As high-net-worth (HNW) investors continue exploring private placements and real estate to diversify their retirement portfolios, self-directed IRAs (SDIRAs) have become a powerful, yet often misunderstood, tool. These accounts can provide access to alternative assets like multifamily real estate, but they also come with strict IRS rules and operational nuances that advisors must navigate carefully.
From avoiding prohibited transactions to understanding how distributions flow and what role K-1s play, SDIRAs raise essential questions that can directly impact compliance, tax treatment, and long-term returns. This article addresses the most common SDIRA-related questions RIAs and their clients encounter, aiming to help you confidently evaluate whether this structure fits within a sophisticated portfolio strategy.
COMMONLY ASKED QUESTIONS ANSWERED [1]
⇒ What are prohibited transactions? Any use of the IRA for personal benefit or transactions with disqualified persons. [2]
⇒ Can investors pool funds from their personal accounts and their SDIRA in the same deal? Only if done with extreme care. Pooling funds in the same entity as your SDIRA and personal money can create a prohibited transaction unless structured legally with a properly documented multi-member LLC or separate investment tranches. [3]
⇒ What is the exclusive benefit rule? All transactions must solely benefit the IRA and its retirement purpose, not the owner or related parties. [4]
⇒ Can investors roll over funds from an old 401(k) into an SDIRA to invest in real estate? Yes. In general, funds from most former employer-sponsored plans can be rolled into an SDIRA, allowing for real estate and private placement investments, but check with the plan administrator first to confirm rollover eligibility. [5]
⇒ What are the liquidity risks of investing in multifamily private placements with an SDIRA? These investments are typically illiquid, meaning they can’t be sold easily to meet RMDs or emergency needs. Advisors and investors should plan accordingly, especially for Traditional IRAs subject to RMDs.[5]
⇒ How do distributions from multifamily investments flow into the SDIRA? All distributions (e.g., rental income, profit share) must be made directly to the SDIRA custodian account, not to the individual investor. [4]
⇒ Will the SDIRA receive a K-1, and how is it reported? Yes. Most private placements are structured as LLCs, so your SDIRA will receive a K-1. The custodian will use that information to file any necessary IRS forms, including Form 990-T if UBTI/UDFI applies. [6]
⇒ How can investors avoid fraud in their SDIRA? Use custodians with strong compliance reputations. Be skeptical of guaranteed or “too good to be true” returns. Check SEC registration for sponsors and investment offerings when applicable. [1][7][8]
WORK WITH BAM CAPITAL FOR MULTIFAMILY REAL ESTATE INVESTING
BAM Capital partners with accredited investors who want to enjoy passive income and all the other benefits of multifamily private placement. As the private equity arm of The BAM Companies, BAM Capital has been focusing on buying the most profitable assets and staying disciplined in its investment thesis. BAM Capital’s investment strategy aims to create forced appreciation while mitigating investor risk. To date, the brand has successfully managed over $1.7 billion in assets across ~9,000 apartment units.
This article is an excerpt from Multifamily Real Estate Funds: A Guide for RIAs. For additional multifamily real estate insights, visit Pathways to Passive Wealth, BAM Capital’s new platform designed to make real estate investing more accessible, transparent, and achievable for aspiring and experienced investors.
SOURCES
[1]: Multifamily Real Estate Funds: A Guide for RIAs. (2025). “Topic 4.3 | SDIRAs: Rules to Know for Multifamily Real Estate Investing.”
[2]: IRA Financial. (2025). “Essential Self-Directed IRA Rules: Dos and Don’ts.” https://www.irafinancial.com/blog/essential-self-directed-ira-rules/
[3]: American IRA. (2025). “Self-Directed IRA ‘Disqualified Persons’ Explained.” https://americanira.com/2025/01/20/self-directed-ira-disqualified-persons-explained/#:~:text=You%2C%20the%20IRA%20owner:%20You,your%20IRA%20is%20also%20disqualified.
[4]: Investopedia. (2024). “Using Your IRA to Buy Real Estate.” https://www.investopedia.com/articles/personal-finance/111615/using-your-ira-buy-investment-property.asp
[5]: The Entrust Group. (n.d.). “Frequently Asked Questions.” https://www.theentrustgroup.com/learning-center/frequently-asked-questions
[6]: IRA Financial. (2025). “What is a K-1 and How Does it Affect my IRA?” https://www.irafinancial.com/blog/k-1-and-self-directed-ira-llc/#:~:text=IRS%20Form%201065%20%E2%80%93%20Schedule%20K,when%20completing%20Schedule%20K%2D1:
[7]: Madison Trust Company. (2023). “Determining the Right Self-Directed IRA Custodian: Guidelines on How to Choose the Right SDIRA Custodian.” https://www.madisontrust.com/determining-the-right-self-directed-ira-custodian-guidelines-on-how-to-choose-the-right-sdira-custodian/#:~:text=A%20Self%2DDirected%20IRA%20custodian%20is%20responsible%20for%20executing%20investment,does%20and%20does%20not%20do.
[8]: advisorinfo.sec.gov. (n.d.). “Welcome to the Investment Adviser Public Disclosure website.” https://adviserinfo.sec.gov/
