By J.P. Dahdah, Founder & CEO of Vantage
Have you considered investing in raw land in a Self-Directed IRA? Many people believe land purchases the domain of real estate developers and don’t give it serious consideration. Land can be a good investment for those who do their due diligence.
You must understand the risks and rewards associated with investing in raw land in a Self-Directed IRA.
Here are some thoughts you might want to consider about land:
- Appreciation. As Mark Twain once said, “Buy land; they’re not making it anymore.” Land can fluctuate in the short run like any other investment, but historically, land has consistently trended up. The law of diminishing returns dictates it.
- Low Overhead. Unlike other real estate IRA investments, land does not have ongoing maintenance issues, insurance needs, or other expenses associated with buildings. And, unlike buildings that depreciate over time, land continues to appreciate in value.
- Tax Advantages. Property tax on land is relatively low because no development has taken place. Undeveloped land does not produce income, so income tax is avoided. Appreciation in land generates tax-deferred IRA growth over time. Capital from land sales can be protected from tax by using the profits available through Self-Directed IRAs for other investments. Talk to your tax advisor to learn more about the tax benefits.
- How to do It. Like any other investment, you need to look at options, weigh the risks and rewards, and have the savings available to fund raw land in a Self-Directed IRA.
The real estate adage, “location, location, location,” certainly applies to land. Look at population growth and migration trends. For example, the massive boomer population, who are all approaching retirement age, expects to seek out warmer climates in areas like the Southwest for a more comfortable lifestyle. Understand development plans and government zoning issues to determine if the raw land opportunity represents a good investment.
A good funding source utilized by a growing number of investors is a Self-Directed IRA. Allocated funds for land purchases available to Self-Directed account holders are not allowed with brokerage IRAs. Find a competent Self-Directed IRA company, like Vantage, specializing in raw land in a Self-Directed IRA to learn more about putting your IRA money to work for you.
Have you considered land as an investment alternative?