I have enough money in my 401K to pay off the Rental.

However, we backed out of said deal because we found out we would only qualify for a certain amount of money on a second loan that was way too low for the market I live in.

Yes, we flipped it to get a chunk of money to invest in other properties, but the chunk somehow slowly disappeared taking care of 3 kids, eating out, etc.Maybe what I learned is to get your financial house in order first. 

When you learn you take action when you take action you make money...

Regardless of your FICO, you will need cash money to be able to invest in holdable real estate.  

But I think that would money down the drain.

Time is exchanged for money. 

Not only are they trying to watch out for there safety, but hey they are bringing up a very valid reason of up keep on your property just as if you had an appliance fail, you go fix it, but only this situation is more reason to give you more service/money made/good review if you show that you give somewhat of a care in the world if the people that are paying your bills are in good hands.

Or are you looking to raise money for the down payment? 

Banks only have 10% of the money they lend thus it makes sense for them - but for people who are not a bank why make 6% taxes as ordinary income and barely keeping up with inflationThat $1000/mo payment will be worthless in 20 years.