Ideally I need to get a separate system installed downstairs for the heat to be a consistent temp (I had an appt for a quote this morning and am waiting to hear back on this) however I know its not going to be cheap so Im debating whether to go through with all these extra costs to turn what was meant to be a single family home into two units or just rent the whole house or sell.To combat the issues above I could just rent the entire house out to someone who would use the downstairs as a mother in law type unit for themselves...that would probably make the most sense - I could realistically get 2200-2500 clear for rent and have them do their own utilities.

Yes, there will be buyers who walk - but the best way to combat that is to show proof of all inspections passed.

I'm interested in hearing how other landlords combat this problem!

However with homeowners its usually been ( especially in a mortgage sherrif sale state) a factor of years that the people have lived for FREE.. not just a month of skipped rent.. and those folks still can be combative as all get out.

There is a lawsuit going on currently to combat that so that would be something to research for sure.

@Tim Gordon I am in the military stationed in Kuwait, I make about $160k a year tax-free since the higher powers consider this a combat zone. 

It is much better to have a positive relationship with a tenant vs a destructive one.In the long run, it is likely worth it to get rid of them if they continue to be combative, pay rent late, not sign a new agreement with you, or what not. 

Lawyers will have a field day with it...discrimination etc etc.Same reason as calling a previous employer about a former employee....they are basically stuck with " I would/would not hire them again" and that's about all they can say without getting sued...and most wont go past "yes they used to work here form date X to date YBest way to combat issues with bad tenant is to screen them aggressively..... especially call their last 2-3 landlords and actually talk to them.

I have PTSD from combat but I'm built like an athlete so everywhere I go someone calls bs. 

Have them discuss it with their seller and have the seller involved with helping you get the home sold.If they don't agree or combat you on this, move on.