I'd pay it & chalk it up to lesson learned.

Made sure to check the ledger and T12 to ensure that the tenant was qualified correctly before purchasing the property.

Warning:If you depreciate a property down near zero and then have to sell your property at a loss during a situation of distress...You could end up giving all the proceeds to the bank AND owe the IRS a big chunk of money for recapture.Long-term tax planning with real estate needs to be coupled with risk management and making sure you don't lose any properties.

Access to a heloc definitely makes more sense if you are doing a BRRRR strategy or flips, but neither are a sure thing.

It is definitely a bit more tricky on an investment property, but it can for sure be done.What area of Chicago is the property in? 

I myself am also trying to learn more about seller financing and you seem to be well educated so just what I wondered about your proposition!

Quote from @Steve Holt: @Michael Baum Sure feel like an early adopter!

My wife and I have one rental unit and are trying to move toward our next property, but still are trying to learn more and find additional ways to make some side income to speed the process.

First I would make sure where you are building allows STRs with no or few restrictions.

Whether you choose short-term or long-term rentals, learning and analyzing deals will help you make the best decision.