Why Promissory Notes Are Becoming More Popular With Investors
For self-directed investors, promissory notes provide an opportunity for a dependable cash flow without the fluctuating returns of stock investments, which makes them an attractive and popular investment strategy. But what does it mean to hold promissory notes for self-directed investors and why are they such an attractive option? Read on to find out, then contact the team at iPlanGroup to learn more about promissory notes.
What is a Promissory Note?
A promissory note is an investment option that allows a lender to loan a borrower a sum of money. This legally binding contract includes repayment terms as well as default terms. The terms exist to protect both parties interests and may be upheld in a court of law.
While promissory notes can be used to pay for different types of purchases, they are most often used for mortgage notes and trust deeds, which makes them an attractive investment option for self-directed IRA owners. Offering an opportunity for portfolio diversification, promissory notes offer a dependability that traditional investment options do not. Instead of relying on market fluctuations, promissory notes offer a predetermined interest rate and monthly payment amount, which means investors can rely on a specific monthly income.
Promissory Note Options for Self-Directed Investors
If investing in promissory notes is an attractive choice for your self-directed IRA, you’ll want to learn more about the different options available to you. There are different means of securing promissory notes that can be held by your iPlanGroup self-directed IRA.
Most self-directed investors will be interested in investing in secured promissory notes, in which the borrower pledges collateral to the lender in the event that they default on the loan. Notes can be secured by real estate or by non-real estate.
Secured by Real Property
If a promissory note is secured by real property, the lender has a lien on the collateral in the event that the borrower cannot repay the loan. If the borrower were to default, the IRA owner would have the option to foreclose.
Secured by Non-Real Estate Collateral
In the event that the promissory note is secured by non-real property, the lender would be entitled to whatever collateral was pledged under the terms of the agreement. This could include machinery or equipment, stocks and bonds, or any other collateral agreed on by the two parties.
Is a Promissory Note Investment Right for You?
Promissory notes are gaining popularity with investors today for many reasons. Recent changes in legislation, insecurity over the financial future, and a generally unstable financial environment have pushed many investors into investment strategies that offer lower risk and more stability. Promissory notes offer a sustainable and reliable cash flow that other investment strategies do not.
If you’re considering investing in promissory notes, talk to a professional at iPlanGroup. We’ll walk you through the process and help you better understand what it means for your self-directed IRA to own promissory notes. Ready to get started? Schedule your free strategy session below.