@Jon Holdman We are on the same page here except for the PM. While the line is fuzzy, it is only fuzzy because of how poorly and non-specific the IRS rule is written. I agree that picking stocks, evaluating tenants, vetting borrowers, etc. all are legal performances of an IRA owner. It was the doing work on the rehab for your IRA, doing property management, and other similar things like that I was referring to as prohibited items. The reason I believe performing PM duties for your IRA would be a no no as far as the IRS is concerned is the fact that such an item typically costs 8%-12% of the gross rents. Doing these tasks yourself is far different then simply vetting a borrower which is not an onging performance, just a one time deal and also does not come with similar costs to have an outside party perform such a duty. As such, performing the PM work would be considered contributing to the IRA.
Again, we also agree that owning RE inside an IRA is the poorest use of the IRA funds (in our opinions). So I am of the opinion that attempting these types of investments are just to risky in potential violations of IRS guidelines and as such, why risk it, just use the funds as a lender and avoid such problems and managerial headaches keeping your IRA and you a much more passive and legal investment.
@Jon Klaus - If the other party is a non-disqualified party, you have zero issues, as Jon stated, i was under the impression that you would be partning with the IRA and in that case, you would likely run into problems, however, if you were to perform the property management, I believe you would still run into problems. Managing the rehab - perhaps not, as long as you were simply hiring the contractors and not swinging the hammer, that would be no different than selecting a borrower or picking a broker.