Written by Forrest Moore, 401K Financing Insiders
Sometimes the banks says no. Maybe you own too many properties. Maybe they don't see your vision. Maybe your finances aren’t what you wish they would be. Sometimes you wish you could tell the bank no. You don’t want to follow their rules, you don’t want to pay them tens of thousands of dollars in interest and fees. Sometimes it’s just time for you to look for a different way to do things.
Turn your IRA or 401(k) into the bank. You can tap your IRA or 401(k) without taxes or penalties to buy real estate or fund a mortgage for a friend or college. Instead of interest and fees funneling to the bank the profits go into your IRA. The law does not require your retirement to be tied to Wall Street. You are permitted to make other investments. Investments that you might find more attractive, lucrative or just plain understandable when compared to investing in stocks.
You can do a lot of things with your IRA or 401(k) that your stock broker may not want you to know about. Buy a rental, flip a property, invest in gold, buy private stock or make a loan. But the Self-Directed IRA rules say that you cannot use your retirement account to create short term value for yourself or your immediate family. So if you use your IRA or 401(k) to buy a rental property you must rent it to someone not in your immediate family. Or if you decide to act as the bank and lend money to someone who is buying a property or other asset, that borrower cannot be a close relative.
Lending money as an investment has become an increasingly popular investment in the past several years. We know why banks make loans – the profits can be considerable and when carefully considered low risk. So when the financial world turn upside down in 2008 and banks stopped lending to even many well qualified borrowers, the demand for money started to be filled be private party investors. Even now as banks start to loosen their purse strings again, many borrowers are leery of traditional financial sources and the private lending market is thriving! IRA and 401(k) investors can make secured loans like mortgages or unsecured loans as they see fit but the law does require that you seek fair market rates.
Bypassing the bank to use an IRA or 401(k) to directly purchase real estate as an investment to be held in the retirement portfolio or perhaps to be resold at a profit is also a very popular investment as people fearing the next Wall Street Fiasco start to look for alternatives investments. Most people who have accumulated retirement savings have real estate investment experience as well and so it is natural for investors to seek a path to invest their retirement funds into real estate directly. It is possible to use IRA or 401(k) funds to buy foreclosure property, buy REOs, acqure property via tax liens or tax deeds or any attractive real estate investment.
The best way to take control of your IRA and turn it into the bank is with a Checkbook Control IRA/LLC. With this powerful retirement tool, you are able to combine the tax protections of an IRA or 401(k) with the legal protects and control of a Limited Liability Company/Corp (LLC). It is also possible to use your IRA or 401(k to replace a small business loan by having your IRA or 401(K) invest in your business tax free. This model can be used for start-up financing or to refinance a business.
For more information about real estate investing or to attend our IRA investing workshop send us an email at: email@example.com