Go to the "horses mouth" call the TREC and ask if they consider an activity a violation of law, they will tell you.

For example, many lenders consider an investment property a more risky investment than an owner-occupied home.

The question is if I just keep my houses, or if I sell one or two, and consider an opportunity like this - at the very least, I would like some more information from someone that knows more than I do on the subject.Any advice?

If the only issue you have with them is the late rent but always paid, why would you at least not consider an alternative that benefits both parties? 

If not why not consider an FHA 203k rehab loan that requires a 3.50% down payment but all that can be gifted from significant other, close relatives.

I would consider an umbrella insurance policy to cover EVERYTHING related to the property.

When you have $100,000 or so in equity, it's time to consider an LLC.

If seller financing is an option with $100,000 down payment, I would definitely want to know the terms and interest rate the seller desires.In order to raise $100,000  to acquire the property vs losing the deal, you might want to consider an equity partner or joint venture partner.

Have you asked them is they're willing to consider an owner finance situation yet? 

You should request an IRS Form W-9 from all independent contractors you hire.A best practice is to consider an executed W-9 part of a complete contract.