UBIT, Roth IRA and a private loan

[Chris Weiler]

Let's assume I would like to purchase 200K in properties using my Roth IRA for 10% down and a private investor for the rest. These are high cash flowing properties. Assuming I have the properties in a self-directed Roth IRA LLC and use a majority of the profits to pay off the loan aggressively, I believe I can have the loan paid off in just a few years. Before the loan is paid off, I will have to pay a fair amount of taxes on profits due to UBIT. But once the loan is paid off, won't all future profits be tax free? What is your opinion on using this strategy to increase the value of my Roth IRA?