Im thinking Seller Financing deals but not sure if they usually come with a prepayment penalty or a minimum holding period.

The IRS exceptions to the early 10% penalty are detailed on their website, link below.

Is there any other options to use this money without penalties or heavy taxes? 

You can withdraw from your IRA but will get hit with a penalty and taxes.

Purchasing tax liens and holding them for a year will average you 12%-16% ROI from penalties if the homes are redeemed during that year.

If they don't want the fresh unit you could tell them you're not renewing their lease - chances are they won't be stoked about having to find a new place to live, so you might want to consider giving them an option to leave before the end of the lease term without a penalty. 

And the fines and penalties are not worth it.

Normally it will be some form of sending itemized list of back rents due, late fees, penalties, damages that exceed normal wear & tear, a check for balance if they're owed any, or bill for extra money due if damages exceed deposit, then mail (with proof you've mailed) to last known address. 

You do not want your pre-approval higher than your offer because otherwise they know you can go higher.Understand the details of the loan... if it balloons, early payoff penalty, closing ability - how fast can a appraisal be completed, underwriting, etc.

The deadline was Jan 31st though, so it's subject to late penalties now.