Invest Your Retirement Funds in Real Estate —
Without a Personal Guarantee
Non-recourse loans allow self-directed IRAs and 401(k)s to leverage real estate investments. If the loan defaults, the lender's only recourse is the property — not your personal assets or retirement account.
Real estate has long been one of the most powerful ways to build wealth. With a self-directed IRA or Solo 401(k), you can put retirement funds to work in real property — and use leverage to do it.
But there's a catch: IRS rules prohibit your IRA from borrowing money with a personal guarantee. Any financing used within a self-directed retirement account must be non-recourse. The lender can only look to the property to recover their investment in the event of a default. Your other personal assets — and the rest of your retirement account — remain protected.
South County Capital provides non-recourse hard money loans for self-directed retirement accounts investing in California real estate.
How Non-Recourse Loans Work
In a standard (recourse) loan, if you default, the lender can pursue your personal assets beyond the collateral property — bank accounts, other real estate, wages, and so on.
In a non-recourse loan, the lender's only remedy is the collateral property. Period. If the loan defaults and foreclosure doesn't fully cover the balance, the lender absorbs the loss. They cannot pursue the borrower personally.
This structure is required for IRA and 401(k) real estate lending. It also means lenders — including South County Capital — underwrite non-recourse loans more conservatively, typically at lower loan-to-value ratios and with more attention to the property's income potential and exit viability.
Who Uses Non-Recourse Loans
Self-Directed IRA Investors Individuals using a self-directed IRA (SDIRA) to purchase investment real estate with leverage. The IRA is the borrower — not the individual — and the loan must be non-recourse.
Solo 401(k) Investors Business owners with a Solo 401(k) can use non-recourse financing to leverage real estate held within the plan.
Investors Seeking Entity-Level Protection Some investors — particularly those holding real estate in LLCs — prefer non-recourse structures that limit liability to the asset itself, regardless of retirement account involvement.
Key Considerations
UDFI (Unrelated Debt-Financed Income) When a self-directed IRA uses debt to purchase real estate, a portion of the income generated by that property may be subject to Unrelated Business Income Tax (UBIT) — specifically, the percentage of the asset financed by the loan. Consult with your tax advisor about UDFI before proceeding.
IRA Custodian Requirements Each self-directed IRA custodian has their own documentation requirements for non-recourse loans. South County Capital is experienced working with major SDIRA custodians and can coordinate on the necessary paperwork, vesting language, and escrow requirements.
Conservative LTV Non-recourse loans typically max out at 50–65% LTV. The equity cushion protects both the lender and the integrity of the retirement account.
Property Must Be Investment Property IRS rules prohibit self-dealing — meaning you cannot personally use or benefit from real estate held in your IRA. The property must be a pure investment asset (rental, commercial, fix-and-flip).
Why South County Capital for Non-Recourse Loans
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Direct private lender experienced in IRA and 401(k) real estate financing
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Familiar with major self-directed IRA custodian requirements
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Asset-based underwriting — approval driven by property value and deal quality
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Fast closings, even for complex custodian-held entities
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California DRE Licensed (#01884316)