Self Directed IRA--will this work?

[Jon Klaus]

I have a potential partner and this is what we are thinking. Each of us roll traditional IRA's of the same amount of money (say $100K) into new SDIRA's. Each of us also set up new LLC's. My SDIRA lends his LLC $100K. His SDIRA lends my LLC $100K. The LLC's pay the SDIRA's 10% for the money. The LLC's invest in RE as each LLC owner sees fit.

Would we be breaking any SDIRA rules?