Finance Your Deals with a Self-Directed IRA

Posted on December 8, 2016 by

Jay ConnerI want you to succeed in acquiring private money for your deals, which is why I have to tell you this: Over half of the money from my private lenders comes from their retirement accounts.

It’s important to understand the flow of money and how it relates to your own success. If you don’t understand how it works to invest retirement funds, you’ll miss out on a lot of great opportunities, so I’m going to correct that here and now.

The next time you meet a new private lender who doesn’t have any experience but has retirement money ready to go, you’re going to go through a 14-step process to make a deal possible.

One quick note before we get to the plan: You don’t need to tell your private lenders everything you’re doing behind the scenes, because you don’t want to confuse them. That’s not because you have anything to hide, but rather because you want to put this process truly on automatic for your private lenders. 

In other words, you want private lending to be as “done-for-them” as possible. Ideally, they’ll sit home, do nothing, collect checks, and not have to jump through any hoops. We want it to be super easy for your private lenders to do business with you.

So, with that in mind, here are 14 steps on how to fund your deals using a self-directed IRA.

  1. Establish a relationship with a representative at a self-directed IRA company (e.g., Equity Trust). If you don’t know who to contact, reach out to us, and we can help. Call the rep and tell them you want someone you can refer all of your private lenders to. Ask them to send some classy, nice brochures that you can hand to your prospective private lenders.

  2. Offer a three-way call between you, your self-directed IRA rep, and your private lender. You’re in charge of this introductory call. After pleasantries, you want the rep to explain to the private lender how the rep will handle – in a done-for-you way – everything that needs to be done. All the private lender has to do is sign one document authorizing the rep to move funds into their self-directed IRA account from the lender’s retirement accounts. It’ll take two to four weeks for the account to get funded. After that, the beautiful thing is that the private lender will never have to talk to or call up anybody to facilitate the process – it’s all handled in the background by the rep.

  3. During the introductory call, the rep will explain the process of funding and getting the self-directed IRA set up.

  4. The lender signs the authorization and emails it to the rep.

  5. Once the account is funded, you’re ready to do a deal.

  6. Go find a deal.

  7. Now you’ve got a deal, so call up the private lender and tell them four things:

    1. The ARV (After Repair Value)
    2. The location (the community, not the address)
    3. The funding that will be required from their IRA account
    4. The closing date
  8. You have told the private lender you have a deal ready to go. Now, send your attorney the “Closing Agent Instructions.”

  9. Receive the promissory note and deed of trust back from the attorney. Make sure they’re absolutely correct.

  10. Email these documents to the self-directed IRA representative for them to prepare the “direction of investment,” or DOI. Always mark the box “expedited investment.” You’ll need to email your self-directed IRA rep the wiring instructions to your private lender’s trust account.

  11. The self-directed IRA rep sends the DOI to your private lender.

  12. The private lender signs it and emails it back.

  13. Your rep processes and schedules the wiring of funds to the closing agent.

  14. You close the deal.

And that’s it. It may seem like a lot, but there’s really not that much to it. If you haven’t experienced this whole process before, you’ll get the hang it pretty fast, I promise. I’ve done hundreds of these deals and gone through those 14 steps each time.

There’s an exception to this method, though. If your private lender is going to establish – or has already established – a self-directed IRA in an LLC with check-writing privileges, they are their own custodian. You go directly to them, and they can wire the funds directly to you.

Personally, I don’t recommend that any of my private lenders establish an LLC; I recommend they go through a third party.

Now, note that out of 14 steps, your private lender only has to do three things upfront:

  1. Meet your rep.

  2. Sign the authorization to fund the account.

  3. Sign a DOI for each deal.

After the initial setup, the only thing your private lender has to do is sign the DOI when it’s time to make a deal.  Between you and the self-directed IRA rep, everything else is covered. From the perspective of the private lender, this is a fantastic deal. Who wouldn’t want to set up an account, have someone do all the work to uncover a deal, give the borrower some funds, and get back more money than they invested, automatically and in the background?

Well, there you have it! If you have any questions about these 14 steps, self-directed IRAs, or private lenders, I’m always here to help!

Jay Conner

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