I appreciate the positive comments on social media about our articles. Last week I wrote about mobile homes, with or without land, as something our clients have expressed an interest in acquiring with self-directed IRAs. I received numerous comments about this article. Many were requesting help with real estate sales and asking for us to recommend them to our clients.
What Kind of Services Can Self-Directed IRA Administrators Provide?
As I mention in every article and want to emphasize here, IRA Innovations, including me personally and all of our staff, does not make recommendations or provide investment advice. We do not work with product providers who sell anything from real estate to widgets. We are prohibited from doing so and we follow this law to the letter.
We assist with the administration and recordkeeping, following our clients’ directions, to acquire investments on behalf of their IRAs. We do not give out any client information, we do not have a list of clients for sale, and we do not recommend any investments.
Does Acquiring Land for a Self-Directed IRA Make Sense?
The other question I got repeatedly from last week’s article was “does acquiring land for a self-directed IRA make sense?” The choice of any investment is up to you, our client. Here is an example that one of our clients is considering for her self-directed IRA and has given us permission to use as education for this article.
Lisa attended an investor meeting where this deal was presented:
Make a Loan of $10,000 with 2 lots as collateral.
You will make a 17% return on your money in 7 months ($1,000)
If the $10,000 + Interest of $1,000 ($11,000 total) is not paid by December 31, 2013…
The lots are YOURS at their Appreciated Value on December 31, 2013, plus you receive the $1,000 for an even greater deal.
The presenter went on to say: “We all know that land values in our city are on the rise. I need the money now while waiting for investor funds to arrive. I want to hold onto the lots for their appreciating value. You win either way; make 17% in a quick turnaround of 7 months or receive a better deal with lots that are worth more in 7 months”
Lisa is debating this deal for two reasons. One, she generally buys long term alternative investments with her self-directed IRA. Two, there are a lot of lots for sale in this city. She said she will probably pass.
Is this a good deal?
We cannot answer that of course, but some may feel it’s a great return for their IRA. However, holding the actual land in a self-directed IRA has the expense of real estate taxes associated with it. If the land is being held for the long term, generally there is no income coming back into the self-directed IRA. It is up to you and your investment strategy, what the potential for appreciation really is, and what the plans are for the land. These factors should all be considered when deciding on an investment for a self-directed IRA.
All of us should take the time to thoroughly understand what we are buying and what would happen should the investment not go in the direction we had hoped. This applies whether an investor is buying in or out of his IRA. Due diligence pays!