I don't pay any interest on the construction loan until I take a distribution to pay my contractors.

Question 1: I heard LLC owners pay taxes on their distribution.

You accrue the pref and make distributions against the accrual. 

In the event that PURCHASER elects to cancel this Agreement during the initial 60 day inspection period this paragraph shall serve as authority to the Escrow Agent from the SELLER to act upon the “single order” of PURCHASER to distribute the Earnest money to PURCHASER.

In the chapter Ken gives a real world example of his offer on a property that he derived from dividing the NOI by the Cap rate in his area, but most of the properties he talks about in his book are larger properties, most involving hundred unit apartment complexes.

@David MorganIn my personal view, i is generally best to just hold the beneficiary IRA at a company like Fidelity investments and invest in stocks and mutual funds because of the fact that you have to take annual distributions. 

Or, can a portion of the proceeds be kept out and taxed as a distribution?

One is that if you lose this job, you will (usually, check you plan document) have to repay the loan quickly or it will be distribution subject to taxes and penalties.

The rental income would pass-through the C Corp to us (perhaps keeping a minimal profit for itself) as rent, thereby foregoing payroll/SE tax (that would have been paid on wages distributed from the C Corp to ourselves), and most importantly dividend distributions, since all the income would have been passed-through as rent.

How did you derive those numbers?