Many Americans dream of living out their retirement years under a big sky, in the great Western United States, where land plots big enough to run meaningful ranching, farming, timber harvesting and other income-producing activities are still relatively plentiful and affordable. Fortunately, the Self-Directed IRA is a flexible enough vehicle to enable you to realize this American dream.

Of course, Self-Directed IRA investors aren’t limited to farm and ranch investing in this context. Many real estate IRA owners choose to buy large amounts of land and begin developing it, creating country estates and rural housing, to rent out or sell later – again generating income for the real estate IRA owner.

Possible sources of income include:

• Farming
• Ranching and livestock raising
• Egg sales
• Timber rights
• Mineral rights
• Sale of hunting and fishing access (to guides, etc.)
• Grazing fees
• Renting land to neighboring farmers
• Rental real estate
• Barn and other storage
• Billboard advertising space

You don’t have to engage personally in the farming and ranching activities. In fact, it’s usually better if you don’t: As long as you own the property in your Self-Directed IRA, you can’t stay in it overnight, even if you’re doing repairs. You can’t rent it to yourself, nor to any of your descendants, descendants, or those of your spouse. You also can’t pay yourself or any of these individuals anything for their labor, though you can hire others as employees as needed, provided you pay them from within the real estate IRA account. All expenses associated with the property must come from funds from within the IRA in order to maintain the favorable tax treatment of the IRA.

Be sure to consider water access and water rights as well as accessibility to the land during winter months. 

Financing

It is possible to finance real estate purchases within a real estate IRA. All loans and mortgages, however, must be on a non-recourse basis. You cannot sign any kind of personal guarantee for any loans your IRA may take, and your lender can have no claim to any property outside of the IRA.

It is generally easier to get financing on rural properties from lenders with experience with rural lending, and lenders who specialize in structuring loans for self-directed or real estate IRAs. However, you can get financing from any lender, including other Self-Directed IRA owners, as long as the loan is properly structured as a non-recourse loans.

You must also make all loan payments from within the IRA. Consider this carefully when buying raw land – if it will take some time before the land is generating significant income, be sure to reserve enough liquidity within your real estate IRA to keep making the rent payments, as well as taxes and insurance, etc., in the interim.