Weighing UBIT drag against redeployment risk with 214k in a Roth SDIRA
Take 214k moved from an old employer plan into a Roth self-directed IRA, sitting mostly in cash while two paths get compared. Option one: three private notes through a single lender, first position, 60-65 LTV, 10-11 percent, 12-24 month terms, roughly 60k each so 180k deployed, with 34k held back for custodian fees and reserve. Interest earned inside an IRA is passive income, no UBIT, and compounds tax free inside the Roth. The real risk is concentration in one originator and the reinvestment treadmill of redeploying every 18 months, which means real work and idle cash between payoffs. Option two: a multifamily syndication, 100k minimum, sponsor projecting a 6 percent preferred return and a 5-7 year hold, levered around 65 percent with agency debt. That solves the redeployment problem, but debt financing on the property means part of the income and part of the eventual gain is treated as debt-financed and taxed inside the account as UBTI. A sponsor's investor relations answer of "most investors see minimal amounts due to depreciation" is not something to underwrite off of; it needs an actual number pulled from a prior year's K-1. The real decision is between all 180k into notes and accepting the reinvestment treadmill, or splitting into a syndication plus one or two notes and eating whatever the 990-T filing costs. The dollar cost of UBIT on a 100k LP position varies widely by sponsor and depreciation schedule, so the only reliable number comes from an actual K-1 on a comparable deal, not an estimate from the sponsor's marketing team.
