Any positive cash flow should go towards paying off debt.

If you were able to build equity over time, it could be smart to sell, pay off your loan, and use the money for another venture (flip, investments, etc) if it is truly bleeding you out.

Borrowing against your paid off house without an income puts way too much pressure on the success of whatever deal/project you decide to pursue. 

This route requires more attention as you will need to ensure that you are finding good deals wether they are on the market or off market.

DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.

You’re not going to find a safe way to do what you want unless you or the “buyer” has enough cash to pay off the note. 

I am expecting to do 3-4 deals per year until I get to 20 properties or so and then snowball the debt so they are all paid off by retirement. 

And, cutting off liquidation options. 

Being out three months of rent plus $1,500, I'd be better off handing back their SD and forgiving the month of rent they couldn't pay.  

First off, many sellers don't have sufficient equity to offer seller financing.