Self Directed IRA or Take Loan from pre-taxed Retirement?

[Rodney Marcantel]

We have 2 options now that we're selling our home and cashing out enough money to pay our daugher's college fund. We have a 403B account in my wife's dad's name that is over $300K that is only drawing 3.5% interest. So we are moving it to either his existing retirement account (that is already taxed so borrowing funds from that won't penalize us) or to a self directed IRA.

Is it better to move the money to his existing retirement account and let the additional $300K grow at 6 - 7% (which is what they can achieve) where we could then borrow the other pre-taxed $600K at anytime to purchase real estate for flipping OR move the $300K to a self directed IRA account.

Self Directed IRA would require setting up an LLC for it $1,495 plus a $45 per quarter management fee and we would not be drawing any interest off of it but would then be able to self direct investing the money in real estate and at closing the funds (profit) would be written to the LLC and deposited back in the fund account to prevent taxing.

We could then take money out as needed (taxed) under his name (without penalty) and only pay ordinary income tax on his tax form. This could grow the money faster than 6% and the fund management company is on board with us doing it either way although they don't provide the self directed IRA account and we'd have to go elsewhere to get.

Any thoughts?