Real Estate Loans

Written by Johnny Kitchens
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Real estate properties, like other major pieces of real property such as automobiles and water craft, are assets that are financed much more often than they are purchased outright. The loan industry for real estate purchases is worth billions of dollars per year and the returns often outperform many investments in the stock markets. If the loans are structured properly, the possibility of borrower default can be reduced to a very limited risk.

In many cases, real estate that is seized through default turns out to be more valuable than the interest on the initial loan. If the funds are loaned from a qualified IRA and the borrower defaults, the property can automatically be folded into the IRA if the deal is structured properly. Real estate transactions involving IRA funds can be quite complex so it is important to have an IRA advisor that is knowledgeable in this area as well as doing your own research.

Many IRA owners are unaware of the possibility of investing their IRA funds in real estate. The fault for this lies doubly with a lack of investor education and a lack of desire to educate investors by large IRA providers who do not deal with real estate. Major banks, mutual fund companies, and insurance companies wrote the first plan documents regarding IRAs, so their products became the standard because individual investors were less inclined to develop their own plans.

Self-Directed IRAs and Real Estate

Self-directed IRAs are becoming more popular as major financial publications have acknowledged the advantages of investing IRAs in non-traditional assets (like real estate). Additionally, the Internet has proven to be a valuable tool for investors to educate themselves on non-traditional IRA investing. As a result, self-directed IRAs have become more popular because investors are attracted to real estate's relatively strong returns and self-direction is generally required for such investments.


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