Director William Malone was originally going to this direct this sequel as he directed the first film Scared to Death (1980). He ended up passing on the project as he had an opportunity to go direct Creature (1985) which was a higher budgeted film. Malone however still helped out with building the monster suits.
Producer Jack F. Murphy saw the original Scared to Death (1980) and was so impressed with the monster that he wanted to make another film utilizing the same monster design. However since the first film was so a low-budget and rarely seen he wanted to distance this sequel from it in order not to alienate a new potential audience that never heard of the first film. This is why there is no plot connection to "Scared to Death" other than the same monster design.
The trivia item below may give away important plot points.
In the first film Scared to Death (1980) the syngenor creature could not be killed by water (the syngenor even took refuge in a sewer). However at the end of this film, water is used to kill a syngenor creature.