Non Recourse Loans

[James Bolt]

Good morning, I am looking to use a nonrecourse mgt. It will be help set up investment monies from my 401K.

I know nothing about it so I'm taking it slow and learning about it. Does anyone know about the fees, % rate or any 

special thing about it? the obvious next question is a contact? I'm really looking forward to reading you responses.

[Ricardo R.]

Hey James,

Good on you for slowing down and learning before jumping in — non-recourse loans tied to retirement funds (usually through a self-directed IRA or solo 401k) are a very different animal than a conventional mortgage. A few key things to know:

• Rates & terms: Expect higher rates than a standard investment loan. Where you might see 6–7% on a conventional, non-recourse often comes in closer to 8–10% (sometimes more), with shorter amortizations (20–25 years instead of 30).

• Down payment: Lenders usually want 35–40% down. They want plenty of cushion since they can’t come after you personally if things go south.

• Fees: Closing costs and lender fees are typically higher than normal loans. Think more like commercial lending than residential.

• Restrictions: All income/expenses have to flow through the retirement account — you personally can’t “help out” the property with outside funds or sweat equity. That can catch newbies off guard.

• Contacts: There are a handful of national players who specialize in these loans (North American Savings Bank, First Western, some local credit unions). I'd start with lenders who specifically market themselves as "IRA non-recourse loan" providers.

My view on it, it's a solid tool for unlocking 401k/IRA money for real estate, but the costs and restrictions are real. Make sure the deal itself is strong enough to support the higher rates and down payment; I hope this helps you a bit on your journey, I sent you a DM on BP and hope you can assist.