How to Raise Unlimited Funds in 3 Easy Steps

By Dick Desich, Equity Trust Company Founder

One of the most common stumbling blocks to investing is not having enough cold, hard cash to act quickly to participate in hot deals. Imagine being able to create a funding source from which you could easily and quickly draw upon funds to finance your investments. By utilizing The Private Bank Concept, this vision can become a reality.

Recent estimates place over $4 trillion within IRAs, 401(k)s and other qualified programs across the country. These funds can become available to you through the utilization of self-directed IRAs.

The “private bank” concept is borrowing money from an individual’s IRA (not a financial institution) for investments. For example, an investor can borrow money from someone else’s IRA to complete an investment and pay the IRA back an amount of interest that is agreed upon in advance. Since IRAs are an exempt entity, interest earned on the money loaned is tax-free or tax-deferred depending on your type of IRA.

Lending institutions, insurance companies and venture capitalists have been using similar concepts to raise money for years. By utilizing self-directed IRAs, you can apply this concept to your investments, allowing you to become more profitable and stay ahead of the competition.

Create Your Own “Private Bank” in 3 Easy Steps
The following is a real estate Private Bank example, but this concept can be utilized with other investments such as notes, tax liens, and private placements.

1. Find an investment property and negotiate a 75% or less loan-to-value ratio to give your investors safety for their investment. Build in enough gross profit to pay your investors an attractive rate of return. Remember, it’s not the cost of money, but the availability of it, that is important. Finally, leave yourself enough time, through a contingency clause, to find your investors.

2. Present the deal to potential investors, such as business acquaintances and local professionals (e.g., doctors, lawyers, and business owners). It is important that you offer an attractive rate of return and explain the security they have in the transaction by offering them the first lien on the property. Remind your potential investors that, in addition, their returns will be able to grow in a tax-deferred or tax-free environment, depending on which type of IRA they have.

3. Now that you have the investment and investors in mind, the final step is to open an Equity Trust self-directed IRA for each investor.

Once your investors have established their accounts, and the particulars of the investment have been agreed upon, you are ready to utilize these funds for your investing strategy.

“Private Bank” Advantages
• Allows you to participate in more deals
• More deals = More profits
• You are able to offer cash for investments to receive deep discounts
• Beat out your competition
• Free up personal money for personal needs

What You Avoid by Creating Your Own “Private Bank”
• Lengthy committee approvals
• Bureaucratic red tape
• Potential credit risks
• Tying up your personal funds

Disclaimer: Equity Trust is a passive custodian and does not provide tax, legal, or investment advice. It does not endorse or recommend any contributor, company, or specific investments. Any information communicated by Equity Trust Company is for educational purposes only and should not be construed as tax, legal, or investment advice. Whenever making an investment decision, please consult with your legal, tax, and accounting professionals.