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Promissory Note Investing
It is possible to invest in private debt, also known as private money lending, using a self-directed IRA or other account. Equity Trust makes the process easy, but there are a few things to be aware of if you’re not familiar with lending from your retirement account.
A: Some important rules to remember about private money lending within your qualified account:
For the complete list of rules, visit IRS.gov.
A: Notes can be structured different ways including:
Your account can also purchase an existing secured or unsecured note – at face value or at a discounted price. Your account takes the place of the lender and receives loan payments from the borrower.
A: The easiest way to request to make an investment in Private Debt is to complete the Private Debt Wizard. (Clients: log into myEQUITY.com, navigate to Investments>Private Debt.) The online wizard walks through all the instructions to direct the investment that will be made within your account.
Before you begin the wizard, please be prepared to provide:
Be sure you have enough available funds in your account for the transaction. You can check available funds using myEQUITY.
A: When your account is the only owner, the investment should be titled:
Equity Trust Company Custodian FBO [Account Owner’s Name] [Account Type (IRA, HSA, CESA, etc.)].
The complete Investment Titling Guide can be found in myEQUITY under Resources>Education>Private Debt.
Watch: Client Greg discusses diversifying with notes and real estate in an IRA
A: Private debt investments require a copy of the note to be submitted with the Direction of Investment. In addition, you may be required to submit documents including:
[Read More: What is Promissory Note Investing?]
A: Note terms and conditions will vary based on the agreements within the note.
All notes must include:
A: Your borrowers may send payments directly to Equity Trust to be deposited into your account via direct debits from their checking or savings account. Online payments may be set up as one-time or recurring. Visit our Online Payment Center to learn more.
To deposit income yourself, send the check or wire made payable to your account with a Deposit Coupon.
If your account has partial ownership of an asset, you should only submit payments based on your percentage of ownership of the asset.
A: Read about Guy, a Georgia investor who earned a 10-percent return on his hands-off, self-directed note investment.
Learn more: Private Lending with a Self-Directed IRA video
If you have additional questions about the private lending process at Equity Trust or getting started with a self-directed IRA, request a consultation today.
You are leaving trustetc.com to enter the ETC Brokerage Services (Member FINRA/SIPC) website (etcbrokerage.com), the registered broker-dealer affiliate of Equity Trust Company. ETC Brokerage Services provides access to brokerage and investment products which ARE NOT FDIC insured. ETC Brokerage does not provide investment advice or recommendations as to any investment. All investments are selected and made solely by self-directed account owners.Continue