Also realize you'll need a legitimate POF or preapproval, and won't be able to assign the contract, or do an immediate resale depending on who the lender/investor is.

This is a disturbing list of issues and yes, you can legitimately be sued.

There is no legitimate way around the rules.

An agent can sell a distressed property just as well as a retail property and look significantly more legitimate while doing so.

Rental income is considered to be passive.However, when you own a rental property you can legitimately deduct from the income all of the expenses related to that rental property.

Consider alternatives like renting a car solely for business use, leasing a car with business-friendly terms (consult your tax advisor for details), and focusing on maximizing deductions for legitimate business expenses such as property taxes, maintenance, and cleaning supplies.

I'm assuming the spouse is required to work for a legitimate business and receive either W2 or 1099 from that business, but is this the easiest route to take? 

I have a few questions: 1- Is this a legitimate way to set up a business?

You can qualify for the Solo (superior to SDIRA in many ways) as long as you have legitimate self employment activity and no employees other than your spouse. 

Tbh there were a few other lenders that I knew were slam dunk scammers because of interest rate, but this guy seemed slightly more legitimate so I suppose in relativity I elevated his status to "...Maybe?"