Many people talk about using a self-directed IRA to purchase real estate investments. However, few are aware that you can also use a self-directed IRA to become a private money lender with less risk, through a third-party company like GL&L Holdings. This is what we’re going to discuss in this blog.
If you’re totally new to the concept of self-directed IRA we recommend you read our blog about how SDIRA works and how it’s different from traditional retirement accounts.
Many people who are interested in real estate investing must do the following:
- Drive around looking for properties to buy in different neighborhoods
- Send out mailers and postcards, or door-knocking to find leads
- Negotiate with sellers and invest time that often doesn’t pay off dividends
Many people don’t have the time to do what’s necessary to be successful. If you become a private money lender through us, you essentially give yourself an opportunity to make an above-average rate of return in your retirement portfolio secured by real estate, with less work, leaving you with more time to enjoy and relax.
There are several advantages that make this a good retirement account strategy for you.
Advantages of Becoming a Private Money Lender Using Your SDIRA
1.Above-average returns
When you’re lending using your SDIRA, you can perform much better than if your funds are in a money market or government bonds. You probably won’t triple your money within a year unless you get lucky enough to foreclose on a property, but many have taken advantage of getting a bigger retirement pot through private lending with their SDIRA.
2. It’s less work, less effort, and less time
You may have a thriving career, kids, or other activities that you’d rather focus on rather than active real estate investing. You don’t want to deal with headaches and intense planning, learning marketing strategies, but you believe that real estate is one of the most secure places to grow your self-directed IRA funds. When you’re a lender, you invest in real estate passively, with less work, less effort, and less time!
3.You can count on a steady stream of interest payments per month
We know you only love surprises when it’s your birthday and hate it when it comes to your expenses and income. You can have peace of mind, knowing that your IRA account grows month by month according to the terms you agreed on without surprise deductions and expenses.
Important Considerations Before Using Your SDIRA to Lend
Think of a bank. A bank makes money primarily through collecting interest payments and fees. They also take the necessary precautions so that the loans always end up to their advantage, even when it goes bad. Now imagine that you’re putting up your own private bank when you are a private lender. You need to exercise due diligence to keep yourself safe, just like a bank. Sometimes foreclosure is the best case scenario which we have seen in some cases. This scenario can even be an opportunity to make more money than you would have on interest payments. You don’t have to be scared of a foreclosure, you just need to be prepared for it. In many cases, there might be equity in the property, or it may be in a good area. If you’re the lender and end up taking ownership of the property, you can hold it in your retirement account or as a rental property. Sometimes the rents exceed what the interest payments were. It’s important to know what the foreclosure process is in your area before you commit your IRA. There are landlord-friendly states and some that are not very much. Do your research because the policies in your state can help you identify if this strategy is for you. Remember to loan only on something that you will be excited about owning in case of default.
Becoming A Lender Through GL&L
Evaluating a loan transaction can be quite a daunting task. When you’re only starting out in creative financing, it is best to hire or partner with a professional. You need someone who has the experience to evaluate and manage each loan transaction that you want to fund using your self-directed IRA. When you become an investing partner at GL&L Holdings, you can enjoy a passive stream of income while we do all of the dirty work for you:
- generating the borrower leads
- screening borrowers
- coordinating with the title company
- ordering appraisal and surveys
- making sure your insurance is in place
- making realistic computations of your IRA’s projected income
This way, you can use your time – your most important asset – on what truly matters most to you.
We do not provide tax, legal, or investment advice or endorse any products, services, or investments of any time. This information is for educational purposes only. We encourage you to consult investment professionals.
