How to Use an IRA to Purchase a Land Property

Purchase Property With IRA

By Midland IRA


Are you ready to grab a hold of your portfolio and diversify away from the traditional stock, bond, and mutual fund offerings of Wall Street?  Did you know that you can invest in land throughout the United States, with your IRA?  Individuals today are finding value in tangible assets that they can drive by and visualize, such as undeveloped land. These types of long-term investments, of which you can perform and understand your own due diligence on, can be valuable long-term opportunities inside your retirement plan. If you want to avoid the volatility that comes along with traditional equities and you have a longer investment time table; land can be a great asset for your retirement account.


Can I invest in land with my IRA?


Now you may be wondering how you can invest in land with your IRA. You are not alone, most people are not aware of all the possibilities in which they can invest their IRA. Very few investors have ever heard of a Self-Directed IRA (“SDIRA”), which is the vehicle you would use if you wanted to invest in land with your IRA. An SDIRA is not a type of IRA; in fact, all types of IRAs including Traditional, Roth and SEP IRAs, can be self-directed. Self-Directing your IRA simply means you are in control of selecting each and every investment your IRA makes. Many traditional advisory services offer self-direction, allowing the investor to choose from their suite of products, typically stocks, bonds, mutual funds and ETFs. That is not true self-direction. True self-direction is when an investor gains control of their retirement assets, through a custodian, and invests in an alternative investment that is allowed within the IRS tax code. The IRS rules allow for investments in real estate, notes, precious metals and many other unique financial instruments.


Investing in real estate is a passion for many investors, including those who love to invest in raw land. The problem is real estate and land investments typically require a sizeable down payment. With most of us in the rat-race of paying off a mortgage, saving for retirement and maybe even paying for our children’s education, there may not be many funds left over to invest in additional real estate opportunities. That is what makes self-directed IRA’s so special; they allow you, as the investor, to invest in things you are passionate about.


You may be wondering why I am referencing land investments as investments people are passionate about. Believe it or not, no matter how unsexy a vacant piece of land sounds to you, land has the potential to produce a generous cash flow for its owners. Just think if you had the foresight to invest in a plot of land in North Dakota. Twenty years ago, that sounded as interesting as pre-internet tech stocks, but imagine the appreciation your portfolio would have seen!


Purchase a Property With IRA 3


How do I invest in land with my IRA?


What I am getting at is this: if you want to invest in land with your retirement account, you can! The process is simple:


  1. Open a Self-Directed IRA account with a custodian, like Midland IRA
  2. Fund your account with an IRA transfer or rollover
  3. Identify your land investment opportunity
  4. Complete your purchase with assistance from the Midland’s experienced client services team
  5. Monitor your account through Midland IRA’s Investor Portal


Most investors who purchase land with their IRA tend to fund the entire transaction with cash from their IRA. You may also use your IRA as a partial investor and partner with others, including your personal savings, to complete the transaction. Using bank financing for IRA real estate transactions is not very common, however, it is an option as long as the loan is “non-recourse” to the IRA investor.


Once your transaction is complete, your IRA will be the owner of the land. Since the ownership status is in the name of your IRA, the IRS does have some rules around how the property is used, managed and maintained. Remember, this new property is for investment purposes only, so all income and expenses must flow directly through the IRA. If you rent your land and receive rental income, the income will be deposited into your IRA. Conversely, if you owe taxes on the property, taxes will need to be paid by the IRA. The same goes for insurance, management fees, association dues, maintenance or anything else associated with that piece of land.


If you have any questions, or if you would like to learn more about self-directed IRAs; you can get in touch with one of Midland’s self-directed IRA experts here or contact Matt Almaguer directly at malmaguer@midlandira.com.



About Midland IRA


Midland IRA specializes in self-directed IRAs which allow the investor to hold alternative assets in their IRA account,. Alternative assets include; land, real estate, precious metals, promissory notes, private equity, and more. As an expert Self-Directed IRA Administrator, Midland provides custodial services, recordkeeping and on-going education for their clients. Midland IRA is not a fiduciary. Midland IRA’s role as the administrator of self-directed retirement accounts is non-discretionary and/or administrative in nature.  The Accountholder or his/her authorized representative must direct all investment transactions and choose the investment(s) for the account.  Midland IRA has no responsibility or involvement in selecting or evaluating any investment.  Nothing contained herein shall be construed as investment, legal, tax or financial advice or as a guarantee, endorsement, or certification of any investments.



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Photo Credit: Nazir Amin | flickr




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