So, you’ve decided that you want to learn how to buy land in California. After all, they aren’t making any more of it. But how can you finance your investment?
How to buy land in California with cash:
Option #1, and the one most people think of when they consider buying vacant or undeveloped land, is to invest cash. In this case, you’ll convert the most liquid asset into one of the most long-term investments – it’s a good idea if you have enough of that liquid asset.
You can purchase land by paying it off with cash or financing it with a loan. If you do choose to invest with a mortgage loan, you may avoid some of the risks related to paying off the entire property upfront. Many of our clients choose this fairly straightforward option when considering how to buy land in California.
How to buy land in California with your IRA:
Option #2 is to use an Individual Retirement Account (IRA) to invest in land. If you already have an IRA, investing in land is easy. Unfortunately, some IRA custodians, particularly larger firms like Fidelity, Rowe Price, Morgan Stanley, etc., don’t permit real estate investment. They permit only traditional stock, bond and mutual fund investments, excluding options like real estate, precious metals, and private IRA lending.
In order to diversify and invest in real estate, you may need to open a self-directed IRA with a different custodian. You can easily transfer funds to the new account from your former custodian and invest in land.
If you don’t yet have an IRA but you have a 401(k), you may still have the option to invest in real estate with your IRA.
Here’s how to buy land in California with funds from your 401(k):
If you no longer work for the company to which you contributed 401(k) funds, you can move funds from your 401(k) to a self-directed IRA. You can open a Traditional or Roth IRA. Even if you still work for the company that hosts your 401(k), you may be able to withdraw funds after speaking with your company representative.
The benefits of investing in real estate with your IRA (as opposed to purchasing land in cash) are:
• Broaden the scope of your investments and remedy an underperforming stock portfolio.
• Pay zero out-of-pocket cash.
• Depending on the type of IRA you have, you can eliminate the taxes on your portfolio’s growth.
No blog post can give you the personally tailored financial advice you need. Some customers benefit from converting their cash assets into long-term real estate investments, while others, having suffered a drop in IRA returns, are looking for a way to diversity the investments they have already made and turn stagnation into gain. Your financial advisor or IRA associate is the best person to speak to about how to buy land in California most appropriately with the assets you have. Many of our clients choose a little of each – they purchase land in cash and include land in the path of development in their IRA portfolios. Contact us via email, phone, or web chat for more information on how to buy land in California.