Best way to structure a deal in Self Directed IRA (Roth)

[Sophia Wang]

Scenario: I own a land parcel in my self directed Roth IRA (let's say valued at $50k), and have a small amount of additional funds ($25k) in the Roth account. We plan to build a home and sell (construction budget $250k, home should sell around $400k). Since the funds in the account is not enough to cover the construction cost, we are looking at best option to structure the deal.

Thought process: If we get a none recourse loan to build the home and sell, this will trigger the UDFI tax. To avoid this, is it still possible to add a partner (none related) to the title that becomes the equity partner to the deal, and would this help in avoiding the UDFI tax? 

Any other suggestions? 

[Patrick Prunty]

@Sophia Wang

I have heard of a lender or two who would consider a non-recourse loan for new construction. Non-recourse is hard enough to find, let alone new construction so you'll basically need to find a private, nearly private, party to fund such a loan. Expect the fees and interest rate to be higher, expect the LTV to be lower and likely you'll be paying interest on the full amount of the loan from day 1.

I agree with Dmitriy however that UBIT is in play regardless of whether or not there is a recorded lien or an equity partner.