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To lend money with your SDIRA, you will issue a secured or unsecured promissory note, mortgage or deed of trust, we we can help you draft.  In order to complete the loan investment from your SDIRA, you will draft the promissory note, and the borrower will sign it, along with any related loan documents. The loan may be unsecured or secured by real estate or other assets.

It’s important to know that SDIRA lending gives you the ability to lend to others while keeping all tax benefits associated with IRA accounts. The IRA can receive principal and interest, and as the SDIRA holder, you choose the borrower, principal amount, interest rate, length of the term, payment frequency, and amount. But it’s important to also remember that your IRA is the lender, not you, the SDIRA holder. This means that all income goes back into the SDIRA. All SDIRA loan documents must be in the name of the SDIRA, not your personal name.

As with any type of investment, it’s important to perform thorough due diligence. Here are some key questions to ask: 

• Who is the person, people, or company looking for a loan?
• What is the security? If it is a business, is there a proven track record?
• Are there any financials that can be reviewed before making a loan?
• What are the terms — how much money is needed, for what time period, and when can the SDIRA expect to be repaid?
• What happens in the event of a default? If the loan is secured by real estate, it is the promissory note and mortgage that secures the loan. If a default does occur, you would be able to foreclose and take the property back, which can be done in a SDIRA.