Fund Your Residential and Commercial Real Estate Deals with OPI- Other People’s IRA’s-Jane4

A private lender offers many benefits over the traditional bank loan for investing. With a private lender you have the advantage of receiving your funds in a much more timely manner. A bank will take a few weeks to get you your check where a private lender can usually have it to you in a few days. Since they are investing their own money they simply have to write a check or wire funds which can be done in half the time of a bank.

The process of obtaining your loan from a private lender is much simpler than a bank application as well. With a bank there are many documents to fill out and explanations to write. A private lender will require a good business plan and your personal information, but not much more than that. There will, of course, be a promissory note that will detail the terms of your repayment to the lender, but that will be deliberated over and decided between the lender and the investor. You will sign it and be bound to the terms in it for the repayment of your loan.

A private lender will often offer the benefit of no credit check and have no limit to the amount that you can borrow. A bank will look at your credit, your income, your debt, and then determine what amount of money they are willing to lend. A private lender will look at your business plan and the asset securing his loan rather than your credit. In essence, a private lender will be placing their money on your experience, your track record and the amount of equity above his/her loan. A bank places a great deal of importance on you credit score. A private lender, if satisfied that your idea is worth the investment, will work with you to determine what amount of money you’ll need and use their judgment to determine the amount that will be lent.

A loan procured through a private lender is much less costly than a hard money loan. The hard money loan is one which can be gotten at a high interest rate. This type of loan will be available to those with poorer credit, yet they will pay a high price for that loan. A private lender will offer better interest rates and a better payback plan. A hard money lender will also insist that if you default on the loan, the property will go to them and they will be able to get the money they are owed from the sale of the property. The terms of the private money lender will be more flexible and they will work with you to give you more flexibility in the payment of the loan. The private lender will be willing to work in your favor to get the money they are owed in a way that will work for both you and them.

A private lender may be able to use his/her self-directed IRA in order to fund your loan. In essence they’ll be deferring taxes on any interest they make from the loan. They can take their IRA or 401K and turn it into a self-directed IRA. This is an easy transfer to make and will help them easily facilitate your loans. Their self-directed IRA becomes a quick source of cash that is ready when you need it. There are several well established companies that can work with you and the private lender in order to facilitate the transaction, such as Equity Trust, Entrust, Pensco, etc.

There are a few important things that you’ll want to look into before deciding on which company to go with. Each company will offer their own types of security, service, and access. You will want to weigh each against the other and decide which will work best for you and your lender. You will also need to be aware of the usury laws in your state. This will determine how much interest you can pay each month. You will want to be well aware of the rules for lending with a self-directed IRA. This is something that the equity trust company can go over with you so that you understand everything about this type of lending. Additionally, the equity trust firm can work with you to determine the appropriate time frame for your investment. Be sure that you have a complete understanding of everything that has to do with the rules of the investment at that point. It’s important to know exactly what you’re getting in to before you sign anything, and it's not a bad idea to obtain the counsel of an attorney versed in this field.

Using private lenders and self directed IRA’s are a good way to fund your investment while giving your lender the benefit of deferred taxes. There is much more flexibility with the amount of the loan itself as well as the terms for repayment. This strategy will go a long way in bringing you a great return on your investment.

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