Ten Criteria Needed to Purchase Land for an IRA

by Gina Lynell Smith

 

The key to any successful investment for an IRA is to have an appreciation in value that effectively reaches a retirement goal.

 

More and more individuals are turning to self-directed IRAs to assist them in reaching their retirement goals. One simple investment, which is now allowable by the IRS, can be purchased with a self-directed IRA—Land.

 

Purchasing land and ensuring that it appreciates is risky without locking-in ten criteria before you buy.

 

1.  The first requirement is a master plan for the community surrounding the land must be in place. The master plan should cover a radius of 40 to 60 miles around the land you want to purchase, and it should include detailed planning for streets, sewers, electric and gas services.

 

2.   The next requirement is a large population growth projection that is from a reliable source such as the Census Bureau. Finding out the reason for the expected population growth is also significant. You should make sure that the reason for the growth is not dependent on something that is expected to change in the near future. For example, if the growth is dependent on an airport that is expected to close soon or has been refused expansionary permits and zoning is not a good sign.

 

3.   Another determining factor is the existence of commercial and residential development. Most residential developers who have already begun residential development have also already completed authoritative studies, which support the population growth needed for them to sell homes, condos, and apartment buildings to make a profit. They will need land in that area as they continue to build.

 

4.   Next, is the existence of industry and commerce with a zoning plan in place for both industry and commerce. Check with the local zoning department to see the proximity of allowable zoning for business and/or industrial buildings.

 

5.   Another key factor is the proximity of a large metropolis. Check to see how close the nearest big city is to the land you want to purchase, and I mean big city like Los Angeles, New York, or San Francisco. It should be within 40 to 60 miles from the land you want to purchase.

 

6.   People and families in the big city will eventually need to find affordable places to live outside of those big cities; therefore, schools play a major role in choosing the land for an IRA. Make sure the educational system in the area is developed from primary through college.

 

7.   In addition to factor number one, make sure that those utilities and services in the master plan are prepared or are in the process of preparing to be available for massive population growth.

 

8.   Accessibility by train, freeway, and air is also key. Population growth cannot happen without people and businesses being able to easily reach the area. All three of these transportation systems should already be in place.

 

9.   Man cannot live by bread alone—which means available water supply for massive growth should also be in place.

 

10.  Lastly, the land must be level and usable. If the land has toxic waste, businesses or residential developers cannot use it. Other factors affect land usability, and an informed appraiser and real estate broker should be sought.

 

I work with a group that has a professional acquisitions team. The team has located land parcels that fulfill these criteria, and the parcels have appreciated well beyond the returns of the stock market.