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Promissory Note Investing

Joel’s Story Part I: How His IRA Helped Save a Home

February 10, 2020
The investment was easier and less complicated than any purchase I had ever done in the past.
– Joel, Real Estate Investor


After recently looking into the Erie County registrar of deeds, Joel stated, “I’m happy to say I see thousands of IRA transactions in the county records since I first started. I’d like to think I may be part of the reason for some of those that followed.”

Joel has since used his real estate knowledge and desire “to find a way to get it done right” to make several alternative investments in his IRA – perhaps none more important than the one that helped his brother.

IRA Capital Saves His Brother’s Home

Joel’s brother, also in the construction industry, built a beautiful new home for himself several years ago.

A few years later, he received a private loan from a high-interest private lender. Before long, the high interest rates were overbearing and the lender called the loan due, threatening to foreclose on the home.

Joel realized his IRA capital could provide a solution and issued his brother a $100,000 promissory note to repay the initial loan and save his home.

The promissory note used his brother’s home as collateral and provided a reasonable payment plan that would allow his brother to stay in his home.

Joel worked with his attorney to draw up an amortization schedule with interest rates between 3-5% – thus keeping it at a fair market value.

Joel’s IRA received monthly payments, returning tax-deferred to his account, until his brother paid off the note a few years early.

This investment provided a stable return for Joel’s IRA, but more importantly, he was able to help his brother with his IRA capital in the process.

Continue to Part II: How Joel’s IRA Turned a Run-Down Building into a Community Favorite

Yes, partnering your self-directed IRA or other retirement account with another funding source is possible. You can partner your IRA with your non-IRA money, your other retirement accounts, your spouse’s IRA, other people’s IRAs, another investor’s non-IRA money and your children/grandchildren’s CESAs, to name a few options.

No. This is considered a prohibited transaction (see IRC 4975). You may not purchase a property, or interest in a property, that’s currently owned by a disqualified person, which includes yourself.

Some advantages of self-directed IRAs include:

  • Tax-deferred or tax-free profits
  • Investment diversity (it is possible to invest in an array of assets in your retirement account)
  • Potentially building wealth for future beneficiaries

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