ByOriginate Report Staff See the Investment Potential of IRAs

See the Investment Potential of IRAs

By Clay Malcolm, Advanta IRA

Most people in the US are unaware that tax-advantaged accounts, like Traditional or Roth IRAs or old 401(k) s, can invest in “alternative” assets such as private loans. However, the IRS actually does allow “self-directed” accounts to invest in Private Lending investments, real estate, private placements, gold, and much more. For private lenders, this knowledge can create a new and very large source of capital. self-direction offers. The most wellknown bank and brokerage house retirement plan custodians restrict IRA holdings to assets they sell, which are typically stocks, bonds, and mutual funds.

The self-directed IRA custodians that

handle alternative assets give individuals the ability to control their retirement account investment choices

in a way that can mitigate (and possibly avoid altogether) the highs and lows of the stock market. Individuals do not have to take money from their retirement plans to invest in alternatives. The assets are purchased by the IRA, titled in the name of the IRA, and thereby owned by the IRA. Investments such as private notes provide tax-advantaged growth that can exceed the ROI of typical stocks, bonds, or mutual funds.

Investing in Private Notes with a Self-Directed IRA

Self-directed plans can invest in tangible assets like real estate, as well as private notes that hold property as collateral. If property is used as collateral to back a note and the note goes into default, an IRA has the ability to take possession of the property. The IRA can rent or even sell the property to recoup the balance owed on the note. In the event of the sale of property, capital gains fall under

the tax-sheltered status of the IRA. Depending on the type of plan—these gains are tax deferred (in a traditional IRA) or tax free (in a Roth IRA). That said, collateral is not required by the IRS, but is an oft preferred feature for IRA investors. The fact is, the IRA investor can participate in numerous lending options.

An IRA is a separate legal and financial entity from an individual’s personal money, but the individual controls the IRA’s investment activ

ity. It is, therefore, helpful to recognize that an individual investor may have two (or more) sources of capital to invest: their personal funds and their IRA funds. When speaking to a potential investor, a lender who offers an investment opportunity is addressing one person but two investors—the person and the IRA. Originating or buying existing notes – whole or fractional Selling Notes - whole or fractional Investing in a debt-based fund The IRA owner is responsible for performing all due diligence including but not limited to vetting the borrower or existing note. The IRA owner also sets the terms of the loan and can deny funding to anyone as she/he deems necessary.

There are two key elements for an IRA to successfully engage in private lending investment strategies. First, the IRA holder must have their account’s funds with a custodian that

handles private notes and/or funds. Moving funds to such a custodian can be accomplished without tax or penalty to the account. Second, because an IRA is a legal and financial entity, and because it is the entity making the investment, all investment documents need to use the name of the

IRA, not the name of the IRA holder.

Let’s focus on two popular examples: 1. An IRA as a Note holder

These transactions involve an IRA

holding a note (originated by the IRA holder or purchased by the IRA holder after origination) for a loan made to an individual, a company, or other entity. The borrower may have desired a mortgage loan, a bridge loan, construction loan, or cash for any number of other needs. The IRA grows by receiving the principle and interest payments.

2. An IRA as an investor in a Fund or Company

This private lending investment is characterized by the pooling of money from different sources under the umbrella of one fund/entity that extends loans to others. Here, the IRA is typically more passive, as all lending decisions are made by fund managers. The IRA is simply an investor in the fund or entity. Income earned on these investments is disbursed by the fund/entity and gets deposited into the IRA.

Keep IRAs in mind

The Private Lending industry is a key part of our economic landscape. It allocates capital in a way that most large lending institutions don’t or can’t. The entrepreneurial spirit endemic to Private Lending professionals is similar to the mindset of self-directed IRA investors. Knowing the ability of IRAs to invest in private lending may provide a “winwin-win”. The Private Lender gets a source of capital, the borrower gets their loan, and an IRA holder grows their retirement savings.

ABOUT THE AUTHOR: Clay Malcolm has been in the self-directed IRA and 401(k) industry since 2011, both as an educator and investor. He combines his 20+ years of education experience and his expertise in self-directed account strategies to educate clients, CPAs, CFPs, and real estate professionals throughout the county on the benefits of self-direction. Clay has served on the American Bankers Association IRA steering committee and received his Bachelor of Science degree in Communications from Northwestern University. CONTACT: cmalcolm@advantaira.com | www.advantaira.com

ABS Appoints Jasen Portero as Chief Operations Officer

LONG BEACH, Calif., May 5, 2020 - Applied Business Software, Inc., (“ABS”), leader in loan servicing and origination software in the private lending space, announced today that Jasen Portero, its current Vice President of Development for the last 12 years, has been appointed Chief Operations Officer.

As a Full Stack Developer, Jasen oversees the Development Department, manages all online services, and spearheads all new projects. As VP of Development he has created a multitude of Front-End Service capabilities: iPad app, electronic signature, online loan application and borrower portal, text notifications, loan geo-mapping, API, and the first fully browser based version of The Loan Office® servicing software. As a Chief Operations Officer he will be extending the online services and will oversee development of both products, The Mortgage Office® and the Loan Office®. Prior to joining ABS, Jasen spent 18 years working for Universal Music Group, WellPoint, Warner Bros., and Evite where he took part in developing some of the technology people around the world have come to use and love.

“I am honored and humbled to take on this new role and take ABS to a new level. Our software is a testament to hard work, excellence in coding, and continuous innovation. ABS as a trusted brand is experiencing incredible growth, and I am excited to be a part of it and take the company to the next phase.”, said Jasen Portero.

“Since joining in 2008, Jasen has been instrumental in our growth. He is an excellent addition to our senior management team and will play a critical role in ABS’ future product development strategy. His proven track record and ability to build a winning team are a great combination for what lies ahead”, said Carlos Nodarse, ABS’ CEO.

About Applied Business Software

Applied Business Software is a market leader and global provider of software systems and solutions to the lending industry. ABS offers a complete suite of software products designed from the ground up to specifically address the needs of those who originate and service loans. All our products are consistently rated superior in design, system interface, expandability, and ease of use. ABS is based in Long Beach, California. For additional information about ABS’s products and services, visit https://themortgageoffice.com or call (800) 833-3343.

Elizabeth Morales, Chief Marketing Officer https://themortgageoffice.com | (800) 833-3343 | elizabeth@absnetwork.com

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