Personally, I have stopped making any loans to owner-occupants at all due as the complexity, cost & risk do not justify the return IMO.If you are dead-set on helping your relative, I think the safest thing to do would be to GIFT them a PART of the down-payment they would need to get a BANK LOAN, with no expectation of getting paid back - you can make an agreement with them that they will pay you back, but know up front that there is probably a greater-than-even chance they will not, and accept that it is really a GIFT and any payments you get back are more than you expect, and "nice to have".

I learned a very valuable lesson with the clients response.He simply said "If I accept a personal guarantee as security of payment then I must be willing to use such guarantee to collect.

Just dont accept any rent money, nothing, otherwise the judge will throw the case out.  

Also in lots of auctions lending is not accepted so you may be out of luck there. 

Would the IRS accept the fact that the money is being reinvested in real estate even though the money changed hands?

What have you all found is this acceptable?

We found a guy last week, (on CL) seemed to have a troubled past; but hey, I wasn't taught to judge ppls character, exclusively by their outward appearance. 

If they accept it then we will get the contract signed.

@Mike MakkarIRS rules are explicit about the IRA money being used exclusively for the benefit of the IRA.  

Tenants will accept that in my opinion.