Investing in Unsecured Notes with your Self-Directed IRA
In the current economy, it has become increasingly difficult to acquire traditional bank financing, even with good credit. With the tightening of lending practices to individuals and higher credit score requirements, borrowers are seeking private lending. Providing unsecured notes (private loans) to individuals is a good way to diversify your retirement portfolio.
Unsecured notes are not backed by collateral, which makes them a higher risk, but it can benefit both parties. For lenders, it means getting regular interest payments (or a lump sum upon maturity), and often a better return than other investments. For the borrowers, it provides quick access to the cash they need for that down payment or other needs, with a predictable fixed-interest rate. Of course, always do your due diligence before considering any kind of investment.
Investing in a private note is just one more alternative investment option available to you through a self-directed retirement account. Consult with your tax advisor to ensure that you are not participating in an prohibited transaction that can affect your investment. So the next time that you hear about an opportunity to invest in an unsecured note, see if it makes sense for your retirement future. If so, then take advantage of this great opportunity to explore and expand the wealth-building potential of your retirement funds.
Munzer Ghosheh is the Director of Business Development for Entrust IRA Services, the premier provider of self-directed retirement plans. You can reach him at mghosheh@theentrustgroup.com or 310-899-3811.