I informed the landlord of their options.

This is particularly beneficial in popular tourist areas where demand for short-term lodging is high.Flexibility: Owners can choose when to rent their property, allowing them to use it personally during off-peak times.Support for Local Tourism: STRs provide a unique lodging option for tourists, helping to boost the local economy by attracting visitors who may prefer a home-like stay over traditional hotels.Diversification for Investors: STRs provide real estate investors with an additional income stream, especially if they own properties in tourist-heavy areas.Cons:Strict Regulations and Higher Fees: San Antonio recently updated its STR regulations.

Another option could be to sell and put that into something appreciating faster and maybe a bit closer to where you live. 

Once you start real estate investing you won't ever look back 😂Sounds like you are well on your way, and once you save up a little cash you might benefit from linking with a good lender to see your options!

A better option is for the tenant to take out a personal loan, pay me in full, and make payments to the bank.

I’d recommend looking into insurance options, as it adds valuable protection for your investment.

However, in their attempt to make it as easy as possible for a buyer to make the purchase decision, they’ve created a convention whereby the buyer has what amounts to a “free look” or option with virtually no obligation or real commitment.  

Either way you have better options you can use the land as equity so FHA would nto be the best route. 

@Matthew Brown If you don't mind diversifying your real estate portfolio there is a way to take advantage of both financing options and all of the benefits of the 1031 exchange.There is something known as a diversification exchange that allows you to sell your relinquished property and purchase multiple replacement properties.

Thinking this way will prevent you from moving forward on really solid options.