Using your Self-Directed IRA to Invest in Land and Real Estate


When using a Self-Directed IRA for buying investment land there are a number of ways you can structure the transaction:

  1. Use your Self-Directed IRA funds to make 100% of the investment

If you have enough funds in your Self-Directed IRA to cover the entire land investment purchase, including closing costs, taxes, fees, insurance, you may make the purchase outright using your Self-Directed IRA.  All ongoing expenses relating to the real estate investment must be paid out of your Self-Directed IRA bank account.  In addition, all income or gains relating to your real estate investment must be returned to your Self-Directed IRA bank account.

  1. Partner with Family, Friends, Colleagues

If you don’t have sufficient funds in your Self-Directed IRA to make a real estate purchase outright, your Self-Directed IRA can purchase an interest in the property along with a family member (non-disqualified person – any family member other than a parent, child, spouse, daughter-in-law, son-in–law), friend, or colleague.  The investment would not be made into an entity owned by the IRA owner, but instead would be invested directly into the property.

For example, your Self-Directed IRA could partner with a family member (non disqualified person – any family member other than a parent, child, spouse, daughter-in-law, son-in–law), friend, or colleague to purchase a piece of property for $150,000.  Your Self-Directed IRA could purchase an interest in the property (i.e. 50% for $75,000) and your family member, friend, or colleague could purchase the remaining interest (i.e. 50% for $75,000).

All income or gain from the property would be allocated to the parties in relation to their percentage of ownership in the property.  Likewise, all property expenses must be paid in relation to the parties’ percentage of ownership in the property.  Based on the above example, for a $2,000 property tax bill, the Self-Directed IRA would be responsible for 50% of the bill ($1000) and the family member, friend, or colleague would be responsible for the remaining $1000 (50%).

  1. Borrow Money for your Self-Directed IRA

You may obtain financing through a loan or mortgage to finance a real estate purchase using a Self-Directed IRA.  However, two important points must be considered when selecting this option:

Loan must be non-recourse – A “prohibited transaction” is a transaction that, directly or indirectly involves the loan of money or other extension of credit between a plan and a disqualified person. Normally, when an individual purchases real estate with a mortgage, the traditional loan provides for recourse against the borrower (i.e., personal liability for the mortgage).  However, if the IRA purchases real estate and secures a mortgage for the purchase, the loan must be non-recourse; otherwise there will be a prohibited transaction.  A non-recourse loan only uses the property for collateral.  In the event of default, the lender can collect only the property and cannot go after the IRA itself.

Tax is due on profits from leveraged real estate – Pursuant to Code Section 514, if your Self-Directed IRA uses non-recourse debt financing (i.e., a loan) on a real estate investment, some portion of each item of gross income from the property are subject to Unrelated Business Income Tax (UBTI).  “Debt-financed property” refers to borrowing money to purchase the real estate (i.e., a leveraged asset that is held to produce income).  In such cases, only the income attributable to the financed portion of the property is taxed; gain on the profit from the sale of the leveraged assets is also UDFI (unless the debt is paid off more than 12 months before the property is sold).  There are some important exceptions from UBTI: those exclusions relate to the central importance of investment in real estate – dividends, interest, annuities, royalties, most rentals from real estate, and gains/losses from the sale of real estate. However, rental income generated from real estate that is “debt financed” loses the exclusion, and that portion of the income becomes subject to UBTI.  Thus, if the IRA borrows money to finance the purchase of real estate, the portion of the rental income attributable to that debt will be taxable as UBTI.

For example, if the average acquisition indebtedness is $50 and the average adjusted basis is $100, 50 percent of each item of gross income from the property is included in UBTI.

To learn more about land investment and purchasing land through a Self-Directed IRA, contact a member of the 9 Core Realty Team at (239) 333-2221.


9 Core Realty Featured Lot of the Week- Perfect Fort Myers Dream Home Site

5930 Harborage Dr
This week 9 Core Realty is proud to present you our Featured Lot of the Week located in the exclusive South Fort Myers, The Harborage. One of only a few home sites left, 5930 Harborage Dr is an amazing, oversized lots with over 140 lake frontage panned by sandy beaches. With over $100,000 of improvements, this Featured Lot includes a boat lift and dock made of composite wood that will withstand decades of the harsh South Florida climate.

The Harborage not only offers over 100 acres of spring-fed freshwater lakes for swimming, boating, jet skiing, kayaking, paddle boarding and so much more, but you also get access to the community boat launch with direct access by canal to Gulf of Mexico the perfect perk for buying a Florida home site here. There are tennis courts, playground, basketball court, BBQ area with picnic tables and an air conditioned community gazebo for parties. There is also a storage area for your extra toys like RVs and boats. Most importantly is the 24 hour manned guard at the entrance for your piece of mind.

To learn more about this exciting 9 Core Realty Featured Lot of the Week, contact a member of the 9 Core team at (239) 333-2221.

Southwest Florida home prices outpaced annual national growth in February

9 Core RealtyResale prices of Southwest Florida’s existing single-family homes continued to rise in January, outpacing annual growth nationwide, according to a closely watched market barometer. But the rate of growth is slowing down, signaling a more stable market, analysts said.

Housing prices in Collier, Lee and Charlotte counties grew 8.3 percent year-over-year, according to the S&P/Case-Shiller Home Price Indices. That was the second highest annualized rate of growth in the nation, after the Denver area, where prices grew 8.4 percent.

Nationally, home prices were up 4.5 percent compared to January 2014.

Southwest Florida had seen double-digit annual pricing growth in 2013 and 2014 as the real estate market recovered from the recession. But monthly growth slowed down in the latter part of the year and that trend appears to be continuing into 2015.
Local housing prices grew by .9 percent from January to February, putting Southwest Florida in the middle of the pack of the 20 metro areas surveyed nationwide by Case-Shiller.

That was the same as the rate of growth between December and January. (The numbers have been adjusted to account for seasonal changes in the market).

South Florida’s growth over the last year had been driven in part by low inventory for single-family homes and an influx of foreign cash. If you are an investor looking for the perfect Florida real estate investment or a buyer looking for an ideal home or home site, contact an expert member of the 9 Core Realty team at (239) 333-2221.

Port Charlotte Plot: The 9 Core Realty Featured Lot of the Week

Port Charlotte Land for Sale

This week 9 Core Realty, SWFL’s all access land investment firm, has released a newly listed Featured Lot of the Week. This plot located in picturesque Port Charlotte, FL is a wonderful addition to any investment portfolio or the perfect SWFL home site for your family or retirement dream home. The Featured lot of Port Charlotte Land is located at 2095 Meetze Street, Port Charlotte, Fl 33953 is a steal listed at only $3500.00. Plots of equal comparison in the area are selling for double these prices.

Found along Florida’s welcoming Gulf Coast, Port Charlotte is located about halfway between Sarasota and Fort Myers, perfectly positioned to offer every manner of water activities. It has more than 165 miles of waterways, providing access to Charlotte Harbor and the Gulf of Mexico and many more miles of natural shoreline bordering Charlotte Harbor and the Peace and Myakka rivers. But that’s not all. Seven of the 21 golf courses located in Charlotte County are found in Port Charlotte. Charlotte Sports Park is home to spring training for the Tampa Bay Rays. Tippecanoe Environmental Park offers hiking trails and wildlife viewing through 380 acres of scrub and pine flat-woods.

To learn more about this plot or any of The 9 Core Realty’s large inventories of Cape Coral, North Port and Port Charlotte land lots, contact a member of our qualified team at (239) 333-2221.