@Andrew Hamlett, your first suggestion could work with a proper JV agreement drawn up by an attorney.

I would definitely talk to an LLC attorney to make sure I'm properly covered.

Lately, there have been other issues, such as smoking cigarettes in his unit and playing loud music late at night as well.

You would only pay him when he has successfully completed a phase of the work satisfactorily, including inspections where applicable.Secondly, if you have a proper contract, it will be easy to just suspend the work, fire him ,and hire another Contactor.

Is the HVAC and water heater broken and functioning properly or is this just due to age?

I was kicking ideas around with my wife the other night and thought about the little time I've spent on biggerpockets, listening to my investor buddy and dabbling in the idea of investing myself.

Take ownership of your mistake and learn to do the proper due diligence recommended above😊

Additionally, a good broker will make sure someone buying a $1.2MM property is not a tire kicker, and has a preapproval or proper proof of funds. 

My plan was to sell the property next year, but wanted to pull some cash out prior to selling to help minimize the capital gains tax.Is there a proper name for this type of loan product that I should be looking for?

Both fair and properly incentivized in our minds.