I'd love to hear how market conditions in Waco have affected your ability to execute your business plan. 

It is ideal (and will really improve your ability to successfully engage contractors) if you can float the construction draws3.

I am by no stretch of the imagination an expert, and I'm sure there's missing info here (what do your credit scores look like, what's your DTI look like and will it affect your ability to qualify for future financing, do you have additional credit to make use of, etc.) 

If you haven't shown him that you have the ability to deliver the product, why wouldn't he feel uneasy about it? 

It seems like a fairly thin spread given the risk on your behalf and the ability to sell for $2.2MM (don't forget commission is coming out, so that's $132,000 if 6%). 

You will have the ability to move it once you leave.2. once you leave, you have the option of A.

The heart of the question I'm asking is can this: Do we have ability to get into the position of this new investor on the basis that the seller didn't have the legal right to sell the property to him?

Lenders have the ability to add-back one time items on a return.I guess the follow-up question should be, should the renovation been deducted or capitalized on your return...

They may be in a position where they don't need the chunk of cash and by taking payments, they have the ability to make a return on their money.

In addition, if you are self-employed with no full-time employees you may wish to consider opening a Solo 401k instead of a self-directed IRA as it has several advantages over an IRA LLC such as much higher contribution limits, direct checkbook control (i.e. no need to have the account at a specialty trust company), ability to take a 401k loan, exclusion from unrelated debt finance income tax with respect to investment in real estate acquired with non-recourse financing, etc.In addition, please note if you purchase debt-financed real estate with your IRA, unrelated debt finance income tax should apply to the income attributable to debt-financed real estate held by your IRA.