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Deeds Of Trust and Promissory Notes are the second most common form of investing with a Self-Directed IRA. Most often the loan is to friends, personal acquaintances. Due to the non-liquidity nature of this type of investment, an IRA Deed Of Trust Valuation will be required as part of the overall IRA Valuation before investing.
One of the advantages of investing in a Self-Directed IRA is that if domiciled with the right IRA Custodian, the IRA can invest in Deeds of Trust. The lender loans money to the borrower, who gives up the deed to a property as collateral for the loan. The interest compounds tax-deferred until the maturity of the loan.
The interested parties to a Deed of Trust are the Trustor, which is the borrower. The Trustee, which is an entity that holds "bare or legal" title to the property. The Beneficiary, which is the lender. The actual Deed Of Trust document identifies the original loan amount, interest, payment schedule, and legal description of the property being used as security for the mortgage. Plus the parties to the Deed Of Trust.
The IRS, Dept. of Labor, and most auditors will only accept Valuations computed, and documented with supporting exhibits, from an independent expert. Valuations from the investor, the investment management, and the investment management's accounting firm, are not acceptable to the above agencies.