Preferences and Methods for Holding Title with IRA investments:

Examples of More Passive Investment Strategies:

1. Real Estate Investment Companies - IRA LLC positions.

2. Mortgage Bankers LLC Mortgage Pools - IRA LLC position.

3. Land Trust "Foreclosure Rescue" (Off Title - Blind trust)

Active Investment Strategies:

1. Custodial IRA holds Note and / or Title on deed - IRA Sole Owner.

2. Managed Limited Liability Company - IRA as TIC Positions on Deed.

Examples of Investment Strategies:

Self Directed IRA Real Estate Investing in "Single Family Rentals"

Single family homes can be a great IRA investment also, especially when investing in a fast growing area of California with the right demographics. As a second home, or in a vacation local it may also be a strong strategic consideration for retirement real estate investing.

The following is a single family investment approach in the California Central Valley that should deliver a 13.5% return over a 5 year period. The plan will be to hold the property for a rental income, and perhaps resell at some point in the future as needs change and your capital recovery becomes more a requirement than income. The single family real estate investment assumptions used are as follows:

Assumed expenses increase at 3%, and rent increases 3%, vacancy allowance goes to 1 full month per year after first year, and Property Management expense is calculated at 6% per year of rental income, The single family home price is $165,000 with 50% down payment (because of desired lower risk IRA approach). The single family property is only projected to appreciate at 6% per year in value (2003 was +34%).

IRA Real Estate Investing in "Land Trust Foreclosure Rescues"

The funds of a cash investor1 may be utilized in various types of Land Trust transactions. One of the most powerful ways the Land Trust is being used is to assist homeowners who are facing foreclosure, and who have few choices for dealing with their situation.

For those individuals there may seem to be only four options when a homeowner is in foreclosure situation:

• Payoff the past-due payments to the bank and keep the home;
• Refinance the home and payoff the lender;
• Rent the house out and hope they get enough up front to bring the payments current, and that they can get enough per month to continue to cover the payments; or
• Sell the home before it's too late.

However, there is one more option. If the homeowners have decided that their first choice is to stay in the home, and yet are not in a financial position to payoff the past-due payments and are unable to refinance for personal, credit or financial reasons, you may still be able to help them and put a profit in your pocket. It can all happen quickly and legitimately without a new loan or loan assumption. This is a little known option open to those facing foreclosure. The program entails finding a cash investor to become a partner with the homeowner and with Whitecap Properties, Inc. helping to stop a foreclosure). These Land Trust foreclosure rescues are a passive investment for the cash investor and the returns are often great (15-50%). At the same time the term is relatively short (1-3 Yrs.). That makes them very attractive investment choice to the Self Directed IRA investor.

The investor will bring enough cash to reinstate the loan(s), in exchange for a beneficial interest in the trust into which the property will be placed. The property is then put into a specialized revocable inter-vivos trust (land trust). The homeowner keeps his equity in the home. A portion of the trust's beneficial interest is conveyed to the cash investor (instead of selling the real estate). Also a portion of the trust's beneficial interest is conveyed to the Whitecap Properties, Inc. and its affiliates. After a set period of time at the end of the Land Trust, the homeowner will either refinance and is at the "market value" at the time of the refinance or sale (if necessary determined by an appraisal.

If the homeowner continues to live in the house as a tenant, their payments for a year will be discounted to be less than they are paying as an owner. At the end of the Land Trust, the homeowner has first right of refusal to buy the property back. If it is sold the encumbrances against the property are paid off, and this includes the investor beneficiary who will first receive his refundable contribution to the trust plus interest. The homeowners will then receive their beginning equity in the trust. After these payouts, the balance of the equity would then be split among the remaining beneficiaries in accordance with their beneficial interest in the trust. This is a very good option in many situations, and should be explored as early as possible in the foreclosure cycle. As an alternative, the homeowner may choose to allow a third party resident to live in the house and take over the payments and maintenance of the property. In this case, the distribution of proceeds would still be similar to the above.

IRA Investing in Loans & Notes:

The market for RE Notes is created as both banks, brokers, and private parties sell their loan portfolios on the open market to raise cash. Many times lenders would rather have cash than the promise to pay over time. So they often discount the value of these notes to make it more attractive by increasing the yield for the buyer. The individual investor, rather than buying portfolio's for millions of dollars, can buy individual notes in the amounts that you can afford. Notes against secured property are a solid investment offering a range of returns, from modest to truly significant yields. All the benefits of real estates higher rates of return without the property management headaches, and if you need immediate cash you can sell them on the open market.

What is a Promissory Note?

• Purchasers of Real Estate typically borrow from banks or other lending sources.
• What binds the borrower to a loan is the "promise to pay" back the loan over an agreed period at a certain rate of interest.
• The "promise to pay" is a Promissory Note.
• An IRA can invest in a Promissory Note, and receive interest payments (contributions) as the loan is paid.

  
  Originating and Securing a Real Estate Promissory Note:

• If a borrower fails to repay a loan the lender can take ownership of the property through foreclosure.
• The pledge of the property as security is the deed of trust or mortgage.
• If you loan money to an individual or private party you have originated a loan.
• If you buy an existing note you become "holder in due course" usually at a discounted value in the

An Example of IRA Purchasing a Real Estate Promissory Note:

A lender is owed $100,000. He holds a Promissory Note, and as security a First Deed of Trust on a $100,000 property. Assume the lender will earn 8% over a 10 year period, and receive monthly payments of $1,213 per month. If the lender needs his money back sooner than over the 10 year period he can sell the Promissory Note. A lender in this situation invariably accepts less than the owed amount just to raise the cash quickly. If the RE IRA investor were to offer the lender, say $96,000 in exchange for the remaining payments of $1,213 per month the lender would likely accept. Each of the 120 payments would be deposited back into the IRA and the effective interest rate to the IRA would be 8.9% because of the discount.