I am so confused....Please help

[Brandon R]

I have posted about this deal before but I am still unsure. I bought a foreclosure for 28,000. Put 11,500 into it and now its appraised at 70,000. Of this money 5,600 was out of my own pocket for the down payment. The remodeling was done out of a construction loan with interest only payments for now. So with that said when not considering my down payment I owe the bank 32,400.
I am just getting into a contract sale with a very good prospect. With this I will get a 10% down payment. Sell for 67,900 with 6,790 down. I have it set up were he will pay me 650 per month which included p/i/t. The taxes I will hold until due but he will be responsible for insurance naming me and the bank as additionals and providing proof.
I have a two part question here.
1. Do I use a straight contract with baloon or a lease option? What would benifit me best? I am not sure how a lease option works or how you right it up.
2. I will refi to a conventional loan as soon as possible. Since I have much equity should I take my profit now by cashing out? Or wait until the baloon is due and use a 1031? I typically want to at least get my down payment back plus have the buyers down payment so I can buy another property. ????

Please help... I have many questions.