The Basics of Mortgage Notes

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.

Benefits of Rental Properties

Real estate is a tangible investment, which is one of the main reasons it has become a popular choice for IRA accounts. Unlike stocks and bonds, investors can actually visit their properties. Rental properties are a great way to diversify a portfolio and provide the ability to earn measurable income for the investor.

Here are some benefits to investing in a rental property with a self-directed IRA:

  • Income from Renters

The main benefit of rental properties is the direct income from renters. However, this is only true if the property is occupied. With a house, this can be more difficult, because there is only one renter and the property may remain vacant during transitions between renters. Apartment complexes, duplexes and other multifamily properties have more than one renter and therefore generally provide a more balanced income stream.

  • Income from Property Value Growth

Over time, property value traditionally increases, even with no changes made to the property itself. This depends heavily on the location of the rental property as some areas increase or decrease in value more quickly than others.

  • Sweat Equity

When a property is well maintained and upgraded when necessary, it will add additional value. This allows the owner to charge more for rent and sell if for a larger profit later, if they choose. Home improvement projects such as landscaping, repainting, and upgraded appliances can significantly increase the property value and attract potential renters.

  • Property Management

For investors who do not want to personally manage the property, a property manager can be hired to take care of finding and evaluating renters and ongoing maintenance. Many investors find having a property manager relieves the stress and day-to-day activities from the owner.

For investors interested in investing in rental properties with an IRA, contact Mountain West IRA for more information. Real estate is just one of the many investment opportunities available to Mountain West IRA account holders.