Land Investing in an IRA
Here's what you need to know about buying land in your IRA.
Why do people invest in land in their retirement acount?
Investing a self-directed IRA into real estate grows retirement income by achieving both value appreciation and potential rental income, within a tax-advantaged account. Self-directed IRAs are an excellent source of alternative funds when considering investing in real estate. Land has been a preferred investment as historically it provides better stability than many other investment classes and has low maintenance costs
Looking for the keys to understanding how it all works?
While you will likely have some questions that relate to your particular situation, understanding these 4 key principles will save you a lot of questions down the road.
You can partner with yourself
You can own 100% of a land purchase in your retirement account.
But what if you don't have the funds in that account OR what if you just don't want to use it all?
You can split ownership with yourself using taxable funds or even with another investor.
We're here to help you access your own money
Midland is not a lender, and due to IRS restrictions, loans for land purchases within an IRA are not typical. However, we may be able to help you access money you already have.
What we do is help investors use their retirement accounts to buy what are called alternative investments, and land is a great example of an alternative asset investors find interesting.
Profits and expenses you generate with the land must be paid to and from the IRA.
Think of the IRA account as a separate person. That person earns the income generated by the investment and is also liable for any expenses related to it.
We handle this at Midland by giving you access to bill-paying tools as well as a way to collect income through our platforms. We'll mail the checks from your account, you just have to tell us who to pay or how to deposit funds.
Why Work with Midland?
Midland Trust has been serving the needs of real estate investors since 1994 by offering self-directed retirement accounts and 1031 exchanges. We thoughtfully weave technology and personal service together to provide a streamlined process to unlock the full capabilities of your retirement plan.
Call us Nationwide at (239) 333-1032 or visit midlandtrust.com
QUESTIONS WE GET ASKED
What types of accounts can I use?
Midland can help anyone with an IRA or old employer plan such as a 401(k), 403(b) and 457 plan. 401(k)s with a current employer are not typically able to move into an IRA.
Can I build on the land?
The account holder can decide to improve the land but all expenses related to the IRA's ownership must be paid by the account. These expenses include property taxes, HOA dues, and construction costs. The account holder cannot pay for expenses related to their IRA with out of pocket cash.
Can I live on or use the land?
The IRA holder and his/her family cannot use the land owned by the IRA. The land must be for investment purposes only.
Can I sell the land?
Yes. The IRA can sell the land at any time to any time to any non-disqualified party (you cannot sell it to yourself). All sale proceeds flow directly into the IRA without any taxation.
Can I sell the land to myself when I want to use it?
IRS rules won't allow you to buy property from your own IRA. If you decide that you wish to remove the property from the account it requires a distribution. Like with other retirement plan distributions, this transaction may be subject to taxation and a penalty if the account owner is under 59.5 years of age.
Who is listed on the deed?
The IRA will be the real estate owner and, therefore, is the entity listed on the deed. The IRA is required to pay any expenses related to the property and acquires any proceeds generated from the investment.
Can I sell the mineral rights to my land? Can my land be used for an agriculture preservation program?
Yes. However, as the landowner, your IRA would be paid directly for the proceeds for such transactions. Selling mineral rights or agriculture preservation is a tax-deferred transaction and is considered a dividend of the investment.