It would seem you would at least need to factor some discount into your numbers to offset the risk.I recognize this may be my own inexperience but I do try to avoid things that alienate a portion of my potential buyers. 

As part of my investment plan, I formulated the following: Use a portion of equity in my current single family home for down payment to purchase an investment property.

I feel selling off a property and paying it off (or at least a large portion of it) would give us some freedom, and a feeling of accomplishment.

If you are looking to get a STR management company, they generally take a large portion (if not all) of your profits.  

It’s so tempting because the seller is financing a huge portion of it. 25,000 down with a 475,000 purchase price, he would finance at 7% on a long term note.

Your kindness back fired so may be you need to knock her back on her heels just enough (not too much then you got her lawyer to deal with) just enough to back off and pay you a settlement or sign something to get any portion of her deposit back. get her gone in an agreed manner   Did you ask for renters insurance in your lease? 

You can then pull you money back out of the home leaving a portion of equity (typically 25%-35% depending on lender) and you can redeploy your cash. 

Sorry just read the sweat equity portion and saw it is a duplex.  

I'm not too worried about them being able to pay rent, because I intend to hold back a portion of their proceeds from the sale in escrow to cover a security deposit and rent.

I have a friend who wants to join my current deal and will be contributing about 50% of the capital for the purchase and rehab portion of the deal.So I'll be providing:Half the capital, finding the deal, taking title, managing the rehab, getting it rented, managing the PM, eventually carrying the mortgage note, and handling the long-term management/distribution of funds.My friend is basically a passive investor and this will be his first out of state deal.