To diversify their portfolio, investors sometimes need to think outside the box. This means considering alternative investments such as mortgage notes. Investing in mortgage notes allows investors to get involved in the real estate investing world without flipping houses or vetting tenants for rentals.
When an investor uses their self-directed IRA to invest in a mortgage-backed note, the IRA acts like a bank by loaning money to the borrower. The IRA then receives a note and deed of trust. According to the terms of the mortgage, the borrower pays back the principal and/or interest to the IRA each month until the loan is satisfied. Once payments have been completed, the borrower owns the property outright.
The deed of trust provides protection for the investor in the event of default, putting a lien against the property so the mortgage holder can foreclose and take control of the property if necessary. If this happens, the IRA will own the property instead of the mortgage. The investor is then free to do with the property as they see fit.
To invest in a mortgage note, the investor needs to work with a title company or real estate broker. They will help to gather all of the necessary forms for the investor to sign and send to Mountain West IRA. As the custodian, Mountain West IRA will then review the paperwork before approving the investment to make sure everything is in order.
Mortgage notes do not require as much personal involvement as directly owning a piece of real estate, making them a favorable investment to many investors. For those interested in investing in mortgage notes with their self-directed IRA, visit the Mountain West IRA website to learn more.