Depending on the facts and circumstances of the agreement, it could either be treated either1) the sale occurs as of the original agreement date, and then your taxable gain is generally spread out over the life of the principal payments as an installment sale (although I should mention any depreciation you've taken on your property could affect this), or2) the sale does not occur until the lease option is exercised, and gain reported at that time.

Have you considered a house hack where you buy a small multifamily and life in 1 unit yourself.

There are numerous factors at play and your real estate tax professional is best positioned to opine on that.

Are you in a point in your life where you are ready to take on risks or looking for some steady investment income?

I can't count how many times lenders try to assign a percentage of ownership to a Trustee when numerous attorneys have explained to them that it doesn't work that way, etc...

For example, a buyer putting 20% down on a $500k home would pay around $500k in interest over the life of a typical mortgage at the current ~6.5% rate.

I agree it is a tough decision, but at the end of the day, this is a business and they should live where they can afford to live, whether that is on your property or elsewhere.That being said, you have every right to improve your property and allow for a better quality of life for someone. 

I never understood why ghost want to harass regular folks just because they want to live a peaceful life in the home.

There are no guarantees in life.

I would bring your personal life into the discussion.