“Invest in Debt” by Jim Napier
Review of the Book
Written by Jim Napier in 1994, “Invest in Debt” is an extremely useful and beneficial book. While 1994 may seem like a long time ago, the information contained within it is still valid today. Only a couple of hundred pages, not only is it easy to read but every time you do, you will find something new and helpful that will increase the performance of both your self-directed IRAs and investment portfolio.
The book explains and guides you on how to buy debt instruments and what to do with them. A debt instrument usually comes in the form of a mortgage, deed of trust, real estate contract, installment sale, or any type of contract where party A owes party B money. What Napier is an expert at, is explaining how to buy those same debt instruments at a discount from their face value.
Napier restructures those instruments and buys them at a discount to get the highest possible return on his money. If someone has a current real estate contract or deed of trust with an outstanding balance, then that debt is secured by land and property so that there’s something tangible and physical there that’s worth money. If the note goes unpaid then the property can be sold to satisfy lack of payments.
Buy Debt In A Self Directed IRA
Napier’s approach to securing a discount is to go and make a cash offer for less than the face value of the debt.
To illustrate, let’s say that the face value of the contract is US$150,000, he’ll first determine the deal that he wants to make on his investment by calculating the percentage return that will satisfy his risk concerns, and make a discounted cash offer. Then, of course, it’s up to the seller of the contract to decide if that’s something that they would want to do. If the seller agrees then he or she will take the cash and the contract is modified and transferred over into the name of the person who’s buying the debt instrument. From then on the payments will go to the new owner of the debt instrument and eventually the investor will earn back all of the money that was invested plus a yield. This strategy is something that could be done either personally or within a self-directed IRA.
Because of the long-term nature of debt repayment, where in many cases it will take several years to get all of your money back, this strategy is very effective to use within a self-directed IRA account. Also, with the self-directed IRA, you’re not going to be able to take that money out of the IRA account without penalty, until you are aged 59½. This encourages the long-term holding of this type of asset.
One of the advantages of reading this book is that it makes a good primer for conferences and classes that are offered around the country on the topic of buying debt instruments; notes and paper. Many of these conferences can cost as much as US$500-$700, but by buying this book on Amazon for US$25, you can avoid paying that amount. Often, you get the same information that you would have received at the higher priced conference or class. If interested in saving money, please go to Amazon and look for this amazing book called “Invest in Debt” by Jim Napier.
Please note that before you do any investments, you should always speak with a CPA or tax professional to review the prohibited transaction rules within IRC § 4975, and to see if they apply to your situation. Keep in mind to always make sure to do adequate due diligence before any investment undertaking.
If you have questions concerning this topic, please visit our website at SunwestTrust.com or call here at our office at 1-800-642-7167.
General Book Information
- Name of the book – Invest in Debt
- Name of the author – Jim Napier
- Year of Publication – 1994
- Publisher – Jim Napier Inc
- Price – US$25