Investing with an IRA

[Timothy McKinney]

Hi All,

So I have a situation that i would love some feed back on.

A partner and I have formed an LLC to build or flip houses. He is now retired, and I am a GC. He provided the capitol, I provided the know how. So we bought a building lot through the LLC. Then his ability to fund the rest of the project dried up. However, he has a 401K. Here is my suggested scenario:

Partner converts 401K to a SDIRA.

SDIRA purchases lot from LLC for original purchase price.

Money from sale of the lot to SDIRA gets returned to Partner. 

Then the SDIRA provides funding for the rest of the house construction. 

Upon sale of the property, SDIRA get paid back the full investment amount plus 6%. 

The rest gets paid to LLC as a contractors fee.

The two partners then split the contractors fee 50/50.

  Is this legal?