Keep in mind of the I/O(payments/period) and game plan on how fast you'd like to pay it down. 

Key Factors for a Good Seller-Financed DealCash Flow: Rental income should exceed monthly payments (PITI) by at least 1.25–1.5x.Purchase Price: Compare to ARV and market value for fair pricing and equity potential.Interest Rate: Aim for competitive rates; higher rates must still allow positive cash flow.Amortization/Balloon Terms: Favor longer amortization and align balloon payments with your exit strategy.Down Payment: Lower upfront costs reduce risk but should meet the seller's expectations.Flexibility: Seek no prepayment penalties and fair late-payment clauses.Property Condition: Ensure the property’s condition matches terms through inspections.Seller Motivation: Assess the seller’s willingness to negotiate favorable terms.Exit Strategy: Have a clear plan for refinancing or payoff at term end.Portfolio Fit: Ensure the deal aligns with your financial goals and risk tolerance.Vetting multiple deals and consulting professionals is crucial to making sound decisions.

I handle payments by draws and I must always be ahead and work versus payments.

Your payments are known. 

It might make the most sense to just sell your primary residence and use it as 40% to 50% down payment on your future home. 

A lot of them contain Balloon Payment Provisions. 

The main issue I have is contemplating the baloon payment at the end of the 2nd year and refinancing the remainder with a bank...how can I compute that into calculating the IRR?

1099, social security, trust payments, annuities, etc?

I'm very new to investing and weighing which options would benefit me the most.Option 1:  Use the cash as down payment on another primary residence and rent out the current.

do not use a line of credit for a down payment.