How to use your IRA to make money in real estate
A little known loophole in the law allows Americans to manage their own IRA account. The account needs to be held by a third party IRA administrator. There are only a handful of these companies scattered across the country. I don’t make recommendations as to which company to use that is up to you. Do your research and choose a company that you can work with. Once you find the IRA custodian, it is only a matter of filling out a couple of simple forms to roll your traditional IRA into a self directed IRA.
Now that you have a self-directed IRA, you can start to look for real estate deals or for other real estate investors. If you are looking for real estate deals, then I caution you to learn something about real estate investing before you buy anything.
If you are smart enough to ride the coattails of others, you can make a lot of money without doing anything. Real estate investors are always looking for short term loans. They will pay a lot of money for these short terms loans. If you are the one making the loans then you get to collect the high interest rate on those deals.
If you have trouble believing that anyone would pay high interest on a short term loan then I want you to reach into your wallet and pull out your credit cards. If you have any credit cards then you are the sort of person who will pay high interest for a short term loan. Now real estate investors are not paying for the convenience of quick money like you are, they are borrowing money with the expectation of making even more money. Imagine of you could turn $100,000 into $200,000 in six months. How much would you be willing to pay to borrow the first $100,000? In real estate the first guy to come up with the money gets the bargain
It’s not easy to see why someone will pay a high interest rate. The most important part is to make sure that your investment is safe. No investment is without risk, but you want to make sure that your risk is as small as possible. So how do you do that?
First you need to interview your real estate investor to see what sort of track record they have. I would advise you to only deal with professional real estate investors. Professional real estate investors are people who have the skill set to make a living from their investments.
Once you have an investor that you feel good with then that investor will start to submit deals to your for your approval. Make the investor explain the deal in a way that you understand.
The most important part is the paperwork. The paperwork is the security. You will need a note secured by the property. The property should be purchased below market value to further protect your interest. There should also be two insurance policies to protect you. The first is a fire insurance policy to cover you against the property burning to the ground. The second insurance policy is a life insurance policy on the investor with you as the beneficiary. That way, you are even protected against the real estate investor passing into the next world.
If you have any questions or comments, feel free to contact me directly via email PittsburghREIA@aol.com