Can Your Solo 401(k) Buy Raw Land?

• The Solo 401(k), or

• An investment LLC owned by the Solo 401(k), depending on how the investment is structured.

Because the retirement plan owns the investment, any income and expenses associated with the property must also remain within the retirement plan.

Can You Personally Use the Land?

No.

IRS prohibited transaction rules prohibit using retirement-owned property for personal benefit.

Examples of prohibited personal use include:

• Camping on the property

• Hunting on the property

• Storing personal equipment

• Parking RVs or vehicles

• Letting family members use the land

• Building a personal residence

• Farming the property for personal benefit

Even occasional personal use may create compliance issues.

The investment must be held solely for the benefit of the retirement plan.

Who Pays the Expenses?

Every expense associated with the investment must be paid using retirement funds.

Examples include:

• Property taxes

• Closing costs

• Survey fees

• Environmental studies

• HOA fees (if applicable)

• Maintenance expenses

• Legal costs related to the investment

Personal funds should never be mixed with retirement assets.

Likewise, proceeds from selling the property must return directly to the Solo 401(k) or its investment LLC - not to you personally.

Can You Improve the Property?

Potentially, but it depends on the nature of the improvements.

Improvements funded by the retirement plan may be allowed if they are consistent with IRS rules and do not involve prohibited transactions or personal services by the account owner.

Major development projects can introduce additional complexities, so investors should carefully evaluate compliance requirements before moving forward.

What About Financing?

A Solo 401(k) may purchase raw land using cash or, in certain situations, financing.

If financing is used, investors should understand the rules surrounding retirement plan borrowing and ensure any financing structure complies with applicable IRS requirements.

Before pursuing leveraged real estate investments, it is important to consult professionals familiar with self-directed retirement plans.

Risks of Investing in Raw Land

Like any investment, raw land carries risks.

Potential considerations include:

Unlike rental properties, raw land often produces little or no ongoing income.

Returns typically depend on appreciation.

Land investments may take years before realizing significant gains.

Investors should have a long-term investment outlook.

Local economic trends, zoning changes, infrastructure development, and population growth can all influence land values.

Careful due diligence remains essential.

Selling land may take longer than selling publicly traded investments.

Investors should ensure their retirement portfolio remains appropriately diversified.

Common Mistakes to Avoid

Many compliance issues arise from avoidable mistakes.

Common errors include:

• Personally using retirement-owned land

• Paying expenses with personal funds

• Mixing retirement and personal money

• Purchasing property from a disqualified person

• Selling retirement-owned property to yourself or certain family members

• Failing to properly title the property

• Not maintaining accurate records

Keeping clear documentation can help support ongoing compliance.

Is Raw Land Right for Your Retirement Strategy?

Raw land may be an attractive option for investors seeking:

• Long-term appreciation

• Portfolio diversification

• Tangible assets

• Lower maintenance investments

• Greater investment flexibility

However, it is not suitable for every investor. Your time horizon, risk tolerance, liquidity needs, and overall retirement objectives should all factor into the decision.

A diversified retirement strategy often includes a thoughtful mix of investment types rather than relying on any single asset class.

Final Thoughts

A Solo 401(k) offers far more investment flexibility than many people realize. For eligible self-employed individuals, purchasing raw land can be a compelling way to diversify retirement assets and pursue long-term growth outside of traditional Wall Street investments.

Success starts with understanding the rules. The property must be owned by the retirement plan, expenses and income must remain within the plan, and prohibited transactions must be avoided to preserve the account's tax-advantaged status.

With proper planning, thorough due diligence, and careful compliance, raw land can become a valuable component of a well-rounded retirement portfolio.

Ready to Expand Your Investment Options?

At Survival401k, we help self-employed individuals establish and manage Solo 401(k) plans designed to provide greater investment flexibility. If you're interested in using your retirement funds to invest in raw land, real estate, private lending, or other alternative assets, our team is here to help you understand your options and build a strategy that aligns with your long-term financial goals.

Contact Survival401k today to learn how a Solo 401(k) can open the door to a broader range of retirement investments.

This blog is not legal, tax, or investment advice; it is for educational purposes only. Please consult a professional before making any decisions.