Personal note and SD IRA note on same project.

[Jeff Rabinowitz]

My wife and I have written a personal note (made a loan) on a real estate project. This project is going to require more funding to complete. I am considering providing a second loan, from my self-directed IRA (or my wife's Solo 401K), to this project. The SD IRA loan will be in second position. Would this be considered a prohibited transaction?

[Chris Martin]

@Jeff Rabinowitz 

From what you've written, I would think this would be acceptable. I know individuals 'partner' with SDIRA on deeded interest for ROTH and traditional IRA investments. Here's how one deed is written in my county in NC:

EQUITY TRUST CO CUSTODIAN FBO PARTY A IRA with 11.7% undivided interest and
EQUITY TRUST CO CUSTODIAN FBO PARTY A IRA with 12.46% undivided interest and
PARTY A individually with 25.84.7% undivided interest and
PARTY B with 50% undivided interest

I assume one of the two IRAs is a ROTH, but the above (save for the names removed) is what is written in the Grantee field of the GWD. Your Deed of Trust (mortgage) which would fit your scenario would be in second position, which is fine if that's your investment decision. ETC and other custodians don't really care about the lien position, as long as you are not owner of the property.