IRA Financing - A ‘Double Whammy!’ No comments yet

Here’s a challenge for you, the IRA investor - refinance the rental property you purchased for all cash through your IRA and withdraw enough funds to make a down payment for the purchase of another IRA investment property. The only issue is that the house you need to refinance in order to get the down payment for the purchase is rundown and not in rentable condition.

To his credit the investor set up an LLC with himself as the managing partner so he was able to sign all papers having to do with these two transactions including the purchase contract, loan application and loan documents.  He didn’t have to depend on a 3rd party to do this except the usual signatory required by the trust custodial company. This saved a lot of time when it came to having to close these 2 transactions in 3 days.

The investor hired Lending Resources Group (LRG) to obtain these loans for his IRA investment properties.  Fortunately, LRG has a long standing relationship with the lender that was considering these loans.  They normally would not allow an IRA refinance to be completed until the renovation was finished and in satisfactory condition to be rented. In this case, LRG negotiated with the lender to allow the refinance to occur in order to enable the investor to obtain the funds in the ‘nick of time’ to meet the deadline for the purchase of the other house.

The investor tried to renovate his IRA owned property as best as possible to the lender’s satisfaction. However, he ran out of time to complete the renovation  when it came to being able to comply with the terms of the purchase contract and satisfy the bank simultaneously.  LRG empahsized the investor’s efforts and his completion of most of the work requested by the bank to be done. The bank was also very aware of the investor’s deadline for making the purchase.  LRG suggested that the bank require the investor to escrow enough funds for completion of the renovation to satisfy them and allow the refinance to be consummated.

The net result was the investor met his deadline to perform on the purchase of the other property, because all the dominoes fell into place with no time to spare. The lender sent the loan documents to the title company in time to be signed, the escrow officer at the title company made this closing a priority above all other transactions and the lender agreed to minimize the amount to be escrowed until the renovations could be completed.  LRG coordinated communicatons with the title company and the lender to make sure that this transaction was a top priority and funds were wired on time to fund both loans.  The refinance and the purchase were completed on the very last day possible to meet the deadline required by the seller of the subject purchase. Lending Resources Group would like to thank the lender, the Cascade Title Company and the investor for helping make these transactions become a reality.

The Word ‘The’ in the Loan Papers No comments yet

Lending Resources recently helped an IRA investor obtain non-recourse financing for the purchase of a bank owned single family residence. There were many delays in trying to close this transaction.  Some of those delays were the result of the bank dragging its feet on completing the paperwork or following through on the required approvals.  Other delays were due to the usual last minute details of obtaining insurance for example. However, when it came to signing the actual loan papers, some of the parties involved in this transaction thought that the title to the property was not written correctly.

Title to property bought with IRA funds is usually written in the name of the IRA custodian company for the benefit of (fbo) the IRA investor (their name).  In this case, the custodian’s name was titled with the word ‘The’ and then their full name - in this case Pensco Trust Co.  The IRA holder didn’t sign the papers when he received them, because he was told by one of his advisors that the title was incorrect due to the word ‘The’ in the title.  In addition, he thought his IRA’s designated number was supposed to be on the title which also caused him to question the validity of the paperwork.

Lending Resources sought to answer these questions once and for all. As it turned out the word ‘The’ was in the original corporate paperwork given to the lender’s legal department when the custodian originally filed its official name with that bank.  Therefore, the bank would only use the name of the custodian on the loan papers as it was originally submitted to them. Further, to protect the IRA investor’s right to privacy, the bank never puts the IRA designated number in the title of the loan papers.

As a result of these questions regarding the way the title was written in the loan papers, the signing of the loan documents was delayed. Fortunately, Pensco confirmed tha accuracy of the language in the paperwork and insured the papers were done correctly so there would be no repercussions any time in the future.  We obtained the borrower’s signature as well as Pensco’s, returned the documents to the title company and, ultimately, to the bank for the loan to be funded. It was a good lesson for all parties concerned and also helped to confirm that the lender had written the loan papers correctly.  The loan funded in time to satisfy the bank’s required timeline.