Following are the similarities and differences between the solo 401k and the self-directed IRA.The Self-Directed IRA and Solo 401k SimilaritiesBoth were created by congress for individuals to save for retirement;Both may be invested in alternative investments such as real estate, precious metals tax liens, promissory notes, private company shares, and stocks and mutual funds, to name a few;Both allow for Roth contributions;Both are subject to prohibited transaction rules;Both are subject to federal taxes at time of distribution;Both allow for checkbook control for placing alternative investments;Both may be invested in annuities;Both are protected from creditors;Both allow for nondeductible contributions;Both are prohibited from investing in assets listed under I.R.C. 408(m); andNeither may be invested in your own business. 

You should be paying sales tax at the point of purchase for all materials on your rehabs...if you're pulling permits to do the work, most jurisdictions will ask you to put up a use tax bond for the work.  

It is all still within the IRA owned LLC.We have many clients who open a checking account with a bank or brokerage for the purposes of managing alternative asset investments such as real estate, notes, etc.  

who's going to track materials and labor costs for you? 

As a wholesaler in Washington I am concerned about a Seller who may not fully disclose material defects that affect the value of the home. 

One guy told us $4,000 if we supplied the materials, but he bailed on vacation and left us hanging.

If those cabinets have good boxes (i.e. plywood) and you want to save costs, you could re-face them (or maybe even repaint).Alternatively, if you replace the cabinets, I would look for ones with good quality boxes that you could reface down the road.  

Are there better alternatives to this?

Get some estimates on what you want to get done, labor and material.

Alternatively, if you wanted to keep things simple, I think it would be fair to push for an additional 5-15% split as a result of your role as a loan guarantor.