What are the advantages of using the IRA non-recourse loan to buy your next investment Property? Well I am very glad that you asked this question! Non-recourse simply means that the lender cannot pursue any of your assets if the property were to go into foreclosure and they couldn't recover the full amount of the loan. Most banks do not provide non-recourse loans because they are too risky. That is one of the reasons why 40% down is the minimum in California with a 20% reserve requirement on the loan balance.
It used to be that banks and lenders didn't want to lend on an investment within an IRA because an individual couldn't guarantee the loan according to IRS regulations. Therefore, people paid all cash when they purchased property. However, certain retirement accounts can now be used to leverage your buying power through a non-recourse loan. If someone retired and they wanted to roll over their $400,000 401K into a self directed IRA, they could potentially purchase a property worth $800,000. Now this would mean that they put $300,000 down and that the loan amount would be $500,000. The remaining $100,000 would need to stay in their IRA as the loan guidelines require that 20% of the loan amount be held in reserve in the account. Obviously there would be various other underwriting guidelines needing to be met but these loans are underwritten more like commerical loans rather than personal real estate loans.
Using the IRA Non-Recourse Loan to Buy Your Next Investment Property
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