So remember, for legal and tax planning, a good CPA will recommend that clients hold their properties in an LLC or Limited Partnership and run their businesses as S Corporations to avoid self-employment taxes.

Retire with no worries, no debt, and the ability to travel anywhere we have to to be around family.

It is another term for the Cash on Cash ROI on an all cash deal.The $12,000 NOI is not the return, it is the cash flow produced by the asset before debt service.

I explained we had a signed, legal contract. 

(Property = $100k & Loan = $50k)  So the borrower can simply sell the property to repay any debts.  

Would the loan be less likely to be approved with a 50% debt to income ratio?

I'd go to your county courthouse, there is usually a desk there for free legal advice with an attorney, or they can hook you up with a low cost attorney.

Would love to get some schooling from you more experienced Pro's out there on the best completely legal and ethical way to structure this.

My gut tells it's contraction instead of expansion but is that balanced but not carrying any debt service?  

You're correct, if they are on a month to month you should only have to send them a notice to vacate and be done with it.I found that many landlords do not understand their rights or are unfamiliar with the legal process and hence end up putting up with too much.