Guidant Financial Group Blog

We knew that private lending had increased among our clients during the last couple of years, but even we’ve been surprised by recent stats. By comparing past and present surveys of our self-directed IRA LLC clients, we’ve discovered that loan investments inside IRAs have increased by 131.1% since 2005.

A 2007 Guidant survey indicated that 23.8% of self-directed IRA LLC holders were investing their retirement funds into notes and/or loans, while a 2005 survey indicated that only 10.3% of Guidant clients were directing their investments into notes and/or loans.

Why the increase? Investments in private loans, like foreclosures, have actually benefited from the current credit crisis. Because most traditional loans are either based on a borrower’s home equity (as in HELOCs) or secured by it (as in SBA loans), consumers are having a tough time securing the same levels of financing they once did. With lending institutions wary of providing leverage for purchases of nearly every sort, private lenders are stepping in to fill the void.

Self-directed IRA investors are providing much-needed capital for individuals and businesses through primary home loans, second mortgages, bridge loans, hard money loans and so on. Most of these loans are secured by real property and, even if that property isn’t worth quite what it used to be, it can still provide a level of security superior to stock market investments. Many individuals chose self-directed IRAs in the first place because of the ability to invest in secured property versus securities.

Making this sort of investment can be pretty exciting. And realizing you can profit during an economic downturn can bring you some welcome relief during uncertain times.