Lending on 2nd Position or Unsecured thru ROTH IRA LLC

[Steve K.]

We are in talks of doing a loan for unrelated 3rd Party (a repetitive client of ours), to help buy 5 rental or rehab properties. A promissory note will be used, we have not decided if we will use morgages or cross-collaterization. The money from our IRA LLC will be used for a Downpayment and rest of the money will be financed by the Seller (1st lein position).

Is it OK to lein on 2nd lein position or unsecured without having SDIRA Disqualified?

1. Since one the above properties could be rehabbed and sold within one year, it's considered active/trade income per the IRS, we have concerns about UBIT or UBTI, which we may have to pay. Is that a valid concern?

2. Since we are only lending the downpayment, we have to go in Second lien position after the seller, we have UBIT/UBTI concerns again. Since unrealted 3rd party is using leverage to buy Real Estate, our ROTH IRA LLC is not, is that a valid UBIT/UBTI concern?

3. Because of the paperwork required, existing repetive business relationship and insignificant recourse options due to our 2nd lien positions. As an alternative option, can we lend ROTH IRA LLC to that unrelated LLC, using UNSECURED promissory note with personal gurantee from each unrealted LLC member, would that trigger UBIT/UBTI? Is this a valid concern?

Thanks a lot for your inputs

Steve