Private Money and Self-directed IRAs

Happy Friday everyone! Can I just tell you that I am simply floored (almost overwhelmed) by all of the support, encouragement, and advice I received the past couple days from my post about leaving my nearly 11-year career in corporate America? You all are so awesome – thank you!

Just wanted to share some more great news from the week. Remember the verbal agreement we have on the $50K home? Well, we’re still waiting for the owner to get back from vacation to get the signed contract back (she’ll be back this weekend), but the good news is that we’ve just secured a private money lender for the deal once its signed.

The lender will be a family member who has funds in a 401(k) from a previous employer that she will roll over into a self-directed IRA. It’s a true win-win. She’s happy with the returns she’ll get (who wouldn’t be after the huge hit everyone took with stocks and mutual funds the past few years) and we’re thrilled to have an opportunity to provide a fast cash closing to the seller and not deal with conventional lenders. We will pay a 10% annualized interest rate on the loan for a period of 3 years. We’ll make interest only payments on a monthly basis (directly to the IRA) and then at the end of the 3 years we will owe a balloon payment of the full principal amount.

I’m fully convinced that using private money lenders is the way to go. We’ll be doing a lot more of this in order to secure additional rental properties. I’m going to give a shoutout to the Private Money Blueprint program that Patrick Riddle (aka P-Rid), Trevor Mauch, and Susan Lyons put together. It’s really solid and I’ve learned a lot from it that I’m putting into action. To present to potential lenders I just customized the free private money lender presentation that P-Rid provided which I suggest you download if you haven’t already (opt-in required but its worth it).

I’m really loving these self-directed IRAs. One thing to keep in mind is that there are disqualified people who can’t lend to you from their IRAs per IRS rules….these people include spouses, parents, grandparents, great-grandparents, children (and their spouses), and grandchildren and great-grandchildren (and their spouses). You’re good to go with uncles, aunts, cousins, and siblings so keep that in mind.

Since I have a 401(k) with my employer, we’re going to be rolling that over into a self-directed IRA as well upon my departure. I need to do a little research and talk to a tax professional to figure out which direction I want to go….we can:

roll over into traditional self-directed IRA (no tax penalty)
convert to a Roth self-directed IRA (I have to figure out the penalities of doing this, but I LOVE Roths because withdrawals will be tax free during the retirement years)
roll over into a self-directed IRA LLC (I don’t know much about this, but just learned about it as an option this week)

We’re excited about using our own self-directed IRA to be private lenders ourselves and invest in other investor’s deals to build our retirement fund.

Anyway, that’s all for today. I’ll share more as I learn which direction we’re going to go. Have a wonderful weekend and to all of the mothers have a blessed and wonderful Mother’s Day!