@Jacqueline Pelzerwithout digging into details of your transaction further I can't tell you for sure if what you are describing is prohibited or not, but you are in the grey area for sure.Under certain circumstances your IRA could partner up with a 'disqualified person', but such transaction could easily become prohibited down the road.

I am not going to go into the details of the new circumstances, but long story short I now live in the Milwaukee area for work.

The seller may be an unreasonable curmudgeon who won't negotiate under any circumstances.

A lot depends on the circumstances, the market etc.

@Poem TurnerThe class of tenant you will be dealing with with those rents will surely bring unforeseen headaches.

Relationship... consider it depending on circumstances and experience in peripheral areas surrounding investing.  

You could come in with that during the refi, if you wished, and keep that $125k liquid in case some estimate is off or some unforeseen expense comes up during the renovation.

Who knows they may have lowered the price by the entire quote amount of the unforeseen items just to keep the deal alive, or maybe just split the cost...  

In various circumstances, this might mean that they are late on their mortgages, or are otherwise distressed and in need of a quick sale.  

All things change with time and circumstance!