My self-directed IRA is the lender on the refinancing of a property. This is a duplex. This is a B- asset in a B+/A- suburb of Indianapolis. The value of the property is $125,000-$140,000 as is. With a little cosmetic improving it would be worth $165,000. Both sides are rented at $750 a side. The property is owned free and clear. I have put a note on property for $85,000. This is a 30 month note at 7.5% per annum interest only. The refinancing was done at a title company where I got a Lender's Policy of Title Insurance. My Mortgage will be recorded. The note will be serviced by a third party servicer. The owner of the property has several other properties that are just sitting there. He is going to use the $85,000 to fix up those other properties and then sell them.
I requested that my self-directed IRA be put on the Property Insurance Certificate and the Liability Insurance Certificate for the property as that is what I have always done. The borrower came back to me and said that he understood the rationale for me being on the Property Insurance Certificate and thus had no problem doing that. He also said however that he didn't understand why my self directed IRA would need to be listed as Additional Insured on the Liability Insurance Certificate and was thus questioning doing that. What should I tell him in this regard?
Tell him thank you for the good advice as a mortgagee has no premise liability.
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