IRA Rollover to Self Directed (IRA or 401K)

[Bill McGrath]

My wife and I are preparing to invest with a group in an LLC that is purchasing two RV parks. We both have IRA funds with different custodians, but would like to roll them over into self directed vehicles to invest with the RV park LLC.

I've read several threads on the pros and cons of Self Directed IRAs and Solo 401Ks. The LLC is purchasing the properties through a 1031 exchange, plus obtaining a loan. I'm still a couple weeks away from the details of the downpayment/loan ratio. I am aware that the accounts for my wife and I must be separate.

I'm concerned about the Unrelated Business Income Tax (UBIT) aspect of a SD IRA. However, I'm not clear on how easy or difficult it is to open Solo 401ks for myself and my wife, in order to invest. At this point, we have no other business to open the solo 401k with, and I currently have a 401k through my job.

The LLC will be paying out a dividend of about 5% per year, which will go back into either the SD IRA or Solo 401K. We are both in our mid 50's, so not too close to retirement.

Given this situation, which is the best way to go?  What are the potential issues?

Thanks for your input!