It does not seem like a high risk based on your escape clause but I would be making a lower initial offer based on the sellers situation.

I'm also curious to learn about any other sort of private and/or alternative financing that may work well with my scenario.While I don't yet know what my 10-, or even 5-year plan is, the idea of pursuing REI as an escape from the "rat race" is very appealing to me.

Try to get it closer to 1.2M.Get it under contract with sufficient escape clauses and follow through with your due diligence. 

Do you have escape clauses?

., former employer 401k) to a solo 401k are not reported on Form 5498, but rather on Form 5500-EZ, but only if the air market value of the solo 401k exceeds $250K as of the end of the plan year (generally 12/31);When funds are rolled over or transferred from an IRA or 401k to a self-directed IRA, the amount deposited into the self-directed IRA is reported on Form 5498 by the receiving self-directed IRA custodian by May of the year following the rollover/transfer.Rollovers (provided the 60 day rollover window is satisfied) from an IRA to a Solo 401k or self-directed IRA are reported on lines 15a and 15b of Form 1040;Pre-tax IRA contributions on reported on line 32 of Form 1040;Pre-tax solo 401k contributions are reported on line 28 of Form 1040;Roth solo 401k funds are subject to RMDs;A Roth 401k may be transferred to a Roth IRA (Note that from a planning perspective, it may be advantageous to transfer Roth Solo 401k funds to a Roth IRA before turning age 70 ½ in order to escape the Roth RMD requirement applicable to Roth 401k contributions including Roth Solo 401k contributions and earnings.)

I'll never understand why people believe that real estate attracts so many philanthropists and humanitarians who are just wanting to help complete strangers escape the rat race.

However, the definition of “passive” escapes me and there seems to be no concrete definition.I do not want to risk my status or possibility of delaying my green card application.I was hoping that someone can help me shed some light on my situation and how I can proceed in the best possible manner.

Key thing is to make sure the property is zoned for what you want to do with it. another thing to remember is that any space below ground level turned into a bedroom needs an egress window out of it and probably an escape window well.

And there is a fire escape which had been installed 25-30 years ago.

., former employer 401k) to a solo 401k are not reported on Form 5498, but rather on Form 5500-EZ, but only if the air market value of the solo 401k exceeds $250K as of the end of the plan year (generally 12/31);When funds are rolled over or transferred from an IRA or 401k to a self-directed IRA, the amount deposited into the self-directed IRA is reported on Form 5498 by the receiving self-directed IRA custodian by May of the year following the rollover/transfer.Rollovers (provided the 60 day rollover window is satisfied) from an IRA to a Solo 401k or self-directed IRA are reported on lines 15a and 15b of Form 1040;Pre-tax IRA contributions on reported on line 32 of Form 1040;Pre-tax solo 401k contributions are reported on line 28 of Form 1040;Roth solo 401k funds are subject to RMDs;A Roth 401k may be transferred to a Roth IRA (Note that from a planning perspective, it may be advantageous to transfer Roth Solo 401k funds to a Roth IRA before turning age 70 ½ in order to escape the Roth RMD requirement applicable to Roth 401k contributions including Roth Solo 401k contributions and earnings.)