Self-Directed IRA Private Lending

What is Self-Directed IRA Private Lending?

One of the many lesser known but lucrative ways to benefit from your Self-Directed IRA is through private lending. Perhaps the best “alternative asset” to is providing others with the capital to make major purchases such as real estate. Instead of a bank collecting the interest, the Self-Directed IRA makes this profit. Many loans made by Self-Directed IRAs are for purchasing real estate. Some people who may be creditworthy but still are unable to secure financing from a bank will look for other sources for loans. They might not really be such bad risks, but since banks have tightened up their guidelines, such individuals will have to find alternative sources for financing. Some examples of these people who may be unable to qualify for traditional loans are the self-employed or those who earn their income from commissions. However, it is vitally important to do your own due diligence into the potential borrower. Once you determine this person is an acceptable risk, you can proceed with the transaction.

The Self-Directed IRA holder can select the borrower, interest rate, security (which may be real estate, businesses or another asset you agree on) as well as all other terms of the loan such as length and frequency of payment. Like all investments, there is a risk to Self-Directed IRA Lending. The borrower may have not been able to arrange for financing due to legitimate reasons such his credit history, and possibly be unable or unwilling to pay. Should the worst happen, and the borrower fail to honor his/her commitment, you will still have the agreed-upon security to fall back on. If you are willing to take a potentially serious chance in exchange for more income, you can provide an unsecured loan. This will usually generate a higher interest rate, but it can also represent a serious risk because it is not backed by any collateral.

Another type of borrower could be more an entity which wants to raise capital while using a promissory note with company stock as the collateral. The risk to you with this type of secured note is that the value of the collateral is directly impacted by the success or the failure of the company that has issued the note


Benefits of Self-Directed IRA Private Lending

The benefits of Self-Directed IRA Lending are many and varied. Some of these advantages are another way to diversify your investments and create a pre-established return on your money. The loan’s principal and interest payments provide a steady, secure income stream to your Self-Directed IRA. You are essentially investing in both the borrower and the asset pledged as security, since this is ultimately available in the event of a default on the loan.

Another significant advantage of private lending with a Self-Directed IRA comes at tax time. Profits from this lending still benefit from all of an IRA. All gains from this type of investment are tax-deferred until a distribution is taken from your Self-Directed IRA. An additional advantage of a Self-Directed IRA is the ability to adjust the timing of these distributions if you have more than one retirement account, as long as you remove enough funds in total. The distributions from your retirement accounts are not required until the IRA owner reaches the age of 70 1/2. Even better, if you have a Self-Directed Roth IRA, these profits are tax-free permanently.


Regulations of Self-Directed IRA Private Lending

The first essential regulation regarding IRA lending is that it must be a Self-Directed IRA. One of the principal regulations regarding Self-Directed IRA Lending must already be in place. The IRA is a separate legal entity and not your personal finances. All of the necessary paperwork involved with lending money from your Self-Directed IRA will have its own legal name.  It is the IRA itself, and not you, who is making the loan. Therefore, all income produced from this transaction goes directly into the Self-Directed IRA.

Another rule for private lending from your Self-Directed IRA is that the loan must be for a real economic transaction. Additionally, funds from a Self-Directed IRA can only be lent to a “non-disqualified person.”  Certain family members are disqualified people. They include you, your spouse, parents, grandparents, children, etc. However, other relatives such as siblings, cousins, nieces and nephews, as well as aunts and uncles are non-disqualified people.

For more information on Self-Directed IRAs, call us today at 866-7500-IRA (472) or visit us at

A Lender, Be: Using Retirement Funds for a Private IRA Lending Business

Private IRA Lending BusinessIt pays to lend money. Over time, private IRA lending business has been consistently profitable for millions of entrepreneurs of all sizes, throughout history.

After all, the banks don’t own some of the biggest and grandest buildings downtown in every city for nothing.


Private lending scales well, is low cost, is normally fairly-low on the risk curve (depending on how you structure your lending business), but also allows for greater potential profits for those willing to take on risk by lending on less predictable ventures.


And it’s becoming increasingly popular among owners of IRAs, 401(k)s, SEP IRAs and other accounts that allow for self-direction. That is, accounts that let you as the account owner bypass the money manager hired by an investment company, and instead direct the funds yourself, personally.


Why It Makes Sense

With a Dow Jones already at a record high 17,000 – plus, while yields on Treasuries are around 2 percent, a lot of good news has already been ‘baked in’ to both stock and bond markets. Which means many forward-thinking investors are on the lookout for new ways to diversify their retirement accounts.

Starting a private lending practice using retirement funds has never been easier.


  • By picking and choosing your own borrowers, you can build a portfolio of opportunities where you have particular expertise.
  • You can find niche markets underserved by traditional lenders – and charge more interest for a given level of risk.
  • You can personally manage the average duration and maturity of your lending portfolio to suit your own personal liquidity needs.
  • Unlike taxable accounts, balances in self-directed IRAs receive substantial creditor protection under bankruptcy laws.
  • You have tremendous flexibility in choosing security and collateral for your loan.


When considering a private IRA lending business, you must abide by a few rules on prohibited transactions and counterparties. Specifically:

  • You cannot use your IRA to lend to yourself.
  • You cannot use your IRA to lend to a spouse, descendant or ascendant, nor to a spouse’s descendant or ascendant.
  • You cannot use your IRA to lend to a financial advisor who advises you on the use and handling of your IRA
  • You cannot lend to corporations or other entities that are owned or controlled by any individuals listed above.


Your market niche is up to you. Only you can determine your own interest needs and appetite for risk. We have seen people get involved in markets like these, though, with great success:

  • Small-business lending
  • Real estate “hard money” or bridge loans
  • Mezzanine financing
  • Private debt placements
  • Convertible debt (bonds convertible to stock at a pre-arranged price)
  • Transactional loans (i.e., very short-term loans to house flippers and other speculators)
  • Debt consolidation loans
  • Private mortgage lending
  • ‘Factoring’ loans against accounts receivable or credit card receipts

Any given loan, of course, will be risky in any of these categories. But a portfolio of individually risky loans typically has lower volatility than any of its component parts. Moreover, such a portfolio of private loans is not likely to be closely correlated with the broader stock market or bond market. Including a private lending portfolio as part of a larger portfolio can boost diversification and lower volatility.

Meanwhile, lenders have historically been able to hedge their bets thanks to careful underwriting and adequate collateral.

Proven for Income Streams

Historically, lending has been the go-to vehicle of choice for financial experts seeking to create a stream of income with a minimum of maintenance. While rental real estate also provides a stream of income, time and expense devoted to maintenance, upkeep, marketing and renovation can also be substantial. A portfolio of private loans can be structured to provide monthly, bi-annual, quarterly or annual income, as desired.

Are you interested in learning more? Contact American IRA today at 866-7500-IRA(472), or visit, where we have made available a more extensive and exclusive guide to private lending within a self-directed IRA. We will be happy to provide it for you, free of charge, with no obligation. Naturally, we are also happy to walk you through the process of deciding whether self-direction is right for you.

We look forward to hearing from you.



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The Case for “Real Assets” Inside a Self-Directed IRA

Self-Directed IRAsIt’s been a spectacular run for stocks. As of this writing, the trailing 12-month return for stock, as measured by the S&P 500 Index of U.S. large-cap stocks, is 24 percent. Over the last three years the stock market has averaged 16.44 percent. And over five years, the average return has been 18.69 percent for traditional investors and even better for Self-Directed IRA investors who realized those returns tax-free and/or tax-deferred.

You don’t get too many runs like that. And they don’t last forever.

Meanwhile, what investment theorists call “real assets” have been lagging. Asset classes like real estate, natural resource stocks and funds and commodity futures have logged their worst returns – compared to the S&P 500 – since 1970, according to John Ruff, an investment advisor and author of

Don’t blame real estate, though: It’s been engaged in a broad and substantial price recovery right along with stocks, since both stocks and real estate crashed at close to the same time, in 2008-2009 – to the chagrin of those who where too heavy in stocks and over leveraged in their homes, thinking stocks and real estate by themselves provided adequate diversification.
That didn’t work out well.

Meanwhile, Americans are starting to face the prospect of inflation in certain sectors – the inevitable result of years of rock-bottom interest rates just a few points above zero, quantitative easing and massive deficit spending. The consumer price index remained over 2 percent for June 2014, though it was energy (+3.2 percent) and food prices that were responsible for the bulk of it (Hamburger has just reached a record high, for example.) Excluding food and energy, inflation was clocked at 1.9 percent for June, or 2.1 percent with all items included.

If this is true, then producers are starting to find some pricing power – and price gains could continue. This bodes well for a variety of real asset classes, which are natural hedges against inflation.

As we transition through this inflection point in monetary policy, with the Fed gradually taking its foot off the money creation gas pedal, Jon Ruff believes that these unsung asset classes will once again soon take their places in the limelight.

This isn’t just good news for Ruff’s investors (Ruff heads the Real Asset Strategies desk at AllianceBernstein); it’s good news for open-minded, flexible and diversified investors – the kind who elect to use self-direction to diversify their own retirement portfolios.

As we never fail to point out, there is no law that limits your Self-Directed IRA, Solo 401k, SIMPLE, SEP or even Coverdell accounts to the usual mundane asset classes of stocks, bonds and CDs. Indeed, with stocks at such heady heights, interest rates still near historic lows, a Fed that is pulling back on the throttle, and murmurings of inflation, these traditional asset classes may not be where you want to be concentrated.

Using Self-Directed IRAs, you can take the same tax advantages these retirement savings vehicles offer to the standard asset classes, and bring them to bear on these potential investments:

  • Real estate
  • Raw land
  • Commodities
  • Foreign stocks
  • Limited partnerships
  • Oil and gas development
  • Pipelines
  • Farming and ranching
  • LLCs, partnerships or closely-held C corporations
  • Private lending
  • Gold and precious metals
  • Mining interests
  • Wineries and breweries (but not direct ownership of alcoholic beverages such as wine collections)
  • Tax liens and certificates
  • … and many more.

All these different asset classes allow the individual to maximize his or her individual expertise and find new ways to diversify away from vulnerable assets that have already had a good run.


The Secrets Wealthy Self-Directed IRA Investors Know About Finding Private Lenders

Self-Directed IRA, Private LendingOur office has thousands of clients that are using their Self-Directed IRAs to invest in non-traditional assets including real estate. The most successful among them have learned to use other people’s money to finance their real estate deals. This article will outline how they find enough private money to give them an unlimited money vault.

Is borrowing allowed in a Self-Directed IRA?

Yes, you are permitted to borrow within a Self-Directed IRA as long as the loans are non-recourse. Non-recourse simply means that, in the event of a foreclosure, the lender has a right to seize the property the loan was secured by and nothing else. They cannot come after you, your Self-Directed IRA, or any other assets that you and/or your Self-Directed IRA own.

Why would I want a private lender?

Most people stop making deals after they have run out of their own money and/or reached the maximum amount they can borrow from traditional banks. That means they generally get stopped after they buy 3 or 4 houses. Building relationships with private lenders allows you to obtain an unlimited amount of money so that you can make an unlimited amount of deals.

How do I find a private lender?

The truth is that you already know enough people to get you started in private lending. The idea is to start with the people you know and then build from there through referrals. Some of the people you can approach about private lending include but are certainly not limited to:

  • Family
  • Friends
  • Dentist
  • Lawyer
  • Accountant/CPA
  • Doctor
  • Realtor
  • Insurance Agent
  • Pastor
  • Church Members
  • Co-workers (past and present)
  • Other people you do business with
    • The lady that owns the dog kennel you board your dog at
    • The beautician that does your hair
    • The owner of the family restaurant that you go to all the time
    • The owner of the dry cleaner that you take your clothes to
    • Etc.

How do I approach someone about being a private lender?

It’s simpler than you think. When someone asks you what you do for a living, you share a presentation that you have practiced. Here’s an example:

“I buy real estate, fix it up and re-sell it or hold it for long-term investment. I use private financing to acquire these properties. A lot of my private investors loan me funds from their Self-Directed IRA or 401(k) since they are not making very much on their investments in those accounts. They like investing with me because I always give them a loan secured by a 1st mortgage on a property. They get above bank rates through the interest I pay them. If you know of anyone who may be interested or if you may be interested yourself, I would be happy to sit down and have a discussion about it.”

It really is just that simple.

In our next article…we will talk about what you do when a potential private lender wants to discuss things further with you.

FREE Lender Workshop presented by Jason Dillard

Sean McKay, Senior Vice President at America IRA, LLC-a national Self-Directed IRA provider, will be speaking at this event.

Event Location: Thornblade Club

Address: 1275 Thornblade Boulevard, Greer, SC 29650

Date: 2/22/2014

Time: 9:00AM – 12:00PM


Did you work hard for your money and now want it to work hard for you?

Packed with information on how you can safely get your money making more money secured by Upstate SC real estate. American IRA to join!

Cost: Free

The Ultimate Workshop in Real Estate Syndication

Event Location: Santa Ana, California

Date: 11/12/2013 – 11/14/2013


The Ultimate Workshop in Real Estate Syndication gives you a roadmap to successfully forming and operating a group investment. It also answers questions. When do securities laws apply? Are there exemptions? With restrictions on advertising and solicitation, how do I find investors? What corporate entities do I need? What is a Private Placement Memorandum? Can I use legal templates instead of attorneys? Where do I get help? It is the starting point for doing this right.

Click here for more information.

Cost: $1,995 per person; 2 people from the same company for $2,495

Self-Directed IRA Lending

IRA LendingSelf-Directed IRA Lending is A Key Tool in the Tool Box of Mega Successful Investors

Mega successful investors know that they need an arsenal of tools in order to maximize their ability to close those deals. One of the less known tools is an in-depth understanding of Self-Directed IRA Lending. Think about it…how many deals have you lost because your clients couldn’t get the money they needed from a bank?

Finding Self-directed IRA Lenders

  • Identify prospects you know
  • Open conversations
  • Introduction letter
  • One-on-one appointments produce the best results
  • Get commitment
  • Remember, you are presenting an opportunity that will benefit the potential private lender. No Begging, No Selling, No Chasing!
  • Remember, many potential private lenders do not know they can make loans with a self-directed IRA.

Self-Directed IRA Lending – How to Approach Self-directed IRA lenders

Think about what it would take for you to feel comfortable loaning someone money. When you begin to think about it in that light, these guidelines make a lot of sense:

You must gain the confidence of the self-directed IRA lender.

  • A great business plan can be a powerful tool in gaining their confidence. This plan will show them that you have thoroughly thought out the deal you are seeking money for.
  • Detail your skills and experience in relation to the deal you are seeking funds for. Showing them you are experienced in this type of investment gives them confidence that you have the skills you need to make the investment successful.
  • Share your credit report with them. A stellar credit report shows the lender that you are a person who pays what they owe.
  • Provide the lender with comps for the area in which you are purchasing the real estate.

Self-Directed IRA Lending – Reasons to Seek Self-directed IRA Lenders

Why people seek self-directed IRA lending is as diverse as the people and the deals they are working. Some of the most common reasons:

  • Immediate availability of funds is a main reason that investors use self-directed IRA lending. Having those funds available allows investors to swoop in and gather up great deals because they don’t have to make their offers contingent on financing.
  • Ability to close deals quickly is another reason investors seek out self-directed IRA lending.
  • Smaller down payments and in some cases no down payments are required with self-directed IRA lenders.
  • Self-directed IRA lenders often offer no points at closing.
  • You can sometimes get money upfront from self-directed IRA lenders. That’s correct, if you are lucky enough to negotiate this type of deal the private lender will actually give you money at the closing. For instance, if the real estate costs $60,000…you can sometimes negotiate to borrow $65,000.
  • There are times when you can negotiate ‘no payments’. For instance if you are working on a Fix and Flip deal, you can sometimes negotiate with the self-directed IRA lender so that you don’t have to pay them until you sell the home.

You can quickly see that using self-directed IRA lending can give you an edge over your competitors when you are making those offers.

Note: All of these are examples. The actual terms of your private loan depend upon the negotiation between you and your self-directed IRA lender. You should always check with your professionals about the rules and guidelines related to self-directed IRA lending.

Self-directed IRA Private Lending

Self-Directed IRA Private Lending Explained

If someone wants to just simply hold the paper secured by an asset in their self-directed IRA, their self-directed IRA is actually going to be a private lender for that asset. That’s right…self-directed IRA private lending simply means a private individual is using their self-directed IRA to loan the money rather than a bank or lending institution.

Self-Directed IRA Private Lending…The Numbers

In this example, Jack Brown has $100,000 he rolls over into his self-directed IRA. He wants to loan it to an investor as a first mortgage on a property worth $135,000.

Self-Directed IRA Private Lending…Determining the Value

Perhaps Jack’s realtor, an appraiser or some resource told him, or perhaps he’s sophisticated enough to look at the deal and say I’m comfortable that the deal is worth $135,000. We always suggest doing your ‘due diligence’ and using professionals to assess the value of an asset you are going to loan money on.

In this case, we’re looking at an LTV – Loan to Value – of 75%. This is not a hard and fast rule, with self-directed IRA private lending, the Loan to value is negotiated between the private lender and the private borrower.

Self-Directed IRA Private Lending…The Terms

The two parties – the lenders as well as the borrower – agreed to a 9% interest rate with interest only payments over five years and no amortization of the loan. With self-directed IRA private lending, the interest rate is negotiated by the private lender and the private borrower. They agreed on a straight interest-only payment, just to make it really clean and easy.

The property is going to be secured by a mortgage and a promissory note, and it’s going to be recorded with an attorney.



Self-Directed IRA Private Lending…Preparing for the Closing

Jack is going to send us what we call a buy direction letter. It’s an internal document that he completes to tell us the details of what he wants his IRA to invest in.

Jack will then review and approve all the closings documents. He’s the account holder and the decision-maker. He needs to understand the deal, and it’s only going to be funded if Jack is comfortable with it.

Self-Directed IRA Private Lending…The Closing

Even though this loan is being made through his self-directed IRA, this is going to be a regular closing that we’re used to as real estate investors. The documents are going to be recorded, and the only difference is that the original documents are actually going to be held by our office in our fireproof safe at American IRA.

As you can see, we’re not making the decisions. The client is directing us all along the way as to how and when to make the investment. In this case, because it’s a Traditional IRA, the interest is going to be tax deferred in a monthly amount of $750. That’s just 9% of $100,000 broken down into monthly payments.

Self-Directed IRA Private Lending…The Profits

At the end of the five years the loan is repaid, and the interest accrued over those five years is $45,000!

All self-directed IRA private lending investments have inherent risks. With proper due diligence and a professional team, risk can be managed but not eliminated-that is our job as investors. If you don’t want to take a risk whatsoever, tongue in cheek I say “Put it in U.S. Bonds or FDIC Insured CDs…though as you all know…Bonds and CDs are offering very low returns”.


American IRA, LLC does not give investment advice.  We do offer guidance as to the rules and regulations related to their self-directed accounts and the benefits of different account types so that their clients can take that information to their professionals to discuss the ramifications of various decisions on their individual situation.

For more information, or to explore your options, call American IRA today at 866-7500-IRA (472). We look forward to working with you.

IRA Lending

When it comes to the financial sector, what’s the most iconic symbol that instantly comes to mind? You’re most likely seeing dollar signs of course, and that succinctly summarizes the main objective of self-directed private IRA lending: more profits for your retirement fund. Every self-directed IRA at American IRA features the ability to conduct private IRA lending with the potential for increased returns.

Private IRA lending is an even more advantageous asset class in the post-credit bubble environment. Banks and other financial organizations have since tightened lending a great deal and are only starting to loosen their standards once more. Thanks to the power of self-directed IRAs, you can now fill the gap left by traditional lenders and loan to well-qualified businesses and individuals who have been otherwise locked out of the credit market.

Much of the industrialized world revolves around the credit market, as businesses and consumers frequently seek loans of all shapes, sizes, and varieties. With private IRA lending you can diversify your portfolio and reach these well-qualified borrowers. Clearly, the banking industry involves tremendous profit potential (just have a look at some of the elegant bank buildings across the country).

Your private IRA lending options are quite diverse – have a look at some of the top debt instruments you can include in your account:

IRA Lending

In short, private IRA lending has the potential to be a beneficial and effective addition to any self-directed IRA portfolio.

If you have any questions about opening a new account, contact us at 1-866-7500-IRA(472) or If you’d like to transfer your existing portfolio, contact us at 1-866-7500-IRA(472) or


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