Then you could end the contract if you feel there are extra people there.Of course it is discriminatory to not rent to an applicant for being at the occupancy, so tread softly and document your decisions.We have had occupants at the max, we let them know before they sign that no additional people are allowed under any circumstances. 

It seems like your open to selling in an optimal circumstance, which I don't think is short sighted at all, If the opportunity is there and it will be tax free and the rent you would be getting is sub 1% rule AND you have an idea of how to redeploy that capital to get a better return I think it's definitely something to consider.

@Reuben Royal Conventional wisdom on all direct mail is to NEVER indicate anything in the text that indicates personal knowledge of a person's circumstances.

However there could always be individual circumstances that might make a shorter (or longer) holding period appropriate.It sounds like you bought it with the intent to hold for productive use. 

Reading BP and watching the podcasts the past month has helped me realize there will never be the perfect set of circumstances; I will not have started until I start.

Typically you have to show dire difficulty or unique circumstances which warrant the change.

Is there some other set of circumstances I am not thinking of?

So under normal circumstances if they had sold for 241k they would have broke even not considering interest paid.

You may need extenuating circumstances to purchase another property with another FHA loan.As far as renting or selling it depends on your goals and your numbers.

In this circumstance, if you directly pay your own health insurance premiums, you can take a deduction on the 1st page of the 1040 for "self employed health insurance".