I also strongly believe that in the long term we will continue to see appreciation and rent gains as people exit California.

In that time concentrate on continuing to educate yourself on this forum.

So here goes...My wife and I were just plotting our path forward as we continue to research various aspects of REI.

House hacking combined with a 1031 exchange method has the power to truly broaden your investing horizons should you choose to continue investing.

If the intent is not to put the house under contract and continue to accept more offers, and to fix the house up to show it to prospective buyers, I would be concerned.  

Our goals in real estate are to continue to obtain rental properties, currently looking at some duplexes in Sault Sainte Marie which is about 60 miles from us.

Cap rates have been compressed as prices have continued to rise, but I know there are deals within and even outside of those ranges you state depending on what you are looking for when considering passive versus active investing. 

Staying with this deal, and continuously losing money is foolish. 

The only debt we have is the mortgages (2 rentals and our primary residence) so we're really battling psychology on whether it feels better to have zero debt moving forward or the cash flow from continuing to own rentals. 

If the loan documents don't set forth a process for the payments to adjust, then I would recommend continuing to make payments at the normal amount until you get it resolved.