New Funding Resources 
Non-Recourse Loans for Real Estate Investors
What Are Non-Recourse Loans?
Non-recourse loans are loans secured by collateral (typically, real estate) that don’t require a personal guarantee by the borrower. In contrast, recourse loans are loans that, in addition to being secured by collateral, also require a personal guarantee from the borrower. In theory, if a borrower fails to pay a mortgage, a lender can not only foreclose on the house but can also go after that borrower’s personal assets. The overwhelming majority of residential mortgages are recourse loans. So are the majority of hard money loans unless, of course, we are talking specifically about non-recourse loans.
The main attraction of non-recourse loans for real estate investors is not whether they require a personal guarantee or not. What really makes a difference is the favorable tax treatment that often comes with them. In Maryland, DC, Virginia, and many other states, non-recourse loans can only be issued if a borrower is investing with their self-directed retirement account. The advantage of using retirement funds to make investments is that all tax on any gains are deferred until the IRA owner takes a distribution.
What are self-directed retirement accounts?
A self-directed retirement account is a tax-advantaged retirement plan that allows individuals to invest in alternative assets beyond traditional stocks and bonds. These accounts offer greater control over investment choices and are ideal for investors seeking to diversify their retirement portfolios with assets such as real estate, private lending, and startups.
If you have a retirement plan with your current employer, the chances are you might not be able to invest with non-recourse loans as employers limit your options to specific investment vehicles. However, your IRAs and your 401(k) plans not affiliated with your current employer can be easily converted into self-directed retirement plans.
Types of Self-Directed Retirement Accounts
- Self-Directed IRA (SDIRA) – Available as a Traditional (tax-deferred) or Roth (tax-free growth) account, an SDIRA allows you to invest in a wide range of assets, including real estate, private businesses, tax liens, and more. The majority of our clients invest with self-directed IRAs.
- Solo 401(k) – Designed for self-employed individuals and business owners, this plan has higher contribution limits ($69,000 in 2024).
What are the advantages of investing with self-directed retirement accounts?
1. Investment Diversification
Unlike traditional IRAs and 401(k)s, which limit investments to stocks, bonds, and mutual funds, self-directed plans allow you to invest in:
- Real estate
- Private lending
- Tax liens
- Precious metals
- Startups and franchises
- Cryptocurrencies
At New Funding Resources, we enable you to invest your self-directed retirement funds in real estate (via our non-recourse loans) and private mortgage notes.
2. Tax Advantages
- Tax-Deferred Growth (Traditional SDIRA & Solo 401(k)) – No taxes on gains, rents, or interest until withdrawal.
- Tax-Free Growth (Roth SDIRA & Roth Solo 401(k)) – All earnings grow tax-free if held until retirement. Otherwise, depending on your current income, that tax can range from 25% to almost 40% of your overall profits. Please consult with your certified public accountant for details.
3. Estate Planning & Asset Protection
- Assets in self-directed plans are typically protected from creditors and lawsuits.
- Roth accounts allow a tax-free wealth transfer to heirs.
Non-recourse loans by New Funding Resources offer leverage to buy and fix real estate.
One of the best aspects of self-directed retirement funds is that you can use leverage. That means that even if your retirement account is not big enough to finance the entire purchase and renovation of your investment property, you can borrow the funds via non-recourse loans.
Non-recourse loans don’t satisfy many universally-accepted underwriting standards, are riskier for the lender and thus are difficult to come by. But we love them and specialize in non-recourse loans and IRA lending. Our managing partner, Kyle Sennott, is a strong advocate of self-directed IRAs and has helped numerous clients accelerate their retirement growth.
To qualify for a non-recourse loan with New Funding Resources, you need to:
- Have a self-directed IRA account with at least $100,000
- Have that account managed by a reputable custodian such as Equity Trust Company
- Have a working knowledge of rules and regulations regarding self-directed IRA investing
- Be aware that you cannot comingle your personal or business funds with your self-directed IRA funds
We only offer short-term non-recourse financing, which means you must sell the investment property financed with your retirement funds once the renovations are complete.
What are the potential risks of investing with your self-directed IRAs?
While Self-Directed IRAs (SDIRAs) offer greater investment flexibility, they also come with some potential pitfalls:
1. Prohibited Transactions & IRS Penalties
- The IRS has strict rules on self-dealing—you cannot buy, sell, or rent property from/to yourself, family members, or businesses you own.
- Violating these rules can cause your entire SDIRA to be disqualified, triggering taxes and penalties.
Example: You purchase a rental property through your SDIRA and personally manage repairs or stay in it for a weekend—this is a prohibited transaction and could result in your SDIRA losing its tax-advantaged status.
2. Lack of Liquidity
- Unlike stocks or bonds, real estate, private loans, and private equity investments are not easily converted into cash.
- If you need funds quickly, you may have to sell assets at a loss or pay penalties for early withdrawals.
3. Higher Fees & Administrative Costs
- SDIRAs require special custodians to manage non-traditional assets, which often charge higher fees than traditional IRA providers.
- Fees may include account setup, annual maintenance, transaction fees, and asset valuation costs.
4. Risk of Fraud & Lack of Oversight 🕵️
- Since SDIRAs invest in private markets, scams and fraudulent investments are more common.
- Unlike traditional IRAs, SDIRA custodians do not verify or endorse investments—it’s your responsibility to conduct due diligence.
Tip: Avoid investments that promise “guaranteed returns” or seem too good to be true.
As premier experts in non-recourse lending in MD, DC, and VA, we will guide you through each step to maximize your returns, minimize your risk, and build a retirement nest egg other can only dream of.
Non-recourse loans require practicing delayed gratification as you can’t draw on your funds until you retire. If you are looking to supplement your current income, traditional fix-and-flip investing is a better way to do so. However, if you are saving for the future and are looking to seriously accelerate those savings, non-recourse loans are bound to awe you.
New Funding Resources has helped hundreds of local investors to build their long-term wealth. Think about it as putting your retirement funds on all-legal and compliant performance-enhancing drugs. If are serious about saving for the future and want to actively manage your investment opportunities, you need to find out more about non-recourse loans.
Still have questions about how non-recourse loans work? Give us a call at 240-436-2340
