One of the coolest things about passive investing in real estate syndications is that they can be a fantastic investment for funds in an IRA or 401(k).

Before we get to why this is, let’s back up … Did someone mention investing in real estate with your tax-advantaged retirement funds? Is that even possible?

Can You Really Invest in Real Estate with IRA or 401(k) Funds?

Your investment advisor will probably tell you “No, you can’t do that.” But that’s not the whole story.

What your investment advisor really means is “No, I can’t do that for you.” Real estate isn’t something the advisor can earn commissions or fees by selling them to you, so they don’t present it to you as an option.

But the IRA and 401(k) weren’t invented by Edward Jones. They were invented by the government, and the Federal law governing IRAs does not prohibit you from holding real estate in an IRA or 401(k).

So how do you do it? You just need the right kind of IRA or 401(k):

  • Self-Directed IRA. Many companies exist to act as custodians for IRAs that you can fill with any eligible investment you choose, not just investments sold by your wealth manager. A self-directed IRA can be any flavor of IRA — traditional, Roth, SEP, SIMPLE, etc. If you want to transfer assets from your original IRA to a self-directed IRA, keep in mind that it has to be the same type of IRA — Roth to Roth, SIMPLE to SIMPLE, etc. You can’t transfer from a Roth to a SIMPLE, etc. without incurring taxes and penalties for early withdrawal.
  • Solo 401(k). Most peoples’ 401(k) accounts were created by their employer and not eligible for transfer out of the brokerage that created it. But if you leave the job and have the right to take your 401(k) with you, you can roll the assets in your 401(k) into a solo 401(k) and then use those funds to invest in real estate.

Why is Passive Investing in Real Estate Syndications Perfect for IRA and 401(k) Funds?

So now we know you can invest in real estate with retirement funds … Why syndications? Why not buy a rental house on your own?

A lot of rules apply to the use of 401(k) funds. You have to tick a lot of boxes, and passive investment in a syndication ticks all of them. Specifically:

  • Passive Investment. Retirement fund rules require that the investor remain passive and hands-off to continue to protect the funds from taxation. If you fix your own toilets or screen your own tenants, the income from the investment might become taxable as “unrelated business taxable income” (UBTI). Subjecting retirement funds to taxation kind of defeats the purpose, so you want to remain passive. Syndication shares fit the bill perfectly.

 No Commingling of Funds. If you buy a rental house with IRA funds and the house ends up needing a new roof, you cannot use personal funds to fix it. The funds must come from inside the IRA; otherwise, they are an illegal contribution to the IRA. If you don’t have enough funds in the IRA, you’re in trouble — no new roof. Syndication shares circumvent that problem, because all funds stay within the deal.

 Easy Access to Leverage. Lenders typically won’t lend to an IRA. Unless you can buy a house subject to the original financing, you are usually stuck buying all-cash with no leverage. Remember, the leverage offered by a mortgage substantially increases the effect of appreciation on your net worth. With syndications, this isn’t an issue because the deal sponsor is the borrower, not the passive investor.


The rules of retirement accounts and the peculiarities of real estate syndication combine to make passive investment in real estate syndications an ideal use of self-directed IRA or solo 401(k) funds. If you’re unsatisfied with the returns of traditional retirement assets, it’s worth a look.

All Aboard Capital has extensive experience helping investors place their IRA and 401(k) funds in high-performing real estate assets, without extra taxes or penalties. Ready to accelerate your retirement wealth? Contact us today!