Is it really possible for investors to get a 20 to 30% rate of return on their money in a crisis economy? The answer is yes. A vast majority are simply unaware that this rate of return is entirely possible by using a self-directed IRA to invest in mortgage notes (also known as trust deeds in certain states).

Statistics show that only approximately 4% of investors are currently in the know about the self-directed IRA, and many are unfamiliar with mortgage notes as an investment vehicle. However, employing these investing strategies could be the key to increasing the value of your retirement portfolio exponentially.

Self-Directed IRA De-mystified

The self-directed IRA only differentiates from a traditional IRA in the sense that the owner has the freedom to diversify, investing in non-traditional or alternative assets, such as real estate and mortgage notes.
It is relatively simple to convert your IRA account to a self-directed IRA and as long as certain IRS guidelines are observed, it can indeed be the pathway to achieving a desirable above market rate of return. The IRS code permits individuals to invest IRA funds in investment property such as single or multifamily dwellings, apartments, commercial buildings, raw land, vacation rental property, condominiums, mobile homes and more.

Investing in Higher Yield Mortgage Notes

Mortgage notes or trust deeds as secured loans most often provide “real estate property” as collateral. Think about it. In the event that the borrower defaults on the mortgage note, the tangible real estate asset – the property -- including any accrued equity and the borrower’s original down payment, is transferred to your IRA, benefiting you, the self-directed IRA owner/investor.

This risk-reward relationship is in great contrast to stock portfolio devaluation and loss, which leaves virtually nothing but grief in its wake, as many investors have unfortunately experienced in recent years.

However, for clarification, borrower default is not the objective of these secured loans. The “low hanging fruit” is the higher rate of interest that these loans customarily provide, granting investors the benefit of steady returns on a monthly basis, compounding tax-deferred over time, which can indeed produce dramatic results.

You can choose to originate a note or purchase an existing note on the secondary market. These notes are in either the first or subordinate positions and can be purchased through private parties or experienced mortgage brokers.

Most importantly, there are special considerations for mortgage note investing using a self-directed IRA. The IRS does not allow an investment involving disqualified parties, such as a son, daughter, parents, fiduciary or your sole proprietorship. It is therefore recommended that you obtain some first-hand, expert advice before embarking on mortgage note investing with your IRA.

Staying Ahead of the Curve

In this ever-changing market, mortgage notes can indeed be a solid investment opportunity for investors to gain higher yields for their retirement portfolios. Real estate investing using a self-directed IRA is a tried and tested method of growing your portfolio in a tangible and secure manner.

“It is striking that after the longest, strongest bull market in history, the average American built more wealth owning a home than investing in the stock market.” Denver Post, March 14, 2002.

The volatility of the stock market is certainly no secret and although we recently experienced a mortgage crisis in this country, the fact remains that the primary driver of investment wealth still happens to be real estate, our most desirable and tangible asset to date. Historically, the large number of privately held mortgages resulting from the real estate boom of the late 70's and early 80's started the cash flow industry.

According to the American Cash Flow Institute, approximately 50% of the total business activity in the cash flow industry is comprised of the buying and selling of privately held real estate notes. Therefore, to stay ahead of the curve in real estate investing, now is the time to take advantage of the incredible abundance of wealth-building opportunities that offer significant long-term investment potential.

Formula for Successful Investing

In conclusion, investing in mortgage notes using a self-directed IRA is a proven, long-term strategy. You can choose to accept the current market conditions of a weakened investment dollar and return on investment, or to capitalize on well-structured mortgage note opportunities using a self-directed IRA. The steps that you take now in further educating yourself about this valuable investment vehicle will indeed positively impact your retirement future.

Author's Bio: 

Patricia Reynard Hightower is CEO of Bayou Equity (, a mortgage lender in New Orleans, Louisiana. She is also a keynote speaker and educator on Self-Directed IRAs. Contact: 504-875-4018 or email