Anyone have any experience in purchasing land in a self directed 401k? I've been doing some research and would like to hear of anyone that has gone through the process

Interested.

I have no experience with it, but I used to work in retirement plans.
The annual filings require assets to be valued; this may require an annual appraisal.

401k or self-directed IRA? Wife and I both use Equity Trust for our self-directed IRAs. Have purchased minerals, invested in private equity, purchased office buildings, etc. It's pretty easy once you get the account set-up. Never had to supply a 3rd party appraisal/valuation, just supply our own numbers to the custodian.

I was originally thinking 401k, but after a little more research it looks like it may need to be a self-directed IRA as the 401k route seems to only be for self employed single participants

Again, not an expert, but I'm pretty sure the rule is that you cant individually benefit from the land held by the IRA, i.e. you can't hunt on it, or live on it, etc...

Eminus6 said:

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Bitter Old Man said:

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Again, not an expert, but I'm pretty sure the rule is that you cant individually benefit from the land held by the IRA, i.e. you can't hunt on it, or live on it, etc...

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What if you leased it to your buddies and hunted with them as a guest?

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Well, you're dancing with tax fraud there. I'm not a lawyer, so I have no idea the implications (if any) of that.

tx1c said:

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I have no experience with it, but I used to work in retirement plans.
The annual filings require assets to be valued; this may require an annual appraisal.

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My dad's friend has his rental properties set up through his IRA. From an annual valuation perspective, he has used Zillow for the past several years and has not had any issue with his filings. I think that was recommended by his CPA.

Bitter Old Man said:

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Eminus6 said:

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Bitter Old Man said:

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Again, not an expert, but I'm pretty sure the rule is that you cant individually benefit from the land held by the IRA, i.e. you can't hunt on it, or live on it, etc...

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What if you leased it to your buddies and hunted with them as a guest?

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Well, you're dancing with tax fraud there. I'm not a lawyer, so I have no idea the implications (if any) of that.

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That's ok, i was just asking for a friend. Interesting thought though, did not realize that you could purchase those types of assets with an IRA.

That's my understanding as well (that you cant individually benefit from the holding). Even to the extent taxes and any maintenance costs or improvements have to go through the 401k/IRA.

But I also understand that you can take a "distribution" once you reach retirement age to begin using the property. Similar to a cash distribution in a normal 401k/IRA account

From everything I've read it seems to be a good way to purchase a future retirement property/land using pre-tax dollars. Not sure what the taxes would look like come "distribution" time. I assume you would use a Zillow type evaluation and pay taxes on that amount

Personally, I like having real estate in a taxable account. It helps offset income. You can roll gains into the next property, and at death, wipe away all gains.

I've got several clients that have purchased recreational properties numerous times through their self directed IRA. They have hunted them and been doing this for years and are routinely trading up every 3-5 years for 15+ years now. The transaction(s) seem similar to a 1031 exchange when they buy/sell. Couple of the properties have homes on them they use/have used---not as primary residence.

Can you use SDIRA as a downpayment and take a mortgage loan on the remaining balance?

I have a 401(k) trust and love it. There's an advantage over IRAs that comes in real handy with real estate: you can use leverage without the tax hits that occur in an IRA. UBIT or somesuch (I'm not an accountant).

The rules of self-dealing are pretty clear -- you can't do 401k/IRA business in any way with yourself, parents, siblings, or children. But your leasing to buddies idea is creative

Harkrider 93 said:

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Personally, I like having real estate in a taxable account. It helps offset income. You can roll gains into the next property, and at death, wipe away all gains.

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Biden wants to change this.

You need to confirm this but my understanding would be no. In the deals I've seen the SDIRA has to have complete ownership of asset--that's the way I see it. Not a tax nor investment professional!