I did not have any idea of the term "land banking" before just recently, though I have been familiar with the concept. Few years back I got into the personal investment business serving as a financial planner, because that is what my father did and he tutored me into the business.
Generally I helped folks shift their money out of higher risk investments just like mutual funds and into lower risk vehicles that had some guarantees, just like variable or index ammunity What we did to help our clients do with their savings was to raise their return, lessen their risk, decrease taxes, or perform all three if it is possible. I had one near-client who asked about how to "invest your IRA into real estate", and even as he didn't use the term, he was referring to 'land banking'.
It was the time I did some searching into the financial concept and learned that while not well known, the IRS has allowed for what are termed as Self-directed IRAs. Most of people who have Individual Retirement Accounts (IRAs) make use of their IRA "wrapper" (or IRA bucket as we called it) to hold certificate of deposits or simple saving accounts or mutual funds. However, with a self-directed IRA, you can put your real estate investments into your IRA.
Thus why would anybody wish to do this? What probable profit could come from putting land in an IRA? Fine, think of what an IRA does tax-wise. It helps to defer taxes until your retirement. It means, anytime you normally have taxable earnings during a year, with an IRA you do not pay tax on that earnings for that year, or any year until your retirement.
So think of when you sell your property (that is not your personal residence). If you make money on the sell of that property, normally you would have to pay a capital gain tax for that year. Think of the investor who is acquiring and selling out multiple properties in a year. That ids a huge amount of capital gains tax.
Suppose if you could defer the tax on all that real estate benefit? That is exactly what happens when you make use of an IRA. You get to place the entire profit back into acquiring another property, selling it out, and repeating the procedure each year. It is a means to raise your capital, income a potentially nice return. This is how you perform "land banking".
When you perform land banking, you effectively become your own bank. But in this case, you have the capacity to make a much higher return than what you would get at a regular bank. For those who wish to create their retirement nest egg by land or other real property (which is not a bad idea given the outlook for stocks and mutual funds), the policy of "invest your 401k into real estate" known as land banking can prove to be a smart way to go, especially given the tax benefits. - 15224
Generally I helped folks shift their money out of higher risk investments just like mutual funds and into lower risk vehicles that had some guarantees, just like variable or index ammunity What we did to help our clients do with their savings was to raise their return, lessen their risk, decrease taxes, or perform all three if it is possible. I had one near-client who asked about how to "invest your IRA into real estate", and even as he didn't use the term, he was referring to 'land banking'.
It was the time I did some searching into the financial concept and learned that while not well known, the IRS has allowed for what are termed as Self-directed IRAs. Most of people who have Individual Retirement Accounts (IRAs) make use of their IRA "wrapper" (or IRA bucket as we called it) to hold certificate of deposits or simple saving accounts or mutual funds. However, with a self-directed IRA, you can put your real estate investments into your IRA.
Thus why would anybody wish to do this? What probable profit could come from putting land in an IRA? Fine, think of what an IRA does tax-wise. It helps to defer taxes until your retirement. It means, anytime you normally have taxable earnings during a year, with an IRA you do not pay tax on that earnings for that year, or any year until your retirement.
So think of when you sell your property (that is not your personal residence). If you make money on the sell of that property, normally you would have to pay a capital gain tax for that year. Think of the investor who is acquiring and selling out multiple properties in a year. That ids a huge amount of capital gains tax.
Suppose if you could defer the tax on all that real estate benefit? That is exactly what happens when you make use of an IRA. You get to place the entire profit back into acquiring another property, selling it out, and repeating the procedure each year. It is a means to raise your capital, income a potentially nice return. This is how you perform "land banking".
When you perform land banking, you effectively become your own bank. But in this case, you have the capacity to make a much higher return than what you would get at a regular bank. For those who wish to create their retirement nest egg by land or other real property (which is not a bad idea given the outlook for stocks and mutual funds), the policy of "invest your 401k into real estate" known as land banking can prove to be a smart way to go, especially given the tax benefits. - 15224
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