Making the Most of your IRA

As you may know, there are many different ways to make substantial amounts of cash using your IRA. Two of the most popular and easiest to use are creative lending and profit splits. In fact, using these methods you can even gain income for yourself and for the account without entering into “prohibited transaction” territory. An example of this would be if you had a Roth IRA containing a significant amount of cash. You could lend money in this IRA, with interest, to any worthy business venture you are interested in. Let’s say you chose real estate, for example. You could lend the cost of a property to a real estate company or investor. Once the property is bought and the investor has sold it for a greater sum of money, the amount of the loan will be put back in the IRA. Then, as an added bonus, you and the investor would split the profits from the sale.
Of course, before you embark on any such venture, you need to make sure you’re involved in a valid deal. The loan from the IRA should always be unsecured by property or any other asset. That might sound surprising but, in truth, this is the only thing that allows the IRA to remain safe. If the loan was secured, it would be prohibited for you to receive a benefit from the IRA at this time. With an unsecured loan, however, the IRA isn’t really involved at all. It’s just about a personal deal between two people. This is why the process is referred to as “creative” lending and profit sharing.
You may be wondering, however, if the loan is unsecured, what is keeping you and your IRA safe? Well, the answer to that lies with you. It is up to you to research any venture you are entering into. If you’re working with a company, do lots of research on its history. Find out if the company is well known for holding up their end of the bargain on other deals. If dealing with an individual, either go with someone you know and trust a great deal or who is willing to put something down in writing. An attorney can help you to write a contract in such a way that it does not break any of the prohibited transaction rules. You might have to be a little crafty, but it can end up saving you in the long run.
Of course, this is not the only way to go about using profit splits and creative lending; it’s just one of the simplest. If you have another idea that you think might work, don’t hesitate to talk it over with your lawyer or other financial advisor. Doing so will keep you safe from faulty deals that can end up hurting your IRA and costing you a lot of money in the long run. As long as you act carefully and knowledgeably, everything should go smoothly, and you should make a nice profit.

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