Difficult economic times have spurred non-traditional methods to save for retirement, and many people are using a self-directed IRA to purchase non-traded assets like land and real estate.
A self-directed IRA is the lesser known of IRA options and requires account owners to make active real estate investments or other types of investments on behalf of the plan. To open one, an owner must hire a trustee or custodian to hold the IRA assets and be responsible for administering the account and filing required documents with the IRS.
Similar to other IRA accounts, owners can invest in stocks, bonds and mutual funds, but they can also invest in things that investment houses like Charles Schwabb, Fidelity and Vanguard don’t offer, like small businesses, boat slips, storage units, parking lots, land and homes.
Investors may still be leery of investing in land for sale but it can be a good long-term investment and generate higher returns than the stock market.
Investing in real-estate also provides a lot of options. Owning real estate can be very rewarding, especially for people who are investing in what they know. But the process of using a self-directed IRA to jump into investing in real estate requires preparation and caution. The move can make sense in certain circumstances, but only when the investor fully understands both the positives and negatives and the requirements involved.
Interested investors should seek legal advice, as well as input from an accountant and real estate agent for a well-rounded picture. They should also be familiar with the rules for the type of IRA they’re using. Whether it is a Simple IRA, Roth or Traditional IRA, SEP or Solo 401(k), contribution limits still apply, and there are penalties for early withdrawals.
For a no hassle consultation regarding purchasing land through a self-directed IRA and to learn if this land purchase method can work for you contact a member of our 9 Core Realty team at (239) 333-2221.