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How to Invest in Real Estate With Your Self-Directed IRA

Palpitations plague your pulse; your hands are cold and clammy. No, the new intern at your hair salon didn’t just accidentally slice off your bangs exactly one week before your dream wedding in Italy—but the anxiety levels are close.

You are about to become a real estate investor, which for many people, seems like a far-fetched dream, one that is out of reach, by all accounts. Hey, it’s big, and that makes it scary. Most of all, however, would-be land investors grapple with a common mental block: they think they can’t afford it. What they don’t realize is that the opportunity may already be in their hands.

If you have an IRA, you don’t need cash to invest in real estate.

That’s right. Many investors are buying land using their under-performing IRA accounts. It isn’t quite as simple as going through a big company like Fidelity or Morgan Stanley—but it’s close. Since you will own the dirt, in most cases, you’ll need to open a self-directed IRA in order to invest in alternative options. And, to do that, you’ll need a self-directed IRA custodian who can hold the new land as an asset in your account. The process is simple: identify the custodian you would like to use, open a new account, and transfer funds into it. As long as you follow the guidelines, there are no tax consequences or penalties involved in making the switch.

By contrast, there are several seductive benefits to becoming a real estate investor with your self-directed IRA.

A penny saved: When you invest in land with a self-directed IRA, there is zero cash out of your pocket. None! You can invest without spending a single extra dime.

The grass is greener: Odds are you are probably not getting the investment returns that you were used to getting from your traditional IRA back in the early 2000s. You might be looking for alternative ways to invest right about now, and this is a great way to do it.

Tax free (or close): Depending on the type of IRA you have, you can defer or eliminate taxes on the growth of your land investment. Growth in a Roth IRA, for example, will be tax free if you follow the IRS guidelines. Foolproof? Perhaps. Still, you should always consult with your tax advisor or self-directed IRA associate to see if using your IRA account to invest in land is the best option for you. And remember, it rarely hurts to diversify. Many land investors own properties in both cash and in their IRAs, which gives them access to their profits at different times, based on their age and specific needs. The options are there—it’s just a matter of exploring them.

Related: Using Your SDIRA To Invest In Real Estate Crowdfunding

Girls Guide to Real Estate
This guest post was contributed by Girls Guide to Real Estate & edited for clarity


If you want to learn more, take a look at some of the most commonly asked questions we receive about real estate crowdfunding on a daily basis and find out why so many people are crowdfunding real estate projects across the country with Patch of Land.
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One thought on “How to Invest in Real Estate With Your Self-Directed IRA”

  • Mark Padolsky

    Mark Padolsky commented September 11, 2017

    Training as a real estate investor can be a bit tricky and even so expensive as you are spending thousands of dollars on a certain property. Real estate training has been harder to do because of the expensive form of business you as a real estate investor is involved in. This does not mean that it is impossible to train though, as stated in my other articles, there are a lot of different forms of training that do not end up emptying your wallet or leaving you with a huge loss and no lessons learned in the end. The stock market is a form of trading and investing that you may want to practice with

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