(car is paid off)Is it better to just hold some of this debt and let it accrue the interest, so that I can build cash reserves?

Interest accrued doesn't go to the tenants so no need to keep them separated by each property here in Georgia.You'll also need "reserves" for your rental business.

If my strategy is buy and hold, and exit when the property accrues equity, should I consider another strategy or market?

Then you don't get taxed capital gains on equity accrued. 1031 should delay any capital gains, but you have a limited window to apply it. 

Yes, I'm going to talk to my CPA but just trying to make sure I'm thinking of everything.Here are the details:*Purchase price of lot $99,000 bought with 1031 exchange funds*Sale price $175,000*Held less than 1 year*Doing seller financing with $25k down payment and 10% interest -accrues from day 1, but payments start after 12 months w/balloon for balance at completion of their project.

As for the dividend risk, can this be negated if a ROTH 401k or ROTH IRA is used since they don't accrue capital gains?

It would have an accrued deferred interest of x percent per year and then once they start receiving payments an amortization table pay down so at any point in time the risk to me is coffered.The seller would get crushed in instances like that.

You have no rights except for interest to accrue, until you are able to foreclose in three years.

At any time, at Agent’s sole discretion, Agent may terminate the Grace Period privilege outlined herein and assess any and all Late Fees if rent is not received by the first of each month.For each day after any Grace Period a daily fee of 10.0% PER DIEMbased on the monthly rent will be charged until Agent receives all accrued amounts owed by Tenant in full."

However, the would-be seller still hasn’t taken any steps, meanwhile the tax delinquencies are accruing, and the property will officially come under “power of sale” status in a few months from now.