How to Invest in Multifamily Real Estate Using A Self-Directed IRA or solo 401K

retirement plans investment

Investing in multifamily real estate has been a popular venture since the late 19th century, but today it is increasingly accessible to everyday investors. With a self-directed IRA or solo 401K, you can invest in multifamily real estate without incurring significant tax penalties. This blog post will explain how these two retirement plans investment vehicles are used to invest in multifamily real estate.

What is a Self-Directed IRA?

A self-directed IRA (SDIRA) is an individual retirement account that gives investors more control over their retirement plans investment than traditional IRAs. The primary benefit of this type of account is that it allows you to invest in alternative assets such as real estate, private placements, precious metals, and more. In addition, investors can also borrow against the funds for specific retirement plans investment—including investing in multifamily real estate—without incurring early withdrawal penalties or taxes.

One major limitation of self-directed IRAs is that they cannot be used to purchase properties where the investor or family members reside or are employed. Additionally, SDIRAs are not allowed to use funds from one account to buy another asset within the same account—such as transferring funds from a Roth IRA into a Traditional IRA—which is known as “self-dealing” and is prohibited by the IRS.

What is a Solo 401K?

A Solo 401K (also known as an Individual 401(k)) is an employer-sponsored retirement plans investment. It enables business owners who do not have any employees other than themselves and their spouse to save for retirement on a tax-deferred basis with higher contributions limits than traditional IRAs. For example, unlike traditional IRAs, which are limited by annual contributions ($6,000 for 2021), retirement plans investment such as solo 401ks can contribute up to $58,000 annually ($64,500 if age 50+).

Additionally, unlike SDIRAs, which require custodial approval before investing in certain asset classes such as real estate, solo 401ks allow investors full autonomy when making retirement investments, including purchasing a property outright with pre-tax dollars. As with SDIRAs, however, solo 401ks are subject to prohibited transaction rules and must abide by IRS regulations when using funds from the plan for personal benefit or gain.

Invest in multifamily real estate


Investing in multifamily real estate using a retirement plans investment such as SDIRA or Solo 401K offers numerous advantages. These include flexibility and control over your investment decisions while potentially reducing taxation liabilities associated with other forms of investing, such as stocks and bonds.

However, before making any retirement plans investment, it’s essential to understand the rules and regulations associated with each account so you can make informed decisions about your financial future. Utilizing these accounts wisely can help you achieve your long-term financial goals while maintaining compliance with applicable laws and regulations. With proper planning, both accounts offer substantial returns on investing in multifamily real estate when used appropriately!

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