Funding question for a 506b syndication, reg D

[John Hager]

I had a tax related question regarding a self storage investment I am getting into. I am trying to figure the best way to fund the investment - either cash or through cash in a self directed (traditional, not Roth) IRA I am setting up. It is a 506b syndication, reg D offered by a syndication company that specializes in these kinds of investments. I talked to the administrator. According to the proforma, the investment is slated to make a gain of +/- 50% at maturity at about yr 5 but will incur losses at yr 1 based on their investments in facility improvements. He said that I may want to consider paying cash as opposed to paying through my SDIRA, thereby offsetting gains in my rental property with losses in the syndication through them. I have one single fam rental property with an approximate monthly cash flow of $300. I have been making improvements to the basement perimeter drainage which may represent losses too.
Would you agree with his advice or maybe you have additional questions? Just curious. I need to make a decision this week.

[Taylor L.]

Your administrator should have also mentioned UBIT. If you invest in a levered investment in a SDIRA, you'll probably generate Unrelated Debt Financed Income (UDFI) and incur an additional tax. A CPA who is familiar with your situation is probably the best person to advise here.