The current tenants have expressed interest in purchasing the home, however they claim they will not be able to get a bank loan due to outstanding debt- but that they do have a downpayment.

hmm; A short sale is ANY sale less than the outstanding mortgage and yes, Banks will do this to clear their books. 

After 10 years your outstanding balance converts to a payback faze usually 10-15 years and payment will jump drastically many times doubling so plan accordingly.  

His original Distressed Property Newsletter was outstanding, accurate and exceptionally informative.

Contact me if you want to have a access to that or my friend also have a team who have a FULL SERVICE Nationwide for Lease-Options buyers...

If you do collect the rent (delivered or otherwise) and they have any outstanding previous late fees, apply the payment first to all other charges, if your lease includes that wording.Then give notice and file for eviction for the shortage.At least that is my methodology, as in Texas a property manager can only represent a landlord in court for eviction on unpaid rent and holdover.

Is it possible to have an outstanding conventional mortgage and get an FHA loan for a multifamily (duplex or above)?

Currently looking to connect with nationwide investors looking for turnkey, buy and hold or flip deals.

Borrowed money that must be paid back is NOT income and is not taxable as income.If you sell the property for more than the balance on the refinanced loan, then the outstanding loan balance will be repaid from the settlement proceeds.  

My lender does it  nationwide.