# 8 – Invest Using Your IRA
# 9 – Cash to New Loan
# 10 – Gifting
SO MANY WAYS TO BUY( PART 1) BRUCE KELLOGG
# 8 – Invest Using Your IRA
Now that interest yields have been low for so long, people are moving to invest in real estate using their Individual Retirement Account( IRA). Investments can be made in real property or personal property such as notes, coins, paintings, securities, and so on. Basically, the method is to move your IRA account to a“ custodian” and have them buy, manage, and sell your properties at your direction. Custodians are plentiful on the internet, and they have literature galore. Leverage by borrowing from banks can be used to enhance the return in your IRA. Your custodian can steer you to banks that offer to do this.
# 9 – Cash to New Loan
The most common method of purchasing real estate involves the buyer putting up a cash down payment, then qualifying for a new, longterm“ purchase money” loan from a bank, credit union, or mortgage broker. Sometimes, the seller will make( i. e.,“ carry back”) the loan. Usually an institution will fund the loan and either keep it in their portfolio, or, more often, they will bundle it with others and sell it as a security on Wall Street. This replenishes their lendable funds.
Down payments vary. Commercial loans are usually 20 – 40 % down, depending upon the lender’ s guidelines and risk assessment. Owneroccupied, residential loans can be as low as 0 – 3.5 % with mortgage insurance usually required. 1 – 4 unit investment properties typically require 20 – 25 % cash down, but no mortgage insurance. Lenders’ programs vary widely, including rates and fees, so comparison shopping is recommended.
# 10 – Gifting
Purchasing as described in # 9, above, many times offers the opportunity for the borrower( s) to receive a gift of money toward some, or all, of the required down payment. Acceptable donors include“ a relative”, defined as a spouse, child, or other dependent, or any other individual who is related to the borrower by blood, marriage, adoption, or legal guardianship. A fiancé, fiancée, or domestic partner can also donate.