Creative financing? IRA and Conventional

I’m about to go in contract for a small park in Texas (first purchase for me).
The park consist of a single home on a large lot, and about 24 MH Spaces ( 13 currently occupied).
I am planning on using a Self-Directed IRA and a 401K loan to pay the down payment.
For tax purposes, I’m planning on separating out the house under the IRA, and the MHP portion under the conventional business ( non- IRA).
This will allow me to both better use the current IRA, as well as establish a small current cash-flow with the MHP.
I believe I will create two separate LLC for these ‘properties’.
I don’t have quite enough capitol to not use the IRA to have the 20% down payment.

Any thoughts? Has this been done by any one?

Regarding the IRA, when you carve out the single family home, will the IRA be able to cover 100% of the cost? There’s issues/challenges with leverage for an IRA.
Also, how familiar are you with prohibited transactions/disqualified persons regarding the IRA? If not, would recommend doing some research there.

We have had a couple threads on this recently. The consensus was that using your retirement accounts for active investment (e.g. being an owner / operator) is a non-starter due to the paperwork and headaches you’ve outlined above.

You should only do this for passive investments where you’re just collecting and not having to write checks all the time.

I’m not recommending this since I don’t know your situation, but some people have even cashed out those retirement accounts, taken the tax hit and penalty, in order to fund their Park and not be limited to using their money the way the government requires for active investing.

Using your personal funds and performing any labor yourself on this is not allowed under the government’s regulations. If you’re just looking to have someone else operate a Park and you collect a return on your investment then this is a great solution.

Thank you to both for the replies. Yes, I’m a little familiar with prohibited transactions. This is why I was thinking to include only the free-standing home under the IRA (with it’s own LLC)… less checks, maintenance, etc.
The MHP portion of the deal would be under a separate LLC, and not specifically funded by my IRA.
The rent payment from the home would go into the Self-Directed IRA account (holding company), and the MHP would go into my personal current cash-flow (under it’s own LLC).
Again, I’m new, and figuring this out. It just seems I can do this way-maybe.

It looks a little tricky, but I feel I can do it and be within the law.

Again, please continue to provide your insights, there’s alot I don’t know. And, even more I don’t know that I don’t know (that’s the stuff that scares me).

I am currently under contract and in DD for a park in AZ and went into the deal wanting to do something similar. As touched on above its not advised not leverage a self directed account because you would be subject to UBTI. You really want to check with a CPA at least but he will probably tell you to speak with an attorney for the structure as well. My concern for your specific case would be if there was an issue with “arms length” aspect of the deal, I don’t have a clear answer for you just a concern. Make sure you also do your research on fees for the self directed side, pay close attention to the details. I decided against it for my situation after hearing concerns from more than one advisors, your mileage may vary.

Best of luck to you!

Thanks, I have concerns with doing this correctly too. Just signed the contract tonight, starting 45 days diligence. Not sure how I’ll end up yet with the financing. If I can’t discover,a safe way to do this in the IRA, I may go ahead and just take the tax and penalty hit and use the funds as conventional.

Brandon Reynolds, I replied to your PM, not sure if you got it.

Check and see with the local bank first. If they are willing to do with a high vacancy rate, you will probably be better off. If they won’t do, feel free to contact me.