An individual retirement account is an IRA. By using your self directed IRA lending to purchase investment real estate and obtaining a loan to purchase the investment, you have diversification without tying up all your IRA funds. The IRS requires that you have a non recourse loan for any real estate purchases that uses leverage with self directed non recourse IRA loans. You are using self directed IRA to buy real estate essentially. A self-directed non recourse IRA loans can allow the owner to make investment and funding decisions about their retirement on their own. Unfortunately, 24% of retirees are still working full time after they retire. If they invested in a self directed IRA, it may help this avoid happening to you.