How to Set Up a Self Directed Real Estate Note IRA

A real estate note is a document that assigns the buyer rights over a real estate property. A real estate note works as a promissory note and can be used as collateral, repayments or promise to pay. They can also be used along with mortgages to help finance the buying of real estate. It can also work for somebody who is buying stocks within a property rather than acquiring the entire property.

Things You'll Need

• Financial advisor
• Real estate agency

Instructions

Set Up a Self Directed Real Estate Note IRA

1. Enlist the help of a real estate agency to find a real estate note that fits your criteria. Some companies employ real estate note brokers, who specialize in this type of transaction and can help you choose the best type of investment for your available funds and goals.

2. Work with your financial advisor to set up the account or invest through an experienced real estate broker. The limitations and regulations regarding buying and selling real estate notes with your self directed IRA are complicated and you may run into a lot of roadblocks if you are working on your own.

3. Understand the limits and benefits of choosing real estate notes over real estate. With notes, you have the option of buying partial property in a variety of places and types. For example, you could own notes in condominiums, mobile homes and vacant land. Or you could choose a single commercial property and instruct your self directed IRA to buy notes from that property only.

4. Consider non-traditional real estate notes if you want to diversify and don't mind the added risk. Deeds of trust and promissory notes, for example, can be found for less than normal prices and can turn out to be a good investment if handled properly. If you are looking for a safer investment, vacant land is usually one of the best options.

5. Look for online quotes to get a better idea of what to expect in term of prices and options. Some companies now allow for online buying, which gives you the option of comparing different notes before making a final decision. Do this only if you completely understand the process, though, as there may be particular provisions behind the transactions.

Tips & Warnings

• When you set up your IRA account, make sure it allows for real estate investment. Not all IRA accounts do, and some types cannot be transformed later into a self directed account in order to buy real estate notes.