Investing with Real Estate Notes
How it Works
1. Open and fund your Entrust self-directed IRA.
2. Find an individual or entity interested in borrowing money from your IRA. The loan must be secured by real estate.
3. Complete and submit a Real Estate Note Buy Direction Letter to Entrust to request funds. You must include supporting documents.
The documents required are based on the type of note (Secured Note):
i. Issuing new note or seller carry back note.
ii. Buying an existing note.
If you are partnering your IRA with personal funds, both you and your IRA are the lenders. In this case, you need to add the percentages of ownership interest to title.
For example, The Entrust Group, Inc. FBO John Smith Account #12345, [Percentage of ownership] % undivided interest.
4. When you have submitted the required documents, Entrust will process the investment and remit funds to the borrower or to the entity responsible for closing the transaction. Normal processing takes approximately three business days with funding happening on the fourth business day, unless corrections are required. A special handling fee applies to expedited processing requests.
5. Assignment of Deed of Trust: The Deed of Trust or mortgage is owned by your self-directed IRA.
6. Send all documents related to the promissory notes to The Entrust Group for recordkeeping. Entrust must receive all documents signed by all parties for IRS audit purposes.
Entrust must sign investment documents on behalf of your IRA. You will note “read and approved” with your signature and date each page of the investment documents. If the borrower is an entity, Entrust must see the entity formation documents to verify that the transaction is not prohibited under IRC 4975.
After the investment is completed, all payments made according to the terms of the note must be submitted to Entrust using a Deposit Coupon form.