Received a down payment from the buyer and used that to pay back some of our HELOC because their down payment was not as much as ours.

For instance, if you've determined that your max down payment ranges from 3.5% to 4%, ask yourself: do you have the 4% for the down payment plus an additional 3-4% for closing costs (Yes, be prepared to pay the closing cost for the acquisition of your properties) on a $1.3M property, at your disposal?

I want to sell my home and use the gains to place a down payment on a new home as well as purchase properties in a lower income area for rental properties.

I have enough to cover the down payment but the property is going to need some renovations.

Completely free, tenants just have to pay fees for ACH/card payments and screening.

What I am unsure about is if the whole 60-40 rule around payroll deduction vs owner distributions within an S-Corp can still apply in this situation if the filing entity will only be the S-Corp but the payments are made out of LLC #1, the disregarded entity owned wholly by the S-Corp.

I’m not opposed to the idea of seller financing but I’d want me $14k initial investment as a down payment. 

Then the lender will borrow you the $200k at a very high rate hoping you fail to make payments. 

You can have this contract subject to the monthly payments.

That would come down to a payment of 930$.