In today’s dynamic investment landscape, individuals are increasingly seeking avenues to diversify their retirement portfolios beyond the stock market. One promising avenue gaining traction is investing in multifamily properties using self-directed retirement accounts such as a self-directed IRA or a self-directed Solo 401(k). This innovative approach offers investors the opportunity to leverage the benefits of real estate while enjoying the tax advantages of retirement accounts. In this article, we’ll explore the fundamentals of investing in multifamily properties through self-directed retirement accounts, highlighting the benefits, considerations, and strategies involved.

Understanding Self-Directed Retirement Accounts:

Self-directed retirement accounts empower individuals to take control of their retirement savings by allowing investments in a broader range of assets beyond conventional options offered by traditional custodians. Unlike traditional IRAs or 401(k) plans, which typically limit investment options to stocks, bonds, and mutual funds, self-directed accounts offer the flexibility to invest in real estate, precious metals, private equity, and more.

Two popular self-directed retirement account options for real estate investment are self-directed IRAs and self-directed Solo 401(k)s. Both accounts offer tax-advantaged growth potential, but they differ in terms of eligibility, contribution limits, and administrative requirements.

1. Self-Directed IRA:
– Available to individuals who have earned income and meet certain eligibility criteria.
– Contributions are subject to annual limits set by the IRS, with catch-up contributions available for individuals aged 50 and older.
– Offers a wide range of investment options, including residential and commercial real estate.
– Requires a custodian to facilitate transactions and ensure compliance with IRS regulations.

2. Self-Directed Solo 401(k):
– Designed for self-employed individuals or small business owners with no full-time employees, except a spouse.
– Allows higher contribution limits compared to traditional IRAs, including the ability to make both employer and employee contributions.
– Offers greater control and flexibility in investment decisions, including the option to invest in real estate directly or through partnerships.
– Requires adherence to IRS regulations governing 401(k) plans, including annual reporting and compliance with contribution limits.

Benefits of Investing in Multifamily Properties:

Investing in multifamily properties through self-directed retirement accounts offers several compelling advantages:

1. Diversification: Real estate provides an attractive diversification option, helping to reduce portfolio risk by offering exposure to an asset class with low correlation to traditional investments like stocks and bonds.

2. Passive Income: Multifamily properties generate rental income, offering investors a consistent stream of cash flow that can supplement retirement savings and provide financial stability during retirement years.

3. Appreciation Potential: Real estate historically appreciates over time, providing the potential for capital appreciation and long-term wealth accumulation.

4. Tax Advantages: Self-directed retirement accounts offer tax-deferred or tax-free growth, depending on the account type. Rental income generated by multifamily properties held within these accounts can grow tax-free or tax-deferred until distributions are taken during retirement.

Considerations and Risks:

While investing in multifamily properties through self-directed retirement accounts offers numerous benefits, investors should carefully consider the following factors:

1. Due Diligence: Conduct thorough research and due diligence before investing in multifamily properties. Evaluate factors such as location, market trends, property condition, rental demand, and potential returns.

2. Liquidity Constraints: Real estate investments are relatively illiquid compared to stocks and bonds. Investors should be prepared for longer holding periods and consider the impact of liquidity constraints on their retirement portfolio.  There is also the possibility of a capital call should the asset sponsor require one.  Your IRA should be prepared with a cushion of idle cash for situations such as this.

3. Maintenance and Management: Owning multifamily properties entails ongoing responsibilities such as property maintenance, tenant management, and compliance with local regulations. Investors should be prepared to allocate time and resources for property management or hire professional management services.

4. Regulatory Compliance: Self-directed retirement accounts are subject to IRS regulations and guidelines. Investors must ensure compliance with prohibited transaction rules, contribution limits, and reporting requirements to avoid penalties and maintain the tax-advantaged status of their accounts.


Investing in multifamily properties through self-directed retirement accounts presents an attractive opportunity for investors seeking to diversify their portfolios and harness the wealth-building potential of real estate. By leveraging the tax advantages and flexibility offered by self-directed IRAs and Solo 401(k)s, investors can access a broader range of investment options and build a more resilient retirement strategy. However, success in real estate investing requires careful planning, diligent research, and a thorough understanding of the risks involved. uDirect IRA Services is not an investment advisory firm and we do not recommend specific assets to our account holders.  With prudent decision-making and strategic execution, investing in multifamily properties within self-directed retirement accounts can pave the way for long-term financial prosperity and retirement security.  Reach out to to learn more at  Get started by opening your own self-directed account  by clicking HERE.