I'm trying to Figure out how to make this potential deal work.Seller wants to sell but not right away because they still use the house for some income. 

Are they really willing to sell and walk away with zero dollars up front?

There are also few things better than tax free cash if you want to sell it and move out.

Any amount you purchase less than you sell. 

There's a number of them that are selling 3 bed and 2 bed.

It's a small place so I'd guess it won't rent for enough to cover your expenses anyway so I'd probably sell, especially if the loss is small, it unless it's in a great neighborhood that you think will do well over time. 

If you’re not occupying the property and plan to either sell it or keep it as a rental, you might want to consider a bridge loan through a hard money lender.

I do need a property that is not very expensive, which is why I have been looking into Clevland due to their low selling prices and high appreciation rates.  

Operating in the Luxury SpaceWe focus on properties in the $1.4 million to $1.9 million purchase price range, which allows us to sell finished projects in the $2.5 million to $3 million range.

There's growing housing desperation to both purchase and sell in markets with pre-existing supply and price constraints.