For ex, I know that I have to depreciate my bldg value on a 27.5 year schedule, no way to accelerate that.

I can compare GM stock to Ford or a Utility bond to a municipal bond, I can view risk that has been standardized to look at alternative investments.

Alternately, your lender would fund your purchase as a first mortgage and the rehab costs as a second mortgage.

I suggest you get advice quickly from a qualified CPA or attorney who is familiar with IRS regulations regarding alternative assets in a Self-Directed IRA and thoroughly review your current and past transactions.Even your first investment, as you describe it, has some possible prohibited issues.

The GC isn't just pulling permits, they're actually responsible for the project.Another alternative is to get a license. 

I would also check with credit unions, they sometimes can help you when banks can't and sometimes they have alternative loan programs that can help you get into a place.

So its great to get an alternative viewpoint. 

An alternative would be to replace the windows in those units with predominate north and eastern exposures first and the others at a later time after you have replenished your reserves.

I hope it all comes to a resolution you can both be at peace with, since the alternative like @Michael Nemeth mentioned can be never ending war.

Its something that the seller is not usually willing to do so I would resort to avoiding PMI by using alternate choices of putting less than 20% down and do an 80-10-10 loan.