The homeowner now actually is working to acquire a traditional mortgage from a bank to payoff the original owner who holds the current mortgage.  

The IRA FAQ on New Direction IRA says that a person can acquire a property in an IRA.

Another option is to refinance into a conventional mortgage before 5 years if you acquire more capital and/or experience appreciation.

 I am currently in the process of acquiring two properties with septic systems, so for me - the answer is yes.I'm learning as I go, it seems that the issue isn't so much the presence of the septic system per se, but how well that system has been maintained over the years.

This will free me up to acquire more 'real' investment properties that produce cash flow.The current tenant signed a 2 year lease which doesn't end until Jan '16.What are my options for getting rid of this property?  

Properties that are acquired with the intent to rehab and then sell immediately do not qualify for 1031 Exchange treatment. 

Hey BP,I will be acquiring houses using subject-to financing.

With a direct mail campaign you can acquire some undervalued properties do some light rehabbing and put them on the market just below current market prices for a quick sale.

The best way to get started is to utilize an FHA loan which allows you to acquire a 2-4 unit property at 3.5% down so long that you live in one of the units.

But, now that I have discovered the goodness, I am striving to one day acquire many buy and hold rental properties.