Question about SDIRA Hard Money Loan

[Jack Okada]

Been reading a lot about SDIRA and real estate investing, including several posts on BP, but this question I couldn't find an answer to..

Say I form a project LLC with three friends to flip a house. The ownership is split based on our capital contributions, 33% each.

Can my SDIRA LLC lend money to the project LLC without any issue? I read in a few places that there is an issue if I'm a 50% or greater owner in the project LLC that the SDIRA is lending to. Will being a minority owner make this scenario OK?

TIA!

[Haley Gant]

Hi @Jack Okada, other than the "black and white" prohibited transaction rules, there are several grey areas. 

One thing that you always want to keep in mind is who is benefiting from this IRA investment. If you, or anyone else who is disqualified to your IRA receives any sort of direct or indirect personal benefit from your IRA investment, it would very likely still be seen as a prohibited transaction. If you are using your IRA to invest or loan money to an LLC in which you own, control, manage, or are highly compensated by, even if you are not a majority owner, I would say that it could very easily be argued that you are still receiving some sort of personal direct or indirect benefit, which would still make this a prohibited transaction. If you have any other questions, I would definitely be more than happy to help answer them for you!