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How to Invest in Multifamily Syndications using your 401k/IRA


In previous articles, we’ve covered many of the benefits of investing in multifamily real estate.


Today, we will cover how to invest in multifamily real estate syndications using your 401k/IRA. Please note that as tax laws are always changing and each retirement account custodian has different requirements you should consult your CPA before making any decisions.




Using your 401k/IRA for Real Estate Investing



As an investor, you can tap into the focused capital in your 401k/IRA to fund your real estate investments. This process involves rolling over your existing retirement account into a self-directed IRA (SDIRA) that allows for real estate investments. Example, if you have $100,000 in your 401k, you could roll it over to a SDIRA and invest that money in a multifamily syndication.


Benefits of Investing with your 401k/IRA

Investing your 401k/IRA in multifamily real estate syndications has several financial benefits:

  1. Passive Income: Multifamily syndications typically provide regular cash flow from rental income. Let's say you invest $100,000 from your SDIRA into a syndication that yields an 7% annual return. That's $7,000 of passive income each year!

  2. Appreciation: Over time, multifamily properties can appreciate in value, thereby increasing your wealth. For example, if the property's value increases by 3% annually, your $100,000 investment would be worth $103,000 after the first year.

  3. Tax Advantages: The income and gains in your SDIRA are tax-deferred, meaning you won't pay taxes until you start withdrawing funds in retirement.

  4. Diversification: Investing in multifamily syndications allows you to diversify your portfolio, reducing risk and potentially increasing returns.



Steps to Investing in Multifamily Syndications with your 401k/IRA

Most people are unaware that they can use their 401k or IRA to invest in real estate, including multifamily syndications. By doing so, you can tap into your retirement savings without incurring penalties or taxes and potentially grow your wealth faster. Here's how to get started:



  1. Convert your 401k/IRA to a SDIRA: You'll need to set up a SDIRA through a qualified custodian who allows real estate investments. The custodian would then be able to describe any paperwork, requirements and fees associated with this type of investment. The UBIT (unrelated business income tax) is a tax that is typically imposed on IRA accounts when the money is placed on an investment with leverage (debt from a lender). In short, the IRS recognizes that you are receiving additional gains from the leverage and therefore chooses to place a tax on it. Once again, a conversation with a CPA can provide clarity as to the impact of this tax on your investment.

  2. Choose a Multifamily Syndication: Before investing in a multifamily syndication, conduct thorough due diligence. Research the syndication sponsor, property management team, and the property itself. Analyze the market, location, and economic trends to ensure the investment aligns with your financial goals.

  3. Invest: Once you've found a promising syndication, you can invest your SDIRA funds. The custodian will handle the transaction.

  4. Manage your Investment: Monitor your investment's performance. Your syndication team will manage the property, providing you with regular updates and cash flow distributions.

  5. Enjoy the Returns: Sit back and watch your wealth grow!



In summary, investing your 401k/IRA in multifamily real estate syndications can be an excellent strategy for building wealth and achieving financial freedom. With the right syndication and a well-structured SDIRA, you can enjoy a steady stream of passive income and substantial long-term returns. As with any investment, it's crucial to do your research and consider consulting with a financial advisor.


If you would like to learn more about passively investing in multifamily, please set up a meeting with us by completing this form HERE.


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