What Are Non-Recourse Loans & Why Should You Care?
Non-recourse loans are the loans that are secured by collateral (typically, real estate) and don’t require a personal guarantee by the borrower. In contrast, recourse loans are the loans that, in addition to being secured by collateral, also need a personal guarantee by a borrower. The overwhelming majority of residential mortgages are recourse loans. If a borrower fails to pay a mortgage, a lender cannot only foreclose on the house but also can go after that borrower’s personal assets.
However, 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 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. Depending on your current income, that tax can range from 25% to almost 40% of your overall profits.
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 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. If you are new to self-directed retirement investing, the rules can be overwhelming. Our experienced partners and underwriters will work with you throughout the process to help you avoid costly mistakes. 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.
How & Where to start investing with non-recourse loans?
To start investing with non-recourse loans with us, you need to own a self-directed IRA or self-directed 401K account. 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 most of your 401(k) plans that are not affiliated with your current employer can be easily converted into self-directed retirement plans.
Still have questions about how non-recourse loans work? Give us a call at 240.436.2340
Looking to invest in the Washington, DC-area real estate market using your self-directed IRA or 401K? 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.