Menu Close

IRA Financial Group Blog

Multi-Family Real Estate on the Rise

multi-family real estate on the rise
4 Minute Read

A recent Yahoo Finance article has shed light on the increasing growth of multi-family real estate investments, and a few trends behind its success. But why choose multi-family real estate as an investment?

The perks of residential real estate investments are numerous. First, rental income is steady income. Many investors see real estate as a less volatile option than the stock market. Furthermore, it provides financial security on a long-term basis. The value of the property will likely increase overtime if you chose a good location. Finally, real estate investments act as a hedge against inflation. When inflation increases, as does your property value and rental income.

So what’s the deal with multi-family real estate investments?

Multi-Family Real Estate is on the Rise – Here’s Why

Last year, multi-family rentals turned out to be a lucrative investment. Since then, it hasn’t slowed down. Investors who wish for higher returns on single-family investments may want to look into investing in a triplex or duplexes. This type of investment also leads to a more diversified retirement portfolio. What trends are leading to the increase of multi-family homes, and has experts encouraging investors to buy?

Millennials are Taking Over

Millennials, the second largest generation are becoming a formidable force. They’re smart savers and savvy investors, they utilize their employer-sponsored retirement plans and they’re even changing the real estate scene. A majority of Millennials are in their late 20 and early 30s. Many are unmarried, have no children and are passionately starting their careers. As a result, they are delaying home-ownership for apartment rentals. They are the primary demographic turning to multi-family developments, specifically in large cities. Factors that draw Millennials to multi-family rentals include:

  • Residence in a large city – closer to work/good public transportation
  • Quality amenities, such as on-site parking, fitness centers, etc.
  • Social connectivity

Baby Boomers are Downsizing

The largest and oldest generation, Baby Boomers, are also a key contributor to the rise of “multi-family developments and amenity-rich apartment communities,” according to the Yahoo Finance article. Rather than focusing on the upkeep of a large home, Baby Boomers are downsizing in favor of apartment living. Baby Boomers who can care for themselves prefer to stay in their own home rather than a retirement community. They are also embracing the “next stage” of their life, giving up their empty nests in the suburbs to enjoy city-life.

How to Purchase Real Estate with a Self-Directed IRA

If you already have a Self-Directed IRA to purchase real estate, this part isn’t for you. However, if you do not have a Self-Directed IRA, or if you are not using your Self-Directed IRA to purchase real estate, we can help you get started.

Tax benefits are the primary reason to use a Self-Directed IRA to purchase real estate, such as multi-family homes. By using your Self-Directed IRA, you can defer taxes on your real estate investment until you take a qualified distribution. If you setup a Self-Directed Roth IRA, the investment income or gains can accumulate tax-free. In other words, you do not pay taxes on the income of your real estate investment at the time of a qualified distribution. However, you do pay taxes upfront in the case of a Roth IRA.

With the Self-Directed IRA, you can buy, sell and flip real-estate in a tax-advantageous manner.

Considerations Prior to Real Estate Investing

If you are new to the real estate market, it is important to do your due diligence on the property. If you plan to make a multi-family real estate purchase, understand that the Self-Directed IRA custodian does not offer advice. Therefore, it is up to you to understand what it takes to invest in multi-family real estate.

For example, this investment may require larger capital, so you may need approval for a mortgage loan. On the upside, being approved for a mortgage loan is easier for multi-family properties, but taking a loan means you will be subject to the Unrelated Business Taxable Income (UBTI) tax.

Custodian vs Checkbook Control

When using a Self-Directed IRA to purchase real estate, you may prefer the IRA LLC over a full-service account. A full-service account, also known as custodian control, will require custodian consent whenever you wish to make a transaction. This can amount to high custodial fees, especially if you are a moderately active investor. You could end up paying hundreds in aggregate annual fees. However, with an IRA LLC, also known as “checkbook control”, you never need custodian consent, which can be helpful if you are a highly active investor.

You must also be aware of the prohibited transaction rules, and the importance of choosing the right IRA custodian, such as IRA Financial Trust to help navigate these rules to avoid triggering a prohibited transaction.

Choose IRA Financial

Finally, when using a Self-Directed IRA to purchase real estate, such as multi-family homes, choose IRA Financial. We make it easier than any other IRA custodian to establish your account, maintain it, and make investments. If you do not already have an account, you can get started with the free IRA Financial app. If you choose to establish a Self-Directed IRA LLC, you don’t have to leave your house to open the LLC bank account. We can open the account for you. Our relationship with Capital One Bank makes IRA Financial the only IRA custodian that can open an account for its clients. That means we also take care of the tedious bank opening documents.

Set-up in 5 Steps: 

  1. Identify the investment property
  2. Purchase the investment property with the Self-Directed IRA/IRA LLC
  3. Title to the investment property and all transaction documents must be in the name of the Self-Directed IRA LLC. The LLC manager must sign pertaining to the property investment.
  4. All expenses paid from the investment property go through the Self-Directed IRA LLC. Likewise, all rental income checks must be deposited directly in to the Self-Directed IRA LLC bank account. Do not depot IRA related investment checks into your personal accounts.
  5. All income or gains from the investment flow to the IRA tax-free!


Because Baby Boomers and Millennials, the two largest generations, are flocking to apartment rentals, this makes for a very profitable investment opportunity now and in the future. Real estate is a very popular investment for a number of reason, particular resident real estate. Residential properties create financial security, offer tax advantages, and can help investors withstand inflation, therefore multi-family properties will continue to be a good investment.

To get started, download our app or call IRA Financial directly at 800-472-0646. We also encourage you to fill out our form and a tax specialist will get back to you.

Related Articles