How Bill Bought a Mango Farm in Panama with His Self-Directed IRA


“Become so financially secure that you forget that it’s payday.” ~ Unknown

When it comes to investing for retirement, which asset class comes to your mind first?
Stock, bond, or mutual fund! Isn’t that right?
All the major financial providers have, sort of, institutionalized retirement planning, limiting it to these asset classes ( Stock, bond, or mutual funds) only. “Investment freedom” isn’t exactly an option left on the table.
As a matter of fact, the financial institutions will bulk up your portfolio with their financial products, without much of a choice given to you, in a sense that you have to choose from their limited investment pool.
However, Bill, our retirement planning hero, did it differently. Instead of investing in the traditional asset classes, Bill invested in real estate.

How Bill Secured His Retirement

At age 60, Bill was working at an auto manufacturing plant in Bloomington, Illinois. He had a 401k with his employer and another IRA, with the bulk of his investments in stock and bonds.
In order to diversify his investments, Bill chose a self-directed IRA and started looking out for investment opportunities.

Being an avid traveler, Bill found the opportunity to invest in real estate abroad quite enticing.
Bill bought an organic Mango farm in Panama with his self-directed IRA LLC, using a third-party turnkey company – a unique farm-in-a-box business that takes care of the entire operations, from land preparation to sowing and exporting the produce.
Going forward, Bill purchased farmland on a Neem tree farm in Brazil.

How You Can Invest in Real Estate with an SDIRA or Solo 401k Retirement Plan

Bill’s example shows the liberated retirement planning features of self-directed retirement plans. If you have some alternative investments in mind, here’s a quick guide for you.
Let’s break it down into three simple parts: educate yourself, choose a qualified retirement plan, and execute the investment process.

1. Educate yourself about self-directed retirement plans.

It all starts with education. Start by understanding more about your retirement options. If you are in a regular job, a self-directed IRA or SD IRA is one of the options to get started.
On the contrary, if you’re self-employed or own a business without any employees except your spouse, a self-directed Solo 401k plan will suit alternative investments better.
You can start with online research or contact a financial expert for a better understanding.

2. Choose a qualified retirement plan.

Here’s a quick Infographic to start with.

If you’re in doubt, make sure to consult an expert.

3. Follow the 5-step investment process.

Step 1: Open a self-directed retirement plan. It could be an SD IRA or a self-directed Solo 401k. Once the plan is active, fund it through regular contributions and qualified rollovers.
Step 2: Choose an investment property for your retirement plan. Make sure that it has a positive cash flow and higher chances of appreciation. Depending on your investment strategy, you can either go for a residential or a commercial investment property.
Step 3: After choosing your investment property, use your self-directed retirement plan to purchase it. In case of an SD IRA, the plan custodian will hold the title of the property, and you will require his/her approval before purchasing the property.
On the contrary, if you are purchasing the property through a self-directed Solo 401k, your plan’s trust (Solo 401k trust) will hold the title of the property. You will sign on its behalf as the trustee of the plan.
Step 4: Any amount spent in the maintenance of the property should go out of your retirement plan only. Similarly, make sure to avoid transacting with any disqualified person. Consult an expert and learn more about prohibited transactions.
Step 5:  At the qualified retirement age, you can either distribute the property itself or sell it for gain, and distribute the profit. You’ll have to pay the due taxes while taking withdrawals.

Have any doubts?!!!

Leave your questions in the comments and let’s discuss your retirement plans. Good luck!
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By Dmitriy Fomichenko

Dmitriy is the founder and president of Sense Financial Services LLC, a boutique financial firm specializing in self-directed retirement accounts with checkbook control. He began his career in financial planning and real estate investing in 2000. He owns multiple investment properties in various states and is a licensed California Real Estate Broker. Over the years, he has instructed hundreds of investment and financial planning seminars and has mentored thousands of investors.