Investing in Mortgage Notes Inside Your IRA

All too often we come across investors who are unaware of the interest earning power of their IRA dollars. Many of them are under the impression that they cannot touch the money inside of their IRA. When asked to invest, they often reply with “I would, but all of my money is tied up in my IRA.” This is a very common misunderstanding and a very tragic one for those potential investors who are not in the know. By using a tool called a Self-Directed IRA, you are able to use the money inside of the account to purchase mortgage notes. Your IRA will act as the entity to hold your mortgage note and all of the notes should be in the name of your third party administrator or custodian for the benefit of your IRA. Every month the payments from the payor of the note will be sent to the custodian, who will then by contractual agreement, move the funds into your IRA. If your current IRA is not a Self-Directed IRA, you will need to open a new account that is specifically meant for self-direction. Self- direction just means that you choose what investment vehicles your money is invested in rather than having the fund manager choose. When you invest in mortgage notes in your Self-Directed IRA you are allowing the money earned by the note to build either tax deferred or tax free. This depends on if your Self Directed IRA is a Roth IRA or a Traditional IRA. We highly recommend using the Self-Directed Roth IRA as this is what most of our investors have set up. Please contact The Note Factory if you have any questions or if you would like recommendations on our preference for particular companies to help you set up your Self Directed IRA.

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