If you’re looking to expand your IRA-owned real estate portfolio but don’t have enough cash to buy properties outright, non-recourse loans could be the solution. These loans allow your IRA to borrow money without violating IRS rules—so long as you follow specific guidelines. But they work differently from traditional mortgages, and understanding the risks and benefits is key.

What Is a Non-Recourse Loan?

A non-recourse loan is a type of financing where the lender’s only collateral is the property itself. If the loan defaults, the lender can’t go after your personal assets or other IRA funds—just the property. Since IRS rules prohibit personal guarantees on IRA investments, this is one of the few ways an IRA can use leverage.

Lenders take on more risk with these loans, which means they typically require higher down payments (30-40%), charge higher interest rates, and impose stricter approval criteria.

Why Use a Non-Recourse Loan?

A non-recourse loan can help you scale your investments faster by letting your IRA purchase properties without waiting years to save up the full amount. Here’s why many investors use them:

• Expand buying power – Borrowing allows your IRA to buy larger or multiple properties.
• Preserve liquidity – Keeps cash available for expenses or future investments.
• Increase potential returns – Leveraging financing can boost long-term appreciation and cash flow.

That said, leverage can magnify both gains and losses—so smart investing is key.

What Lenders Look For

Not every bank offers non-recourse loans, and those that do set strict requirements. Expect lenders to check:

• Down Payment – Typically 30-40% of the purchase price.
• Cash-Flowing Property – Rental income should cover mortgage payments.
• Loan-to-Value (LTV) Ratio – Most lenders cap it at 60-70%.
• IRA Reserves – Some lenders require reserves for expenses or vacancies.

More details on non-recourse loans from this Investopedia article.

Steps to Secure a Non-Recourse Loan

1. Find an IRA-Friendly Lender – Work with lenders that specialize in non-recourse financing.
2. Set Up a Self-Directed IRA (SDIRA) – Your IRA must be held by a custodian that allows real estate investments.
3. Identify a Rental Property – Lenders want cash-flowing investments, not speculative deals.
4. Apply for the Loan – The lender evaluates the property, expected income, and your IRA’s reserves.
5. Close the Deal – The IRA (or its LLC) purchases the property, and rental income is used to pay off the loan.

A non-recourse loan can be a powerful tool for expanding your IRA’s real estate portfolio, but it’s not a fit for everyone. The key is working with an experienced lender, choosing the right property, and understanding the tax implications.

Before making a move, consult a financial or tax professional who specializes in self-directed IRAs. Used wisely, non-recourse loans can accelerate your retirement wealth—without running afoul of IRS rules.

Contact [email protected] for a list of our preferred nonrecourse loan lenders.