@Matthew DrouinThat is a great position to be in.Now with regards to the refinancing options and how much you should take out, I'd say it depends on what your plans are.If you are planning on holding onto to that rental for the foreseeable future, you should stress test that property to figure out how much minimum income it needs to generate each month to meet your mortgage payments.That monthly would dictate how much you can conservatively take out after refinancing (and providing that you lender is OK with that too) without exposing yourself.Now if you have other deals that you want to pursue and you need as much cash as you can lay your hands on, you should take out as much as your lender would allow you to.Personally, I'd go for the option 1, especially if you have the  ambition is build a sound rental portfolio.

First question is, is this even worth pursuing?

First question is, is this even worth pursuing?

I'm gonna see if I can find some properties of interest and pursue further.I found zillow doesn't give me any entries for 2/3/4plexes.

Since this is all owner finance, it likely won't affect my DTI, credit score, or ability to pursue buy and hold as I've planned all along.We haven't discussed the price they are looking to get, but I don't think they honestly know. 

For $15 grand, I would pursue justice by legal means.

The developer had it rezoned in 2008 (then the crash hit), he did not pursue the land conversion, and just built two duplexes and a triplex within walking distance of the beach.

Will sit on this one a bit, and pursue other opportunities as they arise in the interim. 

Any sort of manipulation other than a 1031 exchange is going to result in a tax consequence although an installment sale or sale of membership interest of an LLC can spread out some of that.However, I think there's one compelling reason to explore the LLC route anyway if the buyer has good financing capability if they do not want to pursue a 1031. 

I recognize there is tremendous risk in pursuing a development and lots of possible pitfalls, but we hit the jackpot with the location and to us represents once in a lifetime opportunity to remain owners in a prime parcel of urban city property that every person I have consulted with in real estate has agreed should be held on forever given its appreciation potential.