How to Transfer SEP IRA Investments Into a Land Investment

A self-directed SEP IRA can be used to invest in land.

A self-directed SEP IRA can be used to invest in land.

An SEP IRA is an employer-sponsored retirement plan often used by self-employed individuals as a tax-deductible retirement planning tool. Typically, a business owner establishes an SEP IRA with a financial services firm and uses the IRA assets to invest in stocks, bonds or mutual funds. However, the tax rules governing SEP IRA plans allow plan assets to be used to purchase alternative investment such land investments. Making a real estate investment with SEP IRA funds can be accomplished if you are the business owner controlling the SEP IRA administration and investments.

Open an SEP IRA account with an IRA custodian company specializing in self-directed IRAs. At publication, there are approximately 10 companies in the U.S. that handle self-directed IRA accounts. Contact several and ask them about handling your SEP IRA and whether they can make the land investment you are planning. Also, compare fees and charges before selecting a self-directed IRA custodian.

Transfer money from your current SEP IRA custodian to the self-directed custodian following the directions from the new custodian. You may choose to transfer the entire balance of your existing SEP IRA account to the new account or just a portion.

Negotiate with the current owner to reach a purchase price on the land investment. When an acceptable price has been agreed upon, let the seller and his real estate agent know the land will be purchased by your SEP IRA custodian.

Direct the custodian of your self-directed IRA to make the land purchase investment as negotiated. Provide the custodian with the name of the seller, the title company handling the transaction and the purchase price. Once the purchase is complete, the property will be titled in the name of the custodian for the benefit of your SEP IRA. The property will then be an asset of the SEP IRA account.

Tips

  • Fees and services vary significantly among the self-directed IRA custodians. Do your research before opening an account with a specific custodian.
  • If you are an employee with a SEP IRA established by your employer, the employer controls the custodian choice for the account. Discuss your desires with your employer to see if a self-directed account for your SEP IRA assets can be established.

Warning

  • A SEP IRA is a tax-advantaged retirement plan. Owning real estate with an SEP IRA account may eliminate some of the tax advantages of owning investment real estate.

About the Author

Tim Plaehn has been writing financial, investment and trading articles and blogs since 2007. His work has appeared online at Seeking Alpha, Marketwatch.com and various other websites. Plaehn has a bachelor's degree in mathematics from the U.S. Air Force Academy.

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