I just got my principal back with an IOU for the profits.

Yes, clean your credit, but also keep saving v Remember that your lender will want to see six months of PITI (principal, interests, taxes, and insurance) in your reserves in addition to your down payment.

I have read stories on here where people offer above the asking price, but the debt service is 100% principal payments.

It's a function of time and effort for the return upon closing of a successful transaction and will it lead to more long term business etc.Hope this helps some as I am an investor myself and principal commercial broker.

Often you need to compromise a bit....but the good news is you're still achieving a lot of the benefit, such as tax write-offs, paying principal down mostly via the rental income, long-term appreciation, and reducing your housing expense significantly. 

As far as tax is concerned do you pay more if you take the cash or is it the same as what goes to the principal of the mortgage?

Since you have a decent amount of remaining term, you could sell a partial of 120 months $34,757 at 8% and get the "tail" of the remaining P&I term which looks to be $14,647 of interest and $30,067 in principal. 

You can win with either strategy (Buy near market and let it appreciate while the tenant pays down the principal and you get the tax advantages, or BRRRR somewhere with easier inventory selection), but in a seller's market to get a property and the discount you want it for you're basically going to have to steal it from somebody.In that case, you're going to need a motivated seller.

Also, I'm hoping you are setting asside money for the property out of your budget.... calculate what the mortgage would be and pay down the principal or put that money aside. 

Specifically, if you’re looking at seller financing, assuming buy and hold investing, comparing the 2 offers below 1.Seller Finance: $250K, 5% down, 30yr @ 2.5% = $11,261 yearly debt service2.Seller Finance: $184K, 5% down, 30yr @ 5% = $11,260 yearly debt service Over the life of the loan, the total cost is the same, the only difference would be the ratio of interest to principal in the total payment.