Seller financing is a great way for the seller to avoid a lump sum capital gains tax, and still make steady/expected income on a property even after they sell it. 

I all but guarantee there is language in the mortgage of something for neglect whatever of property.

This means your monthly rental income should be at least 1% of the property's purchase price.

I wanted to obtain a rental to gain passive income.

Yes can definitely get 100% financing of the construction no income no doc . 50% of the land cashout to cover closing costs 

Even though we have a history of rental income at that property and a 2yr lease in place.

It's a great sign that the tenant is *asking* you before letting his girlfriend move in so you should treat them as any other tenant application: - credit app- background check- income check etc. 

Second homes cannot be utilized for DSCR loans because they can't produce income to qualify.

If you are audited and the IRS looks at your 1031 and there is only your word against your actions, you're going to lose the audit.I totally get you wanting to avoid those nasty ordinary income taxes. 

Sell it...based on your post if you rent this I can almost 100% guarantee you will feel angst and concern with every tenant.