What would you do? SDIRA, Self Storage Pending Exit, 1031, DST, etc.

[Taylor L.]

`What would you do in my situation?

Invested my Roth SDIRA in a self storage deal 4ish years ago. The deal has gone well and a sale within the next few months is likely. My proceeds will be in the low six figures, I don't want to get too specific. It's a pretty healthy equity multiple on my original investment.

Option 1: Distribute the shares to myself prior to the sale and pay the early withdrawal penalty. Pro: I have a lot of deal flow myself, so this would allow me to invest the capital in my own deals. Cons: 1) The penalty is money out of my pocket. 2) If the sale of the property occurs within a few months, am I then in short term capital gains tax territory? That could be a colossal tax bill considering my tax bracket. 

We've had the property for several years, but do I technically wind up in a short term position if I distribute the shares to myself less than a year before the sale? The sponsor may be offering a 1031 Exchange DST option, which I may consider. I do not have the details on that quite yet.

Option 2: Let the sale go through, pay UBIT, and turn it back into a regular Roth IRA in publicly traded securities. I don't love this option but it gets me out of the pain-in-the-butt SDIRA.

Option 3: Other ideas?  I know many others who use their SDIRAs for lending, but I am very big on focus. All of the progress I've made in my syndication business boils down to getting focused and avoiding shiny objects. I am concerned that getting into lending would be too big of a distraction from my actual real estate business. 

What do you think? Am I crazy for thinking about giving up the Roth IRA's tax benefits? Am I potentially walking into a big capital gain tax bill?

I am in my mid 30s now so I have quite a long time to keep it growing. I also have many opportunities to reinvest the capital in my own deals. At my core I am a cash flow investor, I love seeing the funds hit my account every month. However, the idea of paying huge penalties and taxes to free up my money is quite painful.