Rental Property Investor · Houston, TX · Member since 2017 · 144 posts · 42 votes
Hello,
Has anyone had a good experience lending from their IRA to a hard money guy who then lends it out to local flippers. Ive been approached by several people who do this but I've never pulled the trigger even though I'm still interested.
Using an IRA to lend to flippers is very commonly done. This is something I do with my self-directed plan because I have expertise in flipping personally and and know several seasoned investors who flip for a living and need loans to operate at maximum volume and efficiency.
What you are describing sounds more risky, and I would be very careful as to how deals are structured and perhaps have an attorney look at the process.
If the 3rd party is acting as a broker and collecting fees for arranging a note between your IRA and a borrower, with a mortgage and deed of trust secured by a specific flip property, that sounds OK. You would still want to ensure he has the proper licensing for doing so, that deeds are recorded properly, that everything complies with state lending laws, and that you have an opportunity to vet specific lending transactions.
If your IRA is just lending money to the 3rd party or a company he controls and does not have direct security with a lien against the underlying property, just don't do it. You are putting your money at great risk with no viable recourse in that kind of arrangement.
Using an IRA to lend to flippers is very commonly done. This is something I do with my self-directed plan because I have expertise in flipping personally and and know several seasoned investors who flip for a living and need loans to operate at maximum volume and efficiency.
What you are describing sounds more risky, and I would be very careful as to how deals are structured and perhaps have an attorney look at the process.
If the 3rd party is acting as a broker and collecting fees for arranging a note between your IRA and a borrower, with a mortgage and deed of trust secured by a specific flip property, that sounds OK. You would still want to ensure he has the proper licensing for doing so, that deeds are recorded properly, that everything complies with state lending laws, and that you have an opportunity to vet specific lending transactions.
If your IRA is just lending money to the 3rd party or a company he controls and does not have direct security with a lien against the underlying property, just don't do it. You are putting your money at great risk with no viable recourse in that kind of arrangement.
My first loan, I loaned directly to a flipper for a flip in Texas City and that is going well so far. Blink Lending and Investor Loan Source both sell notes if you just want to buy a note that is already underwritten.
Hello @Michael H. - This is a great question. I've had good and bad experiences by lending to people who re-lend their money out. I don't think anybody watches my money better than I do, but time to deploy funds is important. If you can find a good underwriter, build a relationship with them, and understand their processes, that can be very helpful. However, your security may not be tied directly to a property. It may be in a fund, and if things go south, it's a lot harder to collect/take a foreclosure. Secondly, I would take a look at their history in private lending. Most people have been very successful in it from 2012 to today, as the real estate market has increased in value. Therefore, there has been a lot of equity that could be considered reducing risk. Be careful either way that you go. I would also suggest taking courses in private lending before you get into either one of these. I've written a Private Lender's Checklist: 12 Tips to Ensure Your Deal is Done Right here on BP. If you do not understand these criteria, you should re-evaluate your readiness. Obviously, there is more than these items on this list to consider, but I think it is a great way to utilize your SDIRA once you have the knowledge and understanding. If you have any additional questions, I would be happy to connect.
Did you set up the account? If so, I'd be interested to hear how it went and if you made any investments yet. I've been a capital partner for about 6-years in Portland Or.