Well hold my beer.

Seller should record their lien against the property, you both should have an attorney review to make sure all interests are property documented and protected, and i think everyone is in a good place. as far as evicting tenants... this is up to what you and the seller can negotiate. i would still be putting on the same contingencies - appraisal, inspection... know what you're buying. don't get blinded by the seller-finance piece. 

This investment should have done very well based on these facts, but the biggest drag on performance was the yearly high "unexpected" property tax expense ($300-500k drag on NI per year).

Selling to an entity you own and renting from yourself looks like a tax dodge to the IRS, and they’ll likely reject it.Better AlternativesIf you’re looking to maximize deductions, consider more straightforward strategies like:Renting out part of your home (like a basement or room) while still living there.Keeping clear records of home office expenses if you work from home.Investing in other rental properties that aren’t your primary residence.Michael Plaks explained it really well in his response.

It definitely looks infinitely better than when you bought it, well done! 

We now are looking to create an LLC and setup the necessary legal documents to protect both parties and layout the terms of the agreement.

Protect from what?

With the right tax strategy, you can maximize deductions and reduce liabilities, while having the right insurance and reserves in place will protect you from unexpected costs.By Implementing a quarterly financial review to assess performance and make adjustments to avoid cash shortfalls.

Well worth it IMHO given poor performance of RTO/seller financed zillow listings. 

Joe its all about NPV  and rate of return for investors.. either way your going to take a pretty big hair cut out of your equity to do what your wondering about.