Should I owner finance my house to my tenant?

[Jack B.]

This is not my only rental, but the only one in an HOA. The tenant has a bankruptcy and I took a chance on them with a higher rent + double the deposit. They have been great overall, I don't have to worry about them going anywhere on account of their large number of pets and credit situation. They've been there 4 years.

I had talked to them a while back about owner financing the house to them years ago. I figured it would save me a lot on realtor commissions...

Sooooo....they asked about price and terms today. The house is worth about 500k. I owe about 215K on it. I bought it for 300K with 20% down about 6 years ago.

1) SHOULD I even do this? I thought about moving into it again for a low cost place to live in a nice neighborhood and maybe cash out refinancing it (with a lower interest rate to boot) and maybe eventually renting it back out and maybe 1031 exchanging it at some point. It's a newer house so cap ex is far off.

2) What are the benefits of me doing this? I feel like I lose the ability to cash out refinance it and am just becoming the bank to them. Which leaves 285K of equity sitting there until they pay off the sale price after 30 years. 

3) It feels like for my personal situation/goals it may not be to my advantage to do this. I figured I would eventually do a 1031 exchange on it and do what I usually do, sell one house and buy 2 more with the money.