The IRA Multiplierby Lamarr Baxter

Private Lending In You IRA – Allow Your IRA To Become The Bank

Roth IRATraditional IRA SEP

Plan Types

SIMPLE One (k) aka (Solo K) Roth One (k)

Benefits of Self-Direction

Invest in what you know and understand

Take control of your retirement account

Choose from an extensive range of investment types

Minimize your risk and maximize your returns by truly diversifying investments

Perform your own due diligence

Possible IRA Investments• Real Estate

• Mortgages, Notes, Unsecured Loans

• Tax Lien Certificates

• Stocks, Bonds, Mutual Funds

• Extraordinary Investments

• Security Agreements & Notes

• Private Placements

• Certificates of Deposit

• Tangible Asset Deeds

• Corporate Stock

• Accounts Receivable Financing

• Precious Metals

• LPs & LLCs

• Auto Paper

• Trust Deeds

• Like & Unlike Exchanges

• Contract Options

• Building Bonds

• Commercial Paper

• Commodity & Option Exchanges

• Commodities / Futures

• Leases

• Joint Ventures

• Factoring

Self-Dealing – Rules of the Road

• The IRA owner may not loan money for an investment held by the IRA. Instead, a 3rd party must service the loan.

• The IRA owner may not receive a current benefit from any investment in the IRA.

• The IRA is a trust. Assets in the IRA must be vested in the name of the custodian or their nominee for the benefit of the IRA.

– American Estate &Trust, FBO Lamarr Baxter IRA #12345

Benefits to Working with Other People’s IRAs

• Easier to buy mortgages or make a private loan using IRA funds than to purchase real property. The perception is that there is less to worry about with paper than a hard asset that needs maintenance.

• You can set up fractional interests to achieve lending or acquisition requirements.

• Work with multiple investors–each receives a fractional share of the underlining security for the note.

The IRA and the Investment

• With a self-directed IRA, the IRA owner selects the investment and is the ultimate decision maker. The IRA owner must perform his or her own due diligence.

• No requirement to record a document or get title insurance for a property. The IRA can state what it needs to feel protected. What would you do?

• The IRA can make both secured and unsecured loans.

Comfort Level for the IRA Investor

Do not assume that because there are people you know, they feel comfortable doing business with you. Expect

and be prepared for:

• Know the usury rules in the state in which the note is created.

• Know the lending laws in the state in which the loan is granted (securities laws).

• Structure a security interest that is marketable in case the IRA needs to sell its interest to raise cash.

IRA Lending

• Borrower & Lender - Keep the LTV at a reasonable rate.

• Borrower - Provide background on yourself, the investment, and your history in the business. Have a plan to explain how much money you need, for what purpose, when the money is needed, and how you plan on paying the IRA back.

• Borrower - A personal guarantee helps make someone feel better about you if they don’t know you. IRA owners are especially concerned about having an exit strategy and protecting their IRA.

Borrowing as an LLC

• An LLC structure can be detrimental to an IRA:

– Might not allow a change in ownership. For an IRA to be cashed out, the LLC might have to be dissolved.

– Can violate Blue Sky laws

– Undivided interests. Makes your job communicating with an advanced IRA investor more difficult because an LLC make the deal not liquid.

Case Study

Lisa’s IRA agrees to lend $100,000 to Pete, secured by a single-family house in Kansas.

Note Secured by Real Estate

• Lisa’s IRA is the source of funds for Pete’s purchase.

• Lisa submits an Investment Direction Letter to Accuplan to start the transaction.

• Lisa directs Accuplan to send the money on behalf of Lisa’s IRA.

• The Note is made payable to American Estate & Trust FBO Lisa’s IRA.

• Security (deed) is endorsed over: Assignment

• Payments are made to Lisa’s IRA based on terms of the note.

• If Pete defaults, Lisa’s IRA forecloses and takes the Kansas property. Expense of foreclosure comes out of Lisa’s IRA.

Collateral Sources

• Subject Property via Deed of Trust (preferably 1st position and low LTV)

• Other Real Property (Cross-Collateralization)

• Co-signer willing to pledge personal and/or real property as collateral

• UCC-1

• Accounts Receivables (Factoring)

• Automobile w/ clear title (Require Full coverage insurance)

Due Diligence

• Check out the condition of property and neighborhood

• Screen borrower (verify credit, income source, assets and references)

• If loaning to “flippers” verify past performance on previous properties ( i.e. timelines and profits)

• Have title company perform a COMPLETE title search for liens and/or clouds on title

Checklist• Secure a relationship with Title/Escrow Company

• Secure a relationship with a Licensed Appraiser

• Secure a relationship with a Loan Servicer (if long term loan)

• Make sure YOUR appraiser performs the appraisals using BEFORE “Repair Value”

• Have COMPLETE Title searched performed at borrowers cost

• Secure Title Insurance at borrower’s cost

• Monies should be granted the ONLY through the Title/Escrow company AFTER there Deed of Trust has been recorded

Working with OPM in today’s market is more challenging.

Where Do I Find The Money?

• Business Brokers

• Investment Networking functions

• Consultants who work in unique industries

• Investment Seminar and Workshops

• Recently terminated and/or laid off individuals

• Friend and relatives

• Visit your local real estate investment club meetings

• Visit and join online investment forums

• Publish online classified ads relative to real estate and investments

How Do I Ask For The Money?• Be prepared to sell yourself and the investment

opportunity

• Present a professional, polished and brief investment summary describing the investment opportunity (i.e. projections, term, yield, exit strategy, etc…)

• Compare your investment opportunity to their traditional investment vehicles

• Emphasize the collateralized security component of a loan secured by a deed of trust

• Demonstrate you are an expert in your area of investment

• Offer a competitive yield

Questions?

Accuplan Benefit ServicesLamarr BaxterDirector Of Business Development

lamarrbaxter@accuplan.net

www.accuplan.net/norcal

Phone: 916-509-7150

Fax: 916-405-4000