The following case study is from the book,
Self-Directed IRAs: Building Retirement Wealth Through Alternative Investing by Equity Trust Founder and Chairman of the Board Richard Desich, Sr. It illustrates one type of investments possible with a self-directed IRA: raw land.
Greg, an Equity Trust client from Pennsylvania, used his Roth IRA to purchase a 239-acre farm with three houses on it, as well as the mineral rights. A total of 180 acres of the land were tillable and could be farmed, while the remaining 59 acres were wooded.
Greg set up an LLC with his partners to purchase the property and utilized a non-recourse loan to help finance the acquisition. Greg’s team put 20 percent of the purchase price down and paid $1,900 per acre, or $454,100.
Greg began to profit from his investment in a variety of ways. First, he and his partners selectively timbered the property and earned $63,000. Then, they sold one of the three houses on the property and rented the other two for $750 and $850 per month, respectively.
Additionally, they are earning $18,000 per year in rent for the 180 tillable acres on the property. Last but not least, Greg is eager to begin earning royalty checks tax-free back into his Roth IRA from the gas well that is currently being drilled on the property.
All told, Greg’s Roth IRA is benefiting from four different profit-generators on his single parcel of land for an approximate ROI of 109 percent, tax-free. His investment is a great example of the potential raw land has in a self-directed IRA and hopefully provides some insight into the various ways you can profit from raw land investments.
To read more than 30 more case studies about clients using self-directed IRAs, as well as an overview of retirement savings options, check out Self-Directed IRAs: Building Retirement Wealth Through Alternative Investing.