These conditions are highly derivative of typical conditions that my bank would require after approving but before funding a loan.

If you do it, the entire IRA account (not just the loan) is considered to be distributed and taxes and penalties will be due. 

We are starting down the path of distributing the properties, and we are concerned about the tax consequences of dividing up the properties. 

Distributions to be made on a quarterly basis to all investors based on excess cash flow.

@Albert Bui - I don't know how you learned about GRM, but you got it wrong because ANNUAL rent is normally used to derive GRM. http://en.m.wikipedia.org/wiki/Gross_Rent_Multipli...

The incentive would be realized by distributing a 10% cash payoff to any existing lien holders in exchange for a 20% lien on the homeowner’s property.

If there are multiple members, it files a partnership return and the income and expenses are distributed to all the members.

The potential issue with holding the rentals in an S corporation is that although you do receive passive income distributions via a K1, if you are performing services in the S corp the IRS is severely cracking down on individuals who do not receive earned income out of their S corps.

With an S-corp you can split the income between distributions and salary, thus reducing your taxable basis.

So, it seems like it would be reasonable for Manage LLC to collect rent, pay expenses, perform evictions, etc, and distribute the net income to Property 1 LLC.