I want to teach my children the joy & power of saving money, as the first part to their financial education.

Purely tax neutral viewpoint.  

What makes a self-directed IRA custodian different is that they are not purely connected to the public exchanges and limited to investing in stocks, bonds and funds, but rather have the staff training and paperwork to document the IRA's investment in the more individualized transactions that occur when investing in real estate, notes and other non-traditional assets.

I've done the analysis, comparing the cash out refinance vs. a lower monthly payment, and we would need to earn an avg annual return of 7% or more over the next five years on the invested cash out funds ($40k) for it to make sense from a purely dollars/net worth aspect. 

It is hard work pure and simple and most people are not willing to put in the effort.  

The joy and peace it brings me is difficult to quantify monetarily.  10 out of 10 I'd buy it again. 

I'm looking to diversify my investment portfolio from purely residential units into office space.

Rental rates are set by the market so you won't be able to price far above market rates purely due to the solar panels.

So my question is, does anyone know of any hard money lender or other unconventional way to get this money for the units based on purely on future cash flow? 

There may be other reasons to create an LLC but if you're purely looking at tax effects, you will pay more with an LLC.Perhaps look into the section 199A pass through deduction that is brand new to see if you can get a tax break from that.