I've got some $$ in an IRA which is worth a little less now than when I opened it. I'm thinking of starting a self directed IRA to use this money to buy some ranch land as an investment. I know I can't hunt off it but I can lease it out and make a few bucks plus I'm thinking it'll appreciate over the years. Have any of you tried this and do you have any suggestions on how to go about it? thanks
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You actually cant have any say so in the management of that land. You nor your family or friends can even step foot on the property. You have to hire a third party to manage it and make those decisions.Originally posted by valverdehunter View Post -
I have one and I have all of the say in the management of the land. That land is owned by an LLC that is owned by my 401k that is set up under my business. I am the manager of all of it. You can put all of the time and sweat into it that you want, but all of the income and expenses go into and out of the LLC and the funds cannot be used for personal use unless you take a distribution and pay taxes on the distribution. You cannot take a salary from the LLC unless you pay taxes, etc.
Now, I am way past 59 1/2 so if you are under that age and take any distributions you may have to pay a penalty as well.
You can do this with timber property, rental property, or just investment property. I bought timber property with mine that just happens to be surrounded by the DCNF.
It cost me about $4K to get all of the paperwork set up. Sure glad I did it.Comment
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I have 2 of them, bought investment property with both of them. El Paisano is right about the way you use it. Cost me around 2700 each.Comment
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how do you get around IRS rules of self dealing and indirect benefit?Comment
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Paisano, thanks for the great info! My understanding is I could not put sweat equity into investment property like building deer blinds or even cutting brush. Does that change because of an LLC? I assume I could not hunt on it even if it's an LLC. Another question I have is once I hit 70 (hopefully some day) and I must start taking distributions how does that work if your funds are not liquid and are tied up in ranch land? Thanks again!Comment
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VVhunter,
There are several different plans for self-directed IRA's. Some are managed or basically controlled by a bank or other custodian. Those are probably like someone else mentioned and off limits for use by the owner.
There are rules about self dealing, which are that you can't buy or sell to yourself or to close relations. If you want to convert the place to a residence, live on it, or something such as that, you have to declare it as a distribution and pay taxes on it like income.
I am not sure how that would work about taking distributions after age 70. I plan to have enough liquid to do that a long time before disposing of the land. It is a good question though.
My set up was a little more expensive because I had them set up the 401k plan and paperwork, as well as the LLC.
Give them a call. I did mine years ago and haven't thought too much about the details since.Comment
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This is totally false. I had one on my ranch and had 100% say in how it was managed. PM me if you need contacts to learn more.Originally posted by BrandonA View PostComment
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that is false sir, my uncle does this and has 100% say in everything on the ranchOriginally posted by BrandonA View PostComment
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Paisano, thanks again. I'm going to call your contact tomorrow. Ghost and Rodeo, could you let me know what institution you're using. I'd like to speak with different providers to help with my decision on what to do. Thanks for your help,Comment
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Asset Exchange Stratagies in Cedar Park, outside Austin. I dealt with JeremyComment
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I will PM tomorrow ... I have been told day to day management is off limits. Either something's changed or there is a loop hole.Comment
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Brandon, I don't know that much yet but forming an LLC gives you more flexibility in management. Pernell could you recommend someone for me to contact? Thanks!Comment
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