There are many advantages to purchasing land with an IRA or other retirement plan. Most people know about the tax benefits associated with IRA investing. However, some investors may not be familiar with some of the more obscure benefits to purchasing land with a self-directed IRA.
Many investors choose alternative assets simply because they’re tired of the volatility of the stock market, and/or they have specific knowledge and experience in an asset market outside of publicly traded securities. A self-directed IRA allows investors to purchase raw land, agricultural land, mineral rights, and real estate. Except for life insurance and collectibles, the IRS allows virtually any asset type to be purchased inside an IRA.
If an investor values keeping their money in their community, then local domestic ownership of land allows them to invest in their values. Foreign investors or large corporations may purchase land and change the feel and future of a community. Keeping the ownership of land in the hands of locals can preserve community character.
On the same token, many investors have a personal agenda when it comes to choosing assets. Investors can enlist their personal expertise and passions to support local or global development. IRAs can invest in assets such as solar energy enterprises or nature conservancy organizations. They can even team up with other investors to purchase land to preserve it privately.
An example is a family of siblings who inherited percentages of a farm from their parents. Some of the siblings could afford to keep the land they inherited and lease it out, while others didn’t have the funds to support the maintenance of their percentage land. The siblings who wanted to keep the land in the family used their IRAs to buy the percentages of farm land that their other siblings couldn’t afford to keep.
It’s important for investors to remember than an IRA is a separate pot of money that can be used to make large purchases if an investor’s personal funds can’t cover the cost. IRAs can team up with an investor’s personal funds, a different investor’s IRA, and/or a different investor’s personal funds to invest in an asset. In terms of purchasing land, there is no limit to the amount of IRAs and/or personal funds that can work together to own a percentage of a plot of land. IRA partnering can also be used in the private lending realm to support local organizations or social or ecological incentives.
Written by Patty McCrystal, Content Editor for New Direction IRA
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