Can someone explain the advantages and disadvantages of multifamily passive investing with IRA ?
I’m by no means a subject matter expert, but the biggest disadvantage I see for investing in multifamily or anything else, for that matter, is that it’s the IRA making the money, not you. While there can be tax advantages when using tax shielded money to invest, you have to follow IRS rules in order to access the cash or you’ll be penalized on top of the taxes.
When investing in ANY asset that is LEVERAGED, and, most MFR’s (nearly 100%) are so at the tune of 70-80% LTV (loan to value), any SD-IRA investment done in such is subject to UBIT (Google [Unrelated Business Income Tax]…).
Basically though many K-1s are great for MFR investors because the depreciated assets allow for paper losses to exceed one’s distribution, if you do get a distribution that is NOT offset, than you will be subject to UBIT tax rate(I think around 40% or so) which is much higher than Cap gains rate (20%).
If one plans on doing lots of investing in Syndicated deals with SDIRA and one can convert the SDiRA to a SOLO-401k… that would be ideal because no UBIT concerns when investing into any leveraged deal with that vehicle.
food for thought anyway.