Small multis are rare here - South Brazoria County - where I live for work/business so it wouldn't really work for my principal residence, but I know I could find something further away as a non-primary investment.

Why are we not paying the principal portion of the loan.

This would allow you to tap equity in the property AND cashflow while it is appreciating or while you are paying down the principal balance of the loan.   

Lowest monthly paymentRate (APR)4.125% (4.529%)Principal & interest$1,037 mo.Points$9,348SelectRate (APR)4.250% (4.609%)Principal & interest$1,052 mo.Points$8,095SelectRate (APR)4.375% (4.681%)Principal & interest$1,068 mo.Points$6,662SelectRate (APR)4.500% (4.754%)Principal & interest$1,084 mo.Points$5,258See detailsRate (APR)4.625% (4.852%)Principal & interest$1,100 mo.Points$4,527SelectRate (APR)4.750% (4.937%)Principal & interest$1,116 mo.Points$3,453SelectRate (APR)4.875% (5.030%)Principal & interest$1,132 mo.Points$2,632SelectRate (APR)5.000% (5.117%)Principal & interest$1,148 mo.Points$1,661SelectRate (APR)5.125% (5.202%)Principal & interest$1,165 mo.Points$638SelectRate (APR)5.250% (5.312%)Principal & interest$1,181 mo.Points$262SelectStandardRate (APR)5.375% (5.427%)Principal & interest$1,198 mo.Credits- $444SelectRate (APR)5.500% (5.553%)Principal & interest$1,215 mo.Credits- $752SelectRate (APR)5.625% (5.679%)Principal & interest$1,231 mo.Credits- $1,364SelectRate (APR)5.750% (5.805%)Principal & interest$1,248 mo.Credits- $1,880SelectRate (APR)5.875% (5.930%)Principal & interest$1,265 mo.Credits- $2,455SelectRate (APR)6.000% (6.056%)Principal & interest$1,282 mo.Credits- $2,883SelectRate (APR)6.125% (6.182%)Principal & interest$1,300 mo.Credits- $3,313SelectLowest closing costsRate (APR)6.375% (6.434%)Principal & interest$1,334 mo.Credits- $3,441

As in, what's the principal balance of all of the loans you have within your business?

If its owner occupied so I am living here and collecting some rent while paying down mortgage (granted in the first many years it will be paying down the interest mostly and not the principal now) does this change your view or thought process. 

In order to pay down the liability / principal on the new house, and pay off other consumer debts, they want to sell & be cashed out, rather than taking on an "owner finance" deal.

HELOC or cash-out refinance, you are paying principal/interest on the entire amount.Hope that helps!

One more question for my understanding - do I need to somehow document to them how much interest and principal they receive annually for any tax purposes (1099 or other document?).

Your mortgage principal continues to get  paid down