Can I Invest ROBS Self-Directed 401k in Farm Land for home use

BACKGROUND: I would like to buy a farm in Maryland and live on it myself. I would like to use the money in a rollover IRA account to purchase the farm and some equipment. I see that a C corp is what I need to form but I’m confused about how to use my money to purchase the property. A solo 401k cannot be used because I want to live on the farm and I’m disqualified. The same would be true about a self-directedIRA.

There is also an office, woodshop and apartment for rent on the farm property. The actual farmhouse will be rented for about 9 months until the current tenant’s children get out of school next June. And then we would move into it.

Some of the farm land will be rented out to other farmers for the first few years and if that works out it may continue for as long as they need the land.

QUESTION: Is there a way that I can form a C corp, use my rollover IRA money to finance the C corp to purchase the farm and allow me to live on it.

ANSWER: While you can invest your retirement funds in a farm in which you will work (commonly referred by the IRS as roll over business startup), you cannot use your retirement funds to purchase a farm on which you and/or your family will live. 

Regards,

John in Maryland

2012 Study points retirement funds will double by 2020 | Fund business with retirement funds

Recent research performed by LIMRA points that investable retirement funds of US households age 55 and up will double to $22 trillion by 2020.  LIMRA’s findings further divulge that in 2010 the retirement assets of households aged 55 and up held $12 trillion. The publisher goes on to detail that these households plan to invest in in products that will generate retirement income.

These findings are in line with Mysolo401k.net review of its book of 401k business financing clients whom mostly appear to be in their late 50s and are using their 401k funds to finance a franchise that has a proven track record. 

Can I Use My 401k To Buy A Business?

There is no question that the current market has made it difficult for small businesses to obtain loans to purchase a business. Quite simply, traditional lenders have cut down significantly the number of loans granted to entrepreneurs.  However, you don’t have to put your entrepreneurial aspirations aside!  Alternative forms of financing such as 401k small business financing or rollover as business startup (robs) can help you buy your own small business and do what you love while using money you may already have! 

Can I use my 401k to buy a business?

Yes. A ROBS transaction allows you to invest your 401k in non-traditional investments such as: Existing businesses, New Business Start-ups, Franchises, Non-Franchises, Real Estate, and Non-Traditional Investments. 

Do I incur a penalty if I use my 401k to buy a business?

A ROBS business financing transaction is a small business or franchise financing strategy whereby an individual uses retirement assets, such as funds in a 401k, to capitalize new or existing businesses without incurring distribution taxes or penalties.

How common is the ROBS transaction?

For thousands of startups, these rollovers are working. Last year alone, 4,050 entrepreneurs elected to finance a business with 401k funds --60 percent of them franchises, according to FRANdata, an independent research firm. Many are shirking traditional corporate investments and are making the decision to invest in themselves and their passions!

How do I get started?

Once you have made the decision to “invest in yourself” and you have identified the “business-for-sale” of your dreams, the process is actually quite straightforward. Check out 401ksmall business financing page at 

http://www.mysolo401k.net/401k-small-business-financing.html

for more information!