This is one of those confusing tax issues that does not have a short answer: do I need to send Forms 1099-INT to my private lenders, and do they need to send me Forms 1098?

Are you taking the seller's stated CAP or are you digging deeper? 

However, the property has appreciated over $100,000 in the short time we've owned it.

In short, he seemd like a "regular Joe" and he had this laid-back style about him and he explained property ownership in simple terms (I was 24 at the time) for me to understand. 

Can you legitimately purchase multiple properties with this kind of funding during a short period of time? 

Seller financing is a tough thing for seller's to wrap their heads around.

Also, my CPA filed the income as 'short-term capital gains', and after a bit of research i've seen that my income was suppose to be reported as standard income, or is that not a big deal?

All a timing benefit, but does provide some short term relief to free up capital to continue to invest. 

Short of them showing a listed property what do they do thats worth paying thousands of $ . ( never seen an agent have an off market deal in my area ) 

We are a small vacation rental company that manages short-term rentals for homeowners in Los Angeles.