With the stock market reaching record highs, the prices of publicly traded real estate investment trusts have also soared.  Investors should not worry about having missed the opportunity to profit from the rebound in real estate, however.  There is a better way to profit from the recovering American real estate market without the exposure of buying a property or the risk of overpaying for a real estate investment trust that was trading much lower not that long ago during The Great Recession…and could easily fall again.ROI Self Directed IRA 

Developing a portfolio of private mortgage notes in a retirement account such as a 401(k) or individual retirement account (IRA) will yield high interest rates, an equity position in real estate, and a total return that is tax free.

Private mortgage notes are provided by individuals or groups of investors to borrowers whose needs are not being met by traditional lenders such as banks, credit unions or brokers.  The flexibility of private mortgage notes makes for an ideal investment.

According to Jerry Cohen, President of EquityBuild, a premier private mortgage investment firm, “There are two methods for getting started in private mortgages: Mortgage Pools and Direct Lending.  Mortgage pools are like the mutual funds of private mortgages. Each investor's money is pooled with the other investors participating in the pool and the money is used for private lending.

Cohen, who was just awarded the prestigious “Moving America Forward” honor, furthered that, “Direct lending is typically reserved for seasoned real estate professionals due to the level of expertise that is needed to identify undervalued properties...”

Both mortgage pools and direct lending notes are uniquely suited for investing retirement funds.  Due to the tax free nature of retirement accounts such as a 401k or IRA, each is an ideal holding for investments that generate a robust stream of income.  As mortgage pools and direct lending have the potential to produce market beating interest flows for the holders of the notes, retirement accounts are very attractive for this purpose.

Perhaps the most appealing feature of a mortgage pool or direct lending is the flexibility.  The terms can be structured however the borrower and lender agree works best for both parties.  As a result, the private mortgage lender can also create an equity interest in the property with the lending document, if that is desired.

The property is also better known than those held in the portfolio of a publicly traded real estate trust.  The private mortgage lender can only finance the purchases of those properties that are known well.  That offers downside protection for any adverse events.  But knowing the property and the neighborhood well should mitigate the possibility of this event from transpiring.

Just as there are with real estate investment trusts, there are a variety of ways to invest in properties through private mortgage pools or direct lending.  It can be utilized for houses, apartment buildings, trailer parks, office complexes, etc…   The total returns from these investments are protected from taxes when held in a 401(k) or IRA, making these ideal for retirement planning

by, Jonathan Yates: EquityBuild News Contributor