Using Their IRAs to Make Home Loans

From the Walleye: Using Their IRAs to Make Home Loans

In the midst of the mortgage meltdown, some lenders are actually rooting for foreclosures: investors who make mortgage loans with their IRAs.

Through a little-known tool known as a self-directed individual retirement account, individuals can pursue a wide variety of investments, from real estate to businesses. Now, at least several thousand people are trying to goose their retirement savings by using self-directed IRAs to invest in mortgages, according to companies that promote the strategy.

The rise of hard-money lending has begun. This is the first MSM hit on the issue I've seen, but I've come across people touting these type of schemes in more grassroots ways starting a few months ago. I expect to see more.

The pitch goes like this: Got some spare cash? Sick of settling for a measly 4% and change guaranteed return? Why not try your hand at lending money to people who need it & get 10% returns - guaranteed by that most solid of assets: real estate!

How can you lose?

(btw - I guess what makes it newsworthy to the WSJ is that these innovative folks are tapping their IRAs. I find it strange how blithe everyone - WSJ & the investors they interview - is about the foreclosure process. Sounds pretty easy: 1. borrower doesn't pay. 2. foreclose 3. own property 4. sell property. Okay - who can spot a step there where the average truck-stop manager might run into some trouble?)