Notes & Mortgages

Notes & Mortgages in a Self-Directed IRA

Private lending in the real estate world is popular. Private notes and mortgages in an IRA receive consistent, passive income on a tax-deferred basis for your retirement. This is an appealing option to those who don’t want to invest in real estate themselves. Instead, you can loan money to people who purchase real estate as their personal residence or for their own investment property.

As the IRA owner, you personally vet and approve all borrowers. The only people your plan can’t loan funds to are disqualified persons who the IRS prohibits doing business with your IRA. You make income on the interest and terms of the loan and it’s deposited directly into your retirement plan.

You decide if collateral is used to secure the loan. Property attached to a mortgage note can be used as collateral, or you can lend money with an unsecured promissory note. And, it is your decision how to structure the loan—straight interest-only mortgage or a joint venture arrangement.

Private notes & mortgages are advantageous to both the borrow and the lender

  • The private lender (your IRA) provides capital to the borrower much faster and with more accommodating terms than traditional lenders.
  • Your IRA receives monthly income on the interest and terms of the loan from the borrower on a tax-free or tax-deferred basis.

Consult with an attorney or tax professional as rules for notes and mortgages in an IRA vary from state to state.


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