Do you have a pre-existing relationship with the contractor?  

We are respectful of each others' limits and expectations.If you're a newcomer looking for funding, you should realize there is no pre-existing business relationship between you and your potential financing partner.  

When buying a rental with a preexisting tenant in place, and the seller wants to sell as-is, is it worth the risk?

With the 835k and the pre-existing loan I would likely owe approximately 1,000,000 so depending on rates mortgage would be guessing around 7500.

If the process of seeking out and purchasing pre-existing notes is a little more than you wish to deal with, lending is another route to take that may be of interest to you. 

Then we realized that the issue was because of the preexisting tenant down stairs.

As I posted elsewhere (and more than once), I leave them as is if that is acceptable to tenants in the area (usually is), and I tell the tenant that I will not ding their security deposit for any pre-existing damage.

D 506(b) is that the syndicator has a "pre-existing substantive relationship" with the investor, like a family member or business associate, as Bill notes above.

After all, how could anyone buy a pre-existing residential apartment if someone  had not build them in the first place? 

I would say on refi's for buy and hold it's probably not that important, but on a flip it could definitely help.If you aren't there then he/she may or may not see everything you've done or know what was pre-existing or not.