My brothers (who got the same amount) are going the Index Fund / Stock Market route.

Once you have significant capital in qualified retirement funds that you can actually do things like hard money lending or buying properties, then a self-directed plan makes sense.

The following IRS websites cover the UBIT rules. https://www.irs.gov/charities-non-profits/unrelated-business-income-tax To avoid UBIT it will be better if the self-directed IRA loans funds to the LLC as UBIT does not apply to notes.

After doing this for about a year and raising enough capital for a downpayment on a home, I plan on purchasing my first single family home.  

I am also interested in partials -- I have a 2nd that is currently in payoff, so I'll have funds coming free that I want to invest.

Seller is agreeing to loan me the funds for a downpayment and closing on two properties.

I have an offer from a lender that is currently asking for a 12% fee and in return they will provide my business with 60k in Funding. 

If you have been at it long enough to have all the returns and financials the bank needs, but still have no luck securing the funds, Hard, Private or Asset Based loans are going to be your best bet.  

The problem is that I am out-of-state, would need funding, and a partnership with...preferably...a local, trusted investor there.

How do you explain transactional funding to these people?