If you were in my shoes with this amount of money what would you do or where would you start?

We have some liquid capitol, some other assets, and a good amount of equity in our Knoxville home.

Now I get alerts whenever a new one comes on board, along with the rental amount.

Your loan amount will be based on the lower of the purchase price and appraised value. 

Lenders might be willing to accept less than the full amount owed, especially if the property is underwater (i.e., the mortgage balance exceeds the property's market value).So, in short, you can pay off the mortgage even if it's technically still in the previous owner's name.

I’m trying to find if there is a way to lessen the amount of capital gains I pay.

Apprecaite it and that sounds like it could be a great option for some future purchases that need a decent amount of work. 

@Theo Seng As Preston posted above, in general a FHA / conventional loan for 3-5% down and a fixed 30 year rate will be one of the best values for a buyer.I've purchased a number of deals using seller financing. 

STRs are popular in this city as they create significant amounts of jobs and revenue.I am shocked that this model is not more popular around the country.

Mortgage payment is 585$, rent amount is 1320$ currently.