Why You Should Invest in Trust Deeds with Your IRA

Have you found that the stock market is making things difficult for your IRA to hold onto substantial revenue? If so, you might have considered investing in real estate. However, you may have also thought that investing in real estate can be more trouble than it is worth even though potential profits can be quite high.

What if you could find a way to invest in real estate without having to actually buy property? Would you be interested in investing in it if it also meant never having to find or replace tenants? If so, you need to be introduced to the concept of investing in trust deeds using your self-directed IRA.

What is Trust Deed Investing?

In many states, a document that secures a lender’s interest in property is called a mortgage. In Arizona, the document is a trust deed. This document gets recorded with the county clerk’s office after the purchase of a property on which there are a mortgage and a note. In other words, if a buyer needed to obtain financing to purchase the property, they needed to enter into a Trust Deed with the lender.

These instruments are what you can invest in as the holder of an active self-directed IRA account. Every time the borrower makes a payment to the lender, the share of interest paid goes into your hands. You get to share in this investment with many others but instead of making about 5 percent or less on any sum you invest, as you might with a money market fund, you can make up to 10 percent or more on a trust deed investment.  This is why trust deed investing interests many investors.

What is Needed to Invest in Trust Deeds?

An IRA account in good standing has to be in place before selecting a trust deed source from which to buy your interest. The only types of IRA accounts that will be allowed in a Trust Deed investment are those that are self-directed.

You must also have at least $25,000 to invest. Typically you will buy the share in the Trust Deed from a private lender. This is because most large banks are not interested in investing in small, private trust deeds.

The people who buy properties using private or hard money are often those who have to close quickly, or who only want to borrow money for a short time. Most of these deeds are only for three to five years. This is one reason the interest that the buyers pay on the loan is so high. Also, many borrowers use private equity firms to borrow second mortgages against their home. These trust deeds are also provided to borrowers at a higher interest rate.

If you are tired of seeing your investments go up and down with the fluctuations in the stock market, consider diversifying by investing in real estate using your IRA. Talk to a mortgage broker that specializes in these types of investment products for more information on how you can start earning returns on Trust Deeds.

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