Investing with Retirement Funds

Many investors do not realize that retirement funds can be used for any number of investments. By rolling over a retirement account into a "self-directed IRA", an investor can place their monies into lucrative investments of their choosing. One such choice is a private note. Following, you will find the process of how retirement funds can be used to invest. Mid Pac Funding is happy to help or advise with any aspect of this process.

Before proceeding with any plan involving your retirement funds, we highly recommend that you consult your accountant to discuss any possible tax consequences of converting funds into a self-directed IRA. 

The steps for investing are as follows:

• First, you must find a company that will allow you to rollover your retirement funds into a "self-directed IRA". We recommend Pensco (www.pensco.com). Open an account with the company of your choice (Note: Some companies have restrictions about the types of investments you may roll funds into.  Make sure your company allows you to invest in private notes)
• Determine the amount that you wish to invest in private notes.
• Roll over this amount into a self directed IRA.  These funds can come from any number of retirement accounts including Traditional IRAs, ROTH IRAs, Coverdell IRAs, SEP Iras, 401K, Keogh plans, etc.
• As outlined in The Loan Process section, you will then select the private mortgage/note in which your self directed IRA will invest.
• Complete the agreement to fund the loan with Mid Pac Funding showing that the IRA will be the legal custodian for the mortgage/note.
• Complete the “Buy Direction Letter for Real Estate” (or similar form as supplied by your IRA company).
• Title/Escrow company contacts the plan administrator.
• All documents for the transaction are reviewed and signed.
• Administrator of the IRA signs the Buy Direction letter (or equivalent form).
• Administrator funds the purchase of the mortgage/note.
• Any fees incurred from the close of escrow are charged against the note.
• Investor’s self-directed IRA owns the private mortgage/note.
• During the period under which the investor holds the note, all interest earned, and any fees charged by by the Administrator are collected and paid for by the IRA.
• When the mortgage/note comes due, the investor completes a Sell Direction Letter (or equivalent form) and sends it to the administrator.
• The borrower sends a deposit to escrow and the release of mortgage to the IRA Administrator.
• Administrator works with the selected Title/Escrow involved with the close.
• Escrow/Title wires funds to your Administrator for the benefit of the your IRA.
• Your IRA now has all cash net of costs (principal and interest less administrator’s fees).

Again, feel free to contact Mid Pac Funding if you have any questions about this process.