As a kid, did you ever play a game with a group of other kids and then like magic, all of the rules flipped right in the middle of the game?

Since the sole source of recourse is the income from the installment sales contract, this loan does not violate the IRS “pledge rule”.

As Andreas mentioned, it's good policy to outsource your debt collection activities to licensed 3rd parties to reduce risk and stay compliant with rules and regs.

However your state law may exempt you if you follow strict rules/guidelines.

All states have their own rules. 

People keep telling me that around here that is really for "developers" and I guess I don't rate yet (though I'd like to someday :))The problem is the market is so hot up here, it seems like the only way I can find a deal that supports my goals is with fixing up more distressed properties that haven't sold right away, so I'm struggling with the best way to use my available capital.

But these rules are specific state to state and sometimes even county to county.  

Looks to me that prices are a bit high right now not seeing very much that even hit the 1% rule.

If comparable homes support the value, yes.

For me, there is so much to go off of, but I will list a few:1) A passion for real estate - I love learning about it, talking about it, and doing it.2) Be your own boss (B&I, not E&S)3) Financial Freedom for my wife and I (ability to pursue other interests without a need for financial support from those endeavors4) To help others reach goals (if that is financial or otherwise - we love supporting missionaries and hope to be mid-to-long-term missionaries ourselves someday)