The alternative is the Fannie Mae Homestyle Renovation loan which allows for investors. 

Costs also include changes to your current planning and other risksThere is so many problems with places allowing tiny/alternative houses that unless you are really in the boonies and a really well visited area by short term types, I doubt it is a viable longterm plan

If the only issue you have with them is the late rent but always paid, why would you at least not consider an alternative that benefits both parties? 

Alternatively, is there an advantage (tax-wise) in holding on to it as a rental for any period of time? 

So if I know I am in the right as long as you did all that was required of you by your state laws with the inspection, notice of repairs, property documentation of property condition before and after and you weren’t a slumlord while renting it out, then they don’t have any trucks up their sleeves and will be stuck paying your court costs when they lose.

Also I was told that this type of loan (depending on how stringent the lending institution is) can only be held in your name.I went ahead and applied anyway and I have been accepted for one through Loan Depot so I'm still looking into alternative sources of financing because the more options the better.

Then, I will pour all of my income into real estate investing so that I can move to a legal state and quit truck driving forever.

My cuzzo drives dump trucks and he said maybe with a couple loads of asphalt and his skid steer we can fix. and about drainage, i saw a neighboring house have a PVC pipe coming down the side of it carrying water from the top down to street. lol idk

I currently live in St Peters Missouri just west St Louis Missouri.I currently drive truck for a living.

The alternative you're proposing of holding it and potentially only selling a half is a much better one.