At the end of her lease she is 3.5 months behind on payment and I'm not anticipating receiving it. 

That property won't sell for another couple of years and I messed up and didn't lock in when rates were low and am now paying triple on the interest only payment.

Does payment for the PM get taking out of the first rents im getting?

I've build a lot of equity in one of my properties and I am thinking about recasting to lower my monthly payment. 

I would recommend getting in contact with a few lenders to compare:Securing a Mortgage:Down Payment: With $80K saved, you’re in a strong position for a down payment. 

“Creative Financing” However, not many people are talking about the additional risks.For example, with seller-financing: the worst case scenario is a buyer doesn’t make payments.

and hard money you will still need a down payment. 

They would like me to finance the $70,000.00 into a conventional mortgage and also have them as a lien holder with a promissory note of $100,000.00 with $300.00 monthly payments with 0% interest until maturity.

Provide the payment instructions5.

When I have clients contemplating the two, I look at holding plan (you already did this, so great there) and the difference in payment.