The solution is to figure out a method to bill back the tenants for the water usage.

I know stock options is a method of funding growth, but I don't claim to be a finance major, so my understanding of it is only on a surface level.  

@Andrew Johnson I’m using propelio because they offer comps in dallas ft. worth where I’m at and a group I’m involved with on Facebook.

I need to understand what is involved in filing this and if this is something I can do myself or need to get a CPA or attorney involved?

Just because you purchased it from a lawyer does not mean that they were representing your best interests.With community rent at $300/mo, I imagine you would have to scale quite quickly to make the effort that will be involved worth any money at all.

I’m not sure what rate you used to calculate your future payment but I’d stress test your deal by looking at some scenarios involving higher debt service costs.

The seller would qualify for installment method of reporting capital gains.

He can initiate a 1031 exchange by selling his property to you, having the exchange documented on the settlement statements and having a qualified intermediary involved to handle the process. 

Has anyone ever used this methods rather than a cash purchase before?

I am involved in a partnership.