That particular interpretation does seem to be a bit more conservative than the average among the self-directed industry, however.I agree, 4975(d)(2) does not cover managing a rental, but that exemption seems to apply to the plan or IRA actually contracting with and possibly compensating a disqualified person for services necessary for plan operation.

Once they're all leased up and the property is operating at a profit, I'd go to a bank and say, "Look, it's a viable concept, we completed phase 1 without screwing anything up, units are all leased and generating profits, and we have a waiting list for phase 2 and 3 units.

https://www.hudexchange.info/resource/729/sample-development-budget-and-operating-pro-forma-for-a-commercial-and/or-mixeduse-nsp-property/Plug the numbers into this pro forma to see what your real profit will be.

Here are the laws in regards to this stuff.4735.01 [Effective Until 3/20/2019] Real estate broker definitions.As used in this chapter:(A) "Real estate broker" includes any person, partnership, association, limited liability company, limited liability partnership, or corporation, foreign or domestic, who for another, whether pursuant to a power of attorney or otherwise, and who for a fee, commission, or other valuable consideration, or with the intention, or in the expectation, or upon the promise of receiving or collecting a fee, commission, or other valuable consideration does any of the following:(1) Sells, exchanges, purchases, rents, or leases, or negotiates the sale, exchange, purchase, rental, or leasing of any real estate;(2) Offers, attempts, or agrees to negotiate the sale, exchange, purchase, rental, or leasing of any real estate;(3) Lists, or offers, attempts, or agrees to list, or auctions, or offers, attempts, or agrees to auction, any real estate;(4) Buys or offers to buy, sells or offers to sell, or otherwise deals in options on real estate;(5) Operates, manages, or rents, or offers or attempts to operate, manage, or rent, other than as custodian, caretaker, or janitor, any building or portions of buildings to the public as tenants;(6) Advertises or holds self out as engaged in the business of selling, exchanging, purchasing, renting, or leasing real estate;(7) Directs or assists in the procuring of prospects or the negotiation of any transaction, other than mortgage financing, which does or is calculated to result in the sale, exchange, leasing, or renting of any real estate;(8) Is engaged in the business of charging an advance fee or contracting for collection of a fee in connection with any contract whereby the broker undertakes primarily to promote the sale, exchange, purchase, rental, or leasing of real estate through its listing in a publication issued primarily for such purpose, or for referral of information concerning such real estate to brokers, or both, except that this division does not apply to a publisher of listings or compilations of sales of real estate by their owners;(9) Collects rental information for purposes of referring prospective tenants to rental units or locations of such units and charges the prospective tenants a fee.

To do that you may want to keep everything in your name but have an operating agreement with him so he manages and runs the real estate without owning it. 

This LLC would need to have its own separate EIN and bank account as well as an operating agreement which defines the roles and responsibilities of the investors, manager(s), etc. 

Investment Highlights: 12% Guaranteed Returns125% Buy Back Guaranteed year 5Fully Operational Parking Facility with 18 year track recordFully Hands-off & Fully managedTitle deed ownershipThis offering is compliant with Regulation D 506C of the Securities Exchange Act of 1934 and is being made outside the United States to non-US persons under Regulation S, Section 5 of the Securities Act.

[No coverage for] Water below the surface of the ground including that which exerts pressure on or flows, seeps orleaks through sidewalks, driveways, foundations, walls, basement or other floors, or though doors,windows, or any other opening in such sidewalks, driveways, foundations, walls or floors;...Wear and tear; marring; deterioration; inherent vice; latent defect; mechanical breakdown; rust; mold;wet or dry rot; contamination; smog; smoke from agricultural smudging or industrial operations; settling,cracking, shrinking, bulging, or expansion of pavements, patios, foundations, walls, floors, roofs orceilings; birds, vermin, rodents, insects or domestic animals.

Is there a way to avoid a due on sale clause for my current property and duplex but still operate them as rentals and be taxed as a business?

I admit there are bad turnkey operations out there, but a good product that cash flows and isn't in negative equity sounds like the goal of most investors.