Or is it better to capture all the rental income while continuing to pay my current rent at $500/month?

There's no substitute for the power of time - compounding interest, appreciation, inflation capture.

Capturing high cap rate nonsense is just grabbing low hanging fruit.

I have also added line items for common area monetering and additional appliances.

The local law says that the non owner occupied property being rented will need a designated host that may or may not be the owner however that other line item in the code that stipulates that the host must be available within 30 min driving while the unit is occupied becomes the dealbreaker.

I think the above are the type of items your engineer wants you to look at.  

I don't think you need to take a picture of each wall, but of each room and each noteworthy item that was damaged is really helpful. 

If you can hold on till first part of January the showings and everything else should pickup.This would be my action items: 1. hire a new agent that can sell the place, and get you numbers are rent and selling and sell the place. 2. be honest on the numbers you can get on an ARV so that you can sell it 3. start to get the conversation started with a couple lenders on what these numbers on refi would look like for you and this property 4. my suggestion would be to refi/rent before selling at a loss because if numbers work you can hold for a couple years then sell, but this is dependent on your cash position and liquidity of your situation. 

Taxes are another item on your deal analysis.  

You need to make sure that your property is easily financeable if you decide to sell it in the future and any future buyer can call out non-permitted items and actually report you to the building department or, at a minimum, ask for seller concessions.