Partnership structure with Self-Directed IRA

[Amanda Williams]

Hello! I am trying to figure out the best way to structure a partnership opportunity for one of my upcoming land development projects. I will be purchasing land, subdividing, and building 5 homes. I have a partner/investor who wants to fund the land purchase and development expenses via a self-directed IRA while I will be taking care of everything else including the construction loans. Initially, we were going to form an LLC, however this will present issues with construction loans. The lenders won't lend to an LLC with a custodian as a member and the investor does not want to be a personal guarantee on the construction loans. I was thinking that a Joint Venture may be the way to go? Does anyone have any experience or advice on this? Thanks in advance!

[Matt Calhoun]

Hello Amanda,

The JV agreement could be a viable option. You could also look into making the IRA account a debt partner, structuring the investment as a promissory note.I have seen notes that will add language about receiving an upside based on the returns of a project. Either option should eliminate the issue of IRA holders not being able to personally guarantee financing (non-recourse).