Non-Recourse Loans and IRA Investors - Excellent Tool

There is one tool I see missing from most investor's toolbox and most real estate agents don't know about these.

Real estate investors. We are the scourge of the planet--the geese that lay the golden eggs. Those who invest successfully and work with agents can be either your best client or "attention needed" child. Over the years I've had the pleasure of helping all types from the "I read a book so now I know more than you" to the "I've been an investor for 20 years and you've taught me more in six months than I've learned through the years".

What does "non-recourse" mean? Simply put it means the lender's only recourse in the event of a default is to reclaim the property. Any losses cannot come from the borrower's other assets. This is required by IRA rules for those electing to invest in residential real estate using funds from their independent retirement account.

Surprisingly I have even had financial advisers tell me one of two things, "I'm wrong and this can't be done legally" or they have never heard of this and they have been advising their clients to pay cash for investment properties. 

Here is the good news: not only is it legal, it's the most amazing way to invest in real estate with limited personal exposure other than the investment from your IRA -- AND it is available in every state. So no matter where your client lives and where the property is we can add this tool to your sales portfolio.

The borrower is going to need 30% down from the IRA and the IRA must retain an additional 30% (of the loan amount) in their IRA after the purchase. 

Copyright©2008 Ken Cook. Ken is Director of Operations at Novation Mortgage in Marietta, Georgia. Novation is a direct lender and broker specializing in investment properties, short sales acquisitions, FHA and Fannie Mae, and small commercial loans nationwide.