Of course the solo would also pay the notes.

So for example; if you pay $500k for a rental and $400k is building value. 

I am interested in paying off my loan balance on my Primary house ASAP as I pay a pretty heavy Mortgage every month.

I would suggest taking the route of option 2 or 3, so not only are you saving over 10k in rent per year but the residents help in paying down the debt.

Imagine you make $100k and you are affected by 3 tax brackets.0-33k =-33K 0%33,001-66k 10%66,001 - 100k 20%You can take $100k in deductions this year and pay zero taxes, for one year and then $10,100 for for 2 years  ($20,200 total)You can take 67k in deductions this year and pay zero taxes for a year, take 33k the second year and pay $6,800 year two and $10,100 year 3. ($16,900 total)You can take 33k each year and pay $3,300 in taxes all 3 years. ($9,900 total)Obviously this is simplified but unless you expect to make much less and be in a lower tax bracket in the future those deductions could come in handy.

@Nadir M. you would show 100% of whatever you collected on behalf of an owner.Of course, if tenant pays via credit card, you would NOT include the credit card fees, because you did not receive them.From the funds in your OPERATING account, you would pay any expenses on behalf of the owner, including your management fees - which you woul transfer to your PMC account.Owner will be paid from Operating account.Your vendors (office expenses, auto, etc) would be paid from your PMC account.Year end, you are require by IRS to send a 1099 with GROSS amount collected on behalf of owner.

Now I spend 5 years hoping they make their payments and somehow refinance to pay off the balloon. 

Could the seller provide you with a note for the down payment and you pay him back?

What is she doing now in terms of paying for housing? 

Quote from @Micah Huffman: I am considering relocating to Nashville for a job promotion that would be a 20% increase in pay possibly more.