With the continuing evolution of the cash flow industry, new processes, markets, and opportunities are emerging. One of the more exciting opportunities involves the availability of funding to purchase notes. There is in excess of $3 Trillion in IRA funds in the United States today. Most is invested in the more conventional investment types, such as CDs, mutual funds, stocks and bonds. The exciting news for members of the Cash Flow industry is that these retirement funds are all available to be invested through you in your notes or investment pools. The good news for investors considering this strategy is that it can be done without cashing in their IRA account, and can be done penalty-free, tax-deferred, and sometimes even tax-free!
A long-standing Internal Revenue Service ruling allows all Americans to invest their IRA funds, or 401(k) funds rolled into an IRA, in a wide variety of non-traditional investment types. With this type of IRA, called a Self-Directed IRA, individuals can invest in mortgages, private notes, structured settlements, factoring, and limited partnerships – just to name a few. Because these are IRS-permitted investments, made within a qualified retirement plan, rolling current retirement funds into a Self-Directed IRA to do this type of investing is penalty-free. Additionally, the taxes due on the growth of the investments are deferred until distribution begins at retirement. If a Self-Directed Roth IRA is involved, the earnings are tax-free when distributed at retirement.
In order for your investors to take advantage of this opportunity, they must work with a qualified special asset custodian. Unlike most financial institutions offering IRAs, true Self-Directed IRA custodians allow clients to select from virtually any type of investment. Such investments as private notes, factoring, commercial paper, real estate, annuities, structured settlements, car paper and commercial leases, are possible choices for clients of firms that are truly Self-Directed. While clients can still include traditional investments such as stocks and mutual funds within their Self-Directed IRA, they also have the freedom to diversify their portfolio by adding a non-traditional asset like a private note or piece of real estate. Such institutions serve as a vital source of funds to those selling notes and those managing investment pools to purchase notes by assisting individuals, including “angel” investors, to invest their retirement funds in these types of assets. In many cases, these investors have large sums of money accumulated in their retirement accounts, which they can now put to work in non-traditional investments through the services of Self-Directed IRA institutions.
The timing is excellent now for you, as a member of the Cash Flow industry, to take advantage of this little-known retirement planning tool, and the possibilities opened up by it. Daily headlines in the Wall Street Journal discuss economic uncertainties caused by mutual fund mismanagement, corporate accounting scandals and so on. As a result, more and more Americans are pulling out of traditional investments and are aggressively seeking non-traditional assets, like your private notes, as a primary or ancillary investment for their IRAs due to their potential for a higher return.
Your challenge as a member of the Cash Flow industry is to take a proactive role in educating and informing the investors and professionals you work with about the benefits of Self-Directed IRAs. By becoming knowledgeable in this area of specialized IRA investing, the professionals you work with (e.g., CPAs, attorneys, and financial planners) will help their clients earn higher returns on investments, enabling themselves to increase their professional prestige and grow their client base as a result. Your investors will have the potential of a much higher return for their retirement account investments. You will not only strengthen the relationship you have cultivated with current investors by offering them an opportunity to earn more money without any additional out-of-pocket cash, but you will also have the opportunity to increase your investor pool by introducing this unique concept to new potential investors.
Find out more about the opportunities Self-Directed IRAs offer you and your investors, and how you can build your business and grow your profits using this unique retirement planning tool.
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Disclaimer
The information provided in this article is for general educational and informational purposes only and does not constitute legal, financial, investment, tax, or professional advice. Note Servicing Center, Inc. is a licensed loan servicer and does not provide legal counsel, investment recommendations, or financial planning services. Reading this content does not create an attorney-client, fiduciary, or advisory relationship of any kind. Nothing in this article constitutes an offer to sell, a solicitation of an offer to buy, or a recommendation regarding any security, promissory note, mortgage note, fractional interest, or other investment product. Any references to notes, yields, returns, or investment structures are illustrative and educational only. Past performance is not indicative of future results, and all investments involve risk, including the potential loss of principal. Note investing, real estate transactions, and lending activities are subject to federal, state, and local laws that vary by jurisdiction and change over time. Before making any decision based on the information in this article, you should consult with a qualified attorney, licensed financial advisor, certified public accountant, or other appropriate professional who can evaluate your specific circumstances. Some articles on this site include hypothetical stories, examples, and scenarios created to illustrate concepts and demonstrate the types of situations Note Servicing Center, Inc. handles. Any names, companies, properties, and circumstances in these examples are fictitious or have been anonymized to protect confidentiality, and any resemblance to actual persons or entities is coincidental. These examples do not describe specific clients and do not guarantee any particular outcome. Some content may be created with the assistance of generative AI tools and may contain errors or omissions. While we make reasonable efforts to ensure the accuracy of the information presented, Note Servicing Center, Inc. makes no warranties or representations regarding the completeness, accuracy, or current applicability of any content. We disclaim all liability for actions taken or not taken in reliance on this article.
