Optioning RE by SDIRA or Solo 401k

[Thos. A.]

I've been in REI and done most kinds of deals, from tax liens to Sub2s to Short Sales, but haven't used options much. I just set up a Self-directed Roth IRA with checkbook control via an LLC (custodian is Sunwest Trust). I'm looking into setting up a Solo Roth 401k as well, contributing to it based on the flipping income from an LLC I have that I plan to designate to have taxed as an S corp.

I want to keep things simple (from this point on, anyway), and I want to divert as much $$ from the better RE deals I find into my Roth retirement accounts, then rinse and repeat. I'd incur UDFI from buying on low-down leverage/terms in the SDIRA; but apparently the Solo (Roth or not) 401ks are not subject to UDFI/UBTI, which opens up some good possibilities there.

I've heard some people are optioning RE from their SDIRAs and Solo 401ks, since options don't trigger UDFI. A post I read recently spoke of buying an option (strike price $375k) for $100, then finding a buyer for the optioned property for $525k, netting a cool $150k into the SDIRA, a massive return on a hundred bucks.

This is an esp. juicy example, but you get the idea. Have you done options into a retirement account? What are the challenges?

I also wonder about the mechanics of an option transaction. How exactly in the closing and on the HUD-1 does the optioning SDIRA get paid? If the final buyer is using bank financing, would they be OK with this? Is it simply paid like any other recorded encumbrance at closing? Thanks for any insights.