I do think there is some room for interpretation on what can be a "service" and the most conservative approach is indeed to advise clients not to manage properties owned by their IRA or 401k.

So in your example, you'd have to come up with $30k rather than $40k using this approach. 

OK, so this is something I had no idea about but was just brought to my attention.

I feel like those are all things to consider when deciding which way to go.Depending on your current position, I would actually think a hybrid approach of buying a duplex (or other multi) with an FHA loan would be a good way to go.

As an investor I would be looking to get seller financing on a property which I would in turn seller-finance to my buyer provided this approach is permitted in Texas.

Here are a few options:1)HELOC for repairs and flip it for profit2)HELOC for more rentals and hold current to pay off HELOC3)Seller finance to reduce tax obligation and receive. a large enough initial downpayment from buyer to use FHA for a primary4) Hold and use cashflow with the specific intent to invest all residual income5) Sell and take "Capital Gains" hit but purchase another property to help offset it6) Transfer deed to an LLC to remove it from Grandma's name (this opens another door of possibilities but may trigger tax increase due to transfer of ownership)I can go on, and others with different approaches can add to this list as well.

If you are not personally putting your self directed ira into the mix and you are running the project/investment with other people’s self directed ira is this an easier approach regarding access to funds?

's comment about highest and best use, there are many possible approaches. 

The week we started discussing our financial goals, my wife's coworker approached her with the deal.

Most auction companies if the house is occuppied will tell you your not allowed to approach the homeowner.I violate this everytime.. set max bid and semi stick with it though.. but one trick is its human nature to stop at round numbers IE I will bid to 205k and thats it..