So, what can’t you invest in?

The IRS defines a prohibited transaction as follows: “Generally a prohibited transaction is any improper use of your IRA account or annuity by you, your beneficiary or any disqualified person. Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendant, and any spouse of lineal descendant).”–Source IRS Publication 590 In other words, you can’t make loans to yourself, your family, or buy real estate for personal use.

Why use a self directed IRA?

The number one reason for a self directed IRA is to provide private funding for real estate deals.  The funds from a self-directed IRA can provide private lending for the real estate deals of others.  Your money can be secured in first position on investment properties at a safe loan-to-value ratio like 60 or 65%.  You can buy rental property to hold and rent, make high yielding loans to real estate investing professionals (Deeds of Trust), and of course join the millions of others in America making high returns in the fix and flip market.

How do I choose a Self-Directed IRA Company?

Although there are many to choose from in today’s crowded market, I still prefer to go with companies that have been doing this the longest and offer the lowest fees. The annual fees and per-investment fees can really get you so it is important to do your own research. I’ve found the following companies to be the best in my experience.

Equity Trust: http://www.trustetc.com/

Pensco: http://www.penscotrust.com/

Sterling Trust: http://www.sterling-trust.com/

How do I find good investment options for my-self directed Ira?

To learn more about self directed Ira’s, I suggest going directly to one of the 3 IRA company links I posted above. There you will find lots of explanations and tutorials on self-directed IRAs.  Once you have settled on a custodian for your account, review the private lending area on http://www.invesdoor.com to get some good ideas.

Contributed by

Russell Roesner, Financial Director

Invesdoor™ Corporation

I guess my perceptions about banks may have been molded, in part, by the classic 1946 film: “It’s a Wonderful Life” with Jimmy Stewart.  Here we saw a sincere man driven by a true concern for his fellow man seeking a solution through honest business practice under the basic principles of teamwork and trust.  Today, though, kids grow up with an entirely different view of banking.  They see extremely large, cold, complex and insensitive Wall Street-driven institutions that make business decisions with little regard for their customers.

There was a time when a community bank would care for the money of its depositors and wisely lend to local businesses and families wishing to buy a local home for their family.  Over the years this very simple concept has become so large and complicated that the individual small business or homeowner has been squeezed into a very uncomfortable position.

Since the new millennium, most large banks chose to hop on the housing “bubble” and financed homes for families they knew couldn’t afford them.  The resultant U.S. foreclosure crisis is evidence of a policy gone wrong.  Nonetheless, losses must be sustained as families leave their homes either by choice or necessity.

How are the banks dealing with this widespread problem?  They promptly accepted federal aid and yet, still get a failing grade on modifying the mortgages for most of the families who needed it.  They have also tightened up new lending criteria so that new homeowners, businesses and landlords must look elsewhere for funding their transactions.

And this is just what is happening.  A new trend is sweeping the nation:  A move away from traditional banks and towards private lenders.  With private lenders the terms are considerably different than banks…often much higher interest and points.  Nevertheless, with 20-year low purchase prices, one needs the ability to act quickly without a lot of bank “red tape.”

This is especially crucial if you make your living with a real estate home business.  Whether you buy foreclosures, short sales or other distressed investment properties, the real “deals” won’t wait for the bank to get around to your file.  Most real estate investment experts have shifted their paradigm of how they finance their deals.  Thank goodness for competition!

It’s been said that “necessity is the mother of invention.”  Banking will never be quite the same again, ever.  Opportunities, however, continue to arise and one needs to be able to take advantage of these in a reasonably short period of time.  I will talk more about private money in another article soon.

As you may already know, I have been a wholesaler of real estate opportunities for quite a few years now.  One thing you may not know, however, is my secret key to consummating deals.  Today I am going to reveal this well-guarded secret to the world.

Let’s take an example from the many sincere folks losing their homes and selling them short.  It’s no secret that their credit will take a hit broadside for no less than 2 years…and they will be required to work hard to heal the damage done during that ensuing 24 month period.  No one wants to talk to them.  Landlords are skeptical about renting to them and banks refuse to acknowledge their very existence.

The gnawing question is:  Is there any hope for the millions of homeowners nationwide in this predicament?  Thanks to the ingenuity of some highly savvy, creative entrepreneurs, the answer is:  “probably.”

The grim truth is that without good credit, institutional lenders have traditionally turned their proverbial noses up at folks like the foregoing.  Therefore, the answer lies outside of the traditional “box.”  Yes.  Banks are not the answer.  Rather, they are the problem.  If a sincere family wishes to become or even remain a homeowner, with the subsequent tax advantages, they must break convention and seek financing elsewhere.

Tighter restrictions on bank lending have crimped the styles of real estate investors as much as they’ve hurt wannabe homeowners.  Nonetheless, the investment-capital vacuum has sucked in a strong stream of private money, including the retirement funds of ordinary people.

The best of both worlds – upside potential and a healthy interest rate – is the reason for a hybrid investment vehicle that will be offered by Invesdoor Corp. after the first of 2010.  For te most part, money is coming in from private investment accounts known as IRAs which many Americans have, but don’t manage to their benefit.  These funds, while filtered via a 3rd party custodian, cannot be physically handled by the owner.  They can only be allocated to their designated use in which a much higher return is enjoyed, thus growing the retirement account at an accelerated rate.