About Author

Lou Jewell is an Accredited Land Consultant and the author of An Insider's Guide to Land Investment. He is the Broker of Dan River Real Estate, Inc. in North Carolina and is an RLI Land 101 Instructor. He served as the President North Carolina RLI Chapter 33 in 2003 and the NCRCA Board of Governors in 2008.

5 Comments

  1. I guess I would be considered in the authors 3% of Financial Advisors who recommend land as an investment. Iam a Certified Financial Planner who loves the outdoors, owns timber property myself along with stocks and bonds, and also advises clients to invest in land or timber property as part of a diversified portfolio. Contrary to the article I don’t believe that it should not be the only asset class people should have because of the lack of liquidity, especially for people who need a consistent monthly income during their retirement. Investing in Timber Property within Self Directed IRA’s can be beneficial for many reasons the article noted. However the article fails to mention to the outdoor enthusiasts the fact that the property cannot be made for personal usage or for future personal usage. If so this can cause the transaction to be tainted and serious tax ramifications generated. In addition to the author’s asertion that “My Land Investors have not lost a single dime and will not in the future”, is an assumption that past performance is a guarantee of future results, which we all know today is not true. He also suggests that that you can leverage your IRA account by only putting down 15%. This is also false as the payments made toward interest if not made within the IRA would be prohibited contributions to the IRA if the interest paid was beyond normal IRA contribution limits, thus causing more tax penalties. The author, as many of them do has an axe to grind, perhaps its against his own failures in stocks or bonds, or the fact that he maybe in the land or timber business himself. Regardless the facts are that timber property, fixed income, equities, non traded public realestate, managed futures, gold, Treasury Bonds, and CD’s, all represent asset classes that have historical ranges of returns and all should be part of a diversified portfolio. Before 2008 Stocks as definded by the S&P500 have annualized about 10.5% for the last 50 years, compared to timber property at 7.2%. Timber Property has its place in larger portfolios that don’t have the need for a liquidity within the next 10 years, it should be an asset class, but could also could be represented by several publicly traded timber land companies like ST. Joe (JOE) or Plum Creek Timber if you dont’ have the knowledge or money to go by a tract of property yoursely you could consider investing in an EFT or Publicly traded company who stock is trading at 20 year lows.

  2. Our company specializes in land acquisition primarily in Southern California. Although I do agree that land and real estate in general is a great investment it like everything else should only be a portion of your portfolio. I also agree with the article in that ”most” financial planners will steer you away from land investments especially when their commission is eliminated. Marcus seems to be one of the more educated, ethical and savvy financial planners out there and therefore he is not totally adverse to land investment. If purchased properly land can provide extremely large profits with minimal losses. The main issue to remember is the illiquidity of land which investors have to prepare for especially in a down market. Our firm has done quite well with our land investments but that can be attribute to a lot of research and preparation for potential down swings in the market like we see now. I strongly encourage using a portion of your IRA for real estate investment, but definitely not all of it. Again just remember the simplest saying when investing, diversify.

  3. Richard Dale-Mesaros on

    Great insights above!

    We buy and sell a lot of houses in NH, but also do land development and buy/sell distressed land…. much of what has been said about IRA’s/land above is pertaining to a long-term investment. I just wanted to convey to everyone that you CAN make quicker gains with land (3-12 month turnaround), through buying distressed land at deep discounts or adding value such as subdividing. We’ve been able to sell lots quickly with guerilla marketing (no realtors) and offering affordable build-to-suit houses on individual lots.

    The self-directed IRA’s have great relevance to what we do because we’re happy to pay 13% interest and most of our private lenders do so through their IRA’s, TAX FREE; beats the heck out of a CD earning 2.5% that GETS TAXED!A couple of the self directed IRA companies we’ve worked with have been Equity Trust and Pensco Trust… both are excellent. It’s well worth your while doing some more digging on this subject!

    Happy investing.

    Richard :)

  4. I have a self directed IRA account which I have used to purchase real estate, and it is not as simple as it seems. One little mistake and your entire IRA could be disqualified. There are many complex rules you have to follow. And of course, when you hold land in your portfolio, the value may not go up, (mine went down considerably) and in the meantime you do have taxes, custodial fees, and potentially other fees (i.e. HOA fees if it’s a lot in a resort area or development). It is really important to use a custodian that knows what they are doing. I recommend Pensco Trust as one that is knowledgeable and will make sure your IRA is properly set up. And yes, it is not easy at all to borrow against an IRA since any loan has to be non recourse loan against your IRA assets only (or IRA can be DQ’d if you try to use your own assets) and hardly any bank will do a non recourse loan these days. So figure that any property you buy will be an all cash purchase and this can quickly suck up all your IRA funds. Also, all expenses for the property have to come out of the IRA, so you need to keep about $10k at least sitting in there getting no return just to pay property expenses that might come up. You cannot mix any of your own funds with the IRA funds to buy a bigger property, so unless you have an IRA of at least $75k or more it may not make a lot of sense to convert it to a self directed IRA. Lots of pitfalls – take it from one who knows first hand. Doesn’t mean you shouldn’t do it but it’s not for the faint of heart or those who think they can get away with bending the rules. IRS looks at these very carefully.

Leave A Reply