Borrowing Money with Your Self Directed IRA

One of the most common questions from clients is “Can I Borrow Money For Real Estate With My Self Directed IRA?” 

Many people are surprised to find out that your IRA can actually borrow money to purchase real estate.  Most banks are not willing to lend money to a Self Directed IRA.  The reason for this is because they cannot foreclose on a property that is owned by the IRA. If the borrower were to stop making payments the bank would have no recourse for recovering their money.  However, There are some IRA lenders who have developed products specifically for those investing in real estate with a Self Directed IRA. These loans are called Non-Recourse Loans.

What are Non-Recourse Loans?

The IRS requires a non-recourse loan for all real estate purchases that use leverage within a self-directed IRA. The difference between recourse and non-recourse loans is that in a non-recourse loan, if the borrower defaults, the lender/issuer can seize only the collateral, which is usually the property. Non-recourse debt is typically limited to a 50-60 percent loan-to-value ratios.

How it Works

A non-recourse loan is a loan in which you, as the IRA holder, are not personally liable for repaying the loan. Once you locate a lender/bank, the lender will lend to your IRA, not to you as an individual. The lender will have no recourse against you or the balance of your IRA funds in the event of a default. The lender will only be able to recover the property and your equity. In a non-recourse loan, you may not use your personal credit to facilitate the loan.

 

SDIRA Non Recourse Lenders

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North American Savings Bank provide loans in all 50 states. Founded in 1927, NASB now manages over one billion dollars in assets.

NASB offers a IRA lending program to help individual investors with their financing needs within IRA and 401k accounts. NASB lends up to 70% loan-to-cost on single family detached homes and 60% on all other residential properties (CA, AZ, FL, MI, OH, NV have a max 55% loan-to-cost). The loan amount is determined by the property condition, cash flow, recent property history, and retirement reserves in the accounts. Loan decision can be obtained typically within 24 hours. Processing time is about 45 days from application date. NASB offers a 5 year ARM and a 25 year fixed.

Minimum requirements for a non-recourse loan:

  • Minimum down payment is 30% of the purchase price. Insufficient cash flow or the condition of the property may require a larger down payment.
  • The property must generate sufficient Net Operating Income (rents minus operating expenses) to exceed the debt payments by 20–25%.

[email protected] | www.iralending.com

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First Western Federal Savings Bank is a nationwide non-recourse lender that helps their clients use their self directed retirement accounts to purchase real estate investment with leverage. They finance residential, commercial, and multifamily properties in all 50 states for Buy and Hold investors.

First Western Federal Savings Bank offers 25-year, fully amortizing loans with no pre-payment penalty and no balloon payments. The maximum LTV is up to 60% for 1-4 unit residential properties and 50% for larger rental and commercial properties. The loan amount can range from $40,000 to $800,000. Typically, loan decisions are made within 2 days, and processing time is usually 30 to 35 days from the application date.

Minimum requirements for non-recourse loan:

  • Minimum liquid reserves in the retirement account: 15% of the loan amount
  • Net operating income exceeds debt payments by a minimum of 25%

For more information, please contact:

[email protected] | www.myiralender.com

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Marshall Reddick Real Estate has been a prominent nationwide residential real estate firm since 1979. They provide Non-recourse lending options to individuals and self-directed retirement accounts for both buy-and-hold and fix-and-flip transactions. They can lend nationwide and they offer fixed interest rate loans at very competitive rates.

Marshall Reddick Real Estate offers long-term as well as short-term financing options for non-owner occupied residential real estate. There are 3 different loan options for long-term financing which are all fixed-interest rate loans. They are one of the only non-recourse lenders in the country that have a 30-year fully amortized loan option. The maximum LTV is 60% of appraised value, and the loan terms are either a 15-year fixed, 30-year fixed due in 5, 7, or 10 years, and a 30-year fully amortized loan. Loan amounts can go as low as $25,000, and there is a 3-year minimum interest guaranty. For short term fix-and-flip loans, they lend up to 70% of after repair value, and the term is 12 months. There is a 3-month minimum interest guaranty, and lending for both short-term and long-term is available in all 50 states.

Patrick Prunty | BRE 01949337 | NMLS 1205733

Marshall Reddick Real Estate

4299 MacArthur Blvd., Ste. 102, Newport Beach, CA 92660

949-885-8173 | [email protected] | www.marshallreddick.com

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First National Bank of America offers loans in all 50 states for 1-4 units residential properties. Loans for larger multi-family are available locally. Their maximum loan term is 10 years, with a max amortization of 20 years. First National Bank of America also offers rehab loans, refinances, and will consider loans under $50,000. Typical processing time is 30 to 45 days from application to close.

Minimum requirements to qualify for a non-recourse loan at First National Bank:

  • 40% to 50% down payment available in the self-directed IRA
  • The property must generate net operating income that exceeds debt payments by 20% to 25%

[email protected] | www.fnba.com

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FirstBank offers excellent banking services and products, with a great focus on the investor community. After 50 years in the business, FirstBank has grown its assets to more than fourteen billion dollars.

FirstBank offers non-recourse loans to the majority of Colorado, the Phoenix Metro Area in Arizona, all of Southern California and also Central California including the Inland Empire and High Desert areas. The maximum loan-to-value is 65%. Typical loan products are 15 year fixed rate mortgage and 7/1 or 5/1 ARM that can be amortized over 15 or 30 years with a matching maturity. Generally, the bank can complete a transaction in about 35 days for someone who has checkbook control and/or where the IRA owner is signing on behalf of their plan or LLC. There is no minimum or maximum loan amounts.

To qualify for a non-recourse loan, the requirements are:

  • 75% of projected rents must cover principal, interest, taxes and insurance (PITI payments) for 1-4 family residences. No lease is required at closing
  • An analysis of personal debt service, net worth, and credit is required
  • The underlying participant(s) must meet minimum credit standard of a 680

For more information, please contact:

[email protected]

[email protected]

[email protected]

www.efirstbank.com

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Non-recourse lenders

Mark Robbins, CEO, of Lending Resources Group has been a pioneer in helping IRA investors obtain non-recourse loans for their real estate investments, since they became available to the public in 2004. Mark was the first Mortgage Banker in the U.S. at a major mortgage banking company to offer non-recourse loans to IRA investors nationwide.Mark formed Lending Resources Group, Inc. in 2008 and continues to facilitate non-recourse loans for IRA investors from coast to coast.

LRG has helped investors obtain these loans for all types of real estate from single family homes and condominiums to duplexes, 4-plexes, multi-family apartment buildings and commercial properties. LRG has also used its wide array of private sources to fund non-recourse loans that the banks refuse to do.

For more information please contact:

415-309-1803 | [email protected] www.lendingresourcesgroup.com

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Pacific-Crest-Savings-Bank

Pacific Crest Savings Bank was established in 1984 as Phoenix Mortgage and converted to a Washington State-charted, federally insured savings bank in 1998. PCSB combines the advantages of independent ownership with three decades of experience to offer the highest level of customer service.

They offer non-recourse loans to investment properties in Western Washington State that are held in a self-directed retirement plan such as Solo 401(k), IRA and more. The maximum loan-to-value is 50%. Positive cash flow are required. Pacific Crest offers loans to purchase, rate and term refinance, and cash out refinance.

For more information please contact:

Larry Enselman (425) 670-9623 | [email protected] | www.paccrest.com

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psrs_logo

Pacific Southwest Realty Services is a full service mortgage banking company providing our clients with a wide spectrum of financing instruments such as fixed or floating rate mortgages, equity, mezzanine debt, bridge and construction financing.

Life Company CRE Loans offer top-off loan during term, no reserves or impounds, flexible prepay terms, and lock rate immediately at loan application. All loan documents and terms are negotiable.

Loan Terms:

  • $1 Million to $100 Million
  • All commercial property types
  • Single asset or portfolio
  • Interest-only available
  • Fixed terms up to 30 years
  • Amortization up to 30 years
  • Non-recourse
  • Assumable

For more information please contact:

Trevor Blood ∙ CA DRE #01907048
11911 San Vicente Blvd., Suite 390, Los Angeles, California 90049
direct (310) 471-1977 | cell (858) 519-6553 | [email protected] | www.psrs.com

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JMAC Funding is a group of private lenders located in San Diego, California who provides fast Private Hard Money Loans in California. We also buy real estate notes nationwide.

JMAC Funding offers non-recourse loans to self directed IRA LLCs that hold real estate. We are equity based lenders and we make purchase money and cash out refi loans on commercial, residential and land in California only. The loans can be structured as rehab loans or new construction, as well as for rentals. Loan terms are usually short term 5yr max, and project dependent. For rentals the project must be (or projected to be) cash flow positive with the loan in place.

Loan Terms:

  • Max Loan to Value (LTV) of 65%
  • Loan Amounts from $30K and up
  • Commercial, Residential and Land
  • Max term: 5 years

For more information, please contact:

Jim MacArthur
PO Box 91472, San Diego, CA 92169
(619) 846-1550 | [email protected] | www.TheHardMoneyPros.com

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Peak Asset Lending provides non-recourse loans for residential investment property. 30 year term available and no pre-payment penalties. Rate from 7.75% and up to 65% LTV available.

Financing available in markets within AL, AR, AZ, FL, GA, IA, IL, IN, KS, KY, MO, MS, NC, OH, OK, PA, SC, TN and TX. The easiest way to get pre-approved is the “Get Started” button atpeakassetlending.com

  • 30 years fully amortized and no pre-payment penalties
  • Max loan amount typically $300,000. No minimum loan amount.
    • We care about the rental income over the payment amount but we will do higher loan amounts under 55% LTV
  • 50-65% LTV depending on the loan amount. Over $100,000 = 65%
  • Rehab financing is available (with full 30 year terms available even for fix and flips).
    • Up to 80% of purchase advanced at closing, and up to 80% of repair funds available for reimbursement upon completion.
  • Clients can be foreign nationals as well

For more information, please contact:

Dustin Lauer | 11289 Strang Line Rd, Lenexa, KS 66215

(913) 956-7325 (PEAK) | [email protected]www.peakassetlending.com