Private Lenders
Private lenders are individuals who make loans to buyers of real estate, who then use that same real estate as collateral for the loan.
Kalomar regularly works with private lenders for both our long-term hold properties as well as our buy/sell business.
As a private lender, you will know your rate of return in advance, which in our case is 7-8%, secured by a first or second trust deed on the property.
Most lenders prefer to use their IRA funds to lend to Kalomar and they do this for a couple of reasons. One, the income is tax free to the IRA, and two, the safety of a loan secured by a first trust deed allows them to sleep at night! (Remember DOW 14,000?).
What are the benefits of a self directed IRA or real estate IRA?
The largest benefit of a self-directed IRA or real estate IRA is that you can invest in what you know. Period.
With the great tax advantages provided by all individual retirement accounts and 401ks, as well as the wider range of possible investments of a self directed IRA or real estate IRA, you can potentially build wealth and secure your future much more effectively than through traditional retirement plans.
- If you work in or know the real estate field, you can invest in real estate.
- If you work in or know the mortgage field, you can use your IRA as a lender.
With a self-directed IRA or real estate IRA, you are not limited to the investment offerings of an IRA custodian or trustee. By using Entrust (this is who Kalomar uses) as the administrator for your self directed IRA account, you have much greater flexibility in the number of investment choices you have. You are not limited to investing in stocks, bonds or mutual fund investments that are set up by the custodian.
Types of Property Your Individual Retirement Account Can Own
- Single family and multi-unit homes
- Apartment buildings
- Co-ops
- Condominiums
- Commercial property
- Improved or unimproved land (leveraged or unleveraged)
Investing in Real Estate with an Individual Retirement Account
If your self directed real estate IRA doesn’t have enough money to pay for the entire purchase, you can finance or leverage any income-producing property. The property is used as the collateral for the loan. Because the property belongs to your IRA, the debt must be repaid from assets within your IRA, whether it’s income from the property, permissible contributions, or other assets in the IRA.
All real property is either purchased or sold for your benefit using your Qualified Plan and/or IRA funds.
Purchasing and Selling Real Property with a Real Estate IRA
A real property purchase or sale is initiated by executing either a Buy or Sell Direction Letter For Real Estate. Specific instructions for completion of these direction letters are contained on the forms.
Can I use only IRA funds?
No. As a lender, you do not have to use your IRA. You can lend money outside and IRA as well.
What’s Next?
If you are interested in learning more, or becoming a lender to Kalomar, please either call Trent at 760-840-7172 or just fill out the form below and we’ll get you an information kit. Once you’ve read it, we’ll be happy to answer any questions that you have.
