This option is more of a personal preference and emotional choice, rather than just purely financial.2.

Your choice.  

Depending on your loan balance, you may be under water.If you will need to purchase another home to live in after the sale, and you purchase a home around $350,000, you may have to put down $70,000 and that will likely eat up all of your sale proceeds if any.So, it seems like the choice is to either to rent your current property for $285 cash flow, then purchase another home to live in from your savings, or sell the current property, then purchase another home to live in from your savings, or stay in your current property and buy a new rental property from your savings,I would stay in the current home, because you have already upgraded it to your liking, you would not have to go through the trouble of packing up everything and moving, you are already familiar with the neighborhood, and your savings could be invested in a new rental property with much better cash flow, with the tax advantages of interest and depreciation right offs, and with another property to get appreciation from. 

If I make full disclosure and provide the pamphlet, then it's the tenants choice to assume the risk... 

There choice not to pay is affecting others and needs to be taken care of.Hope you can get the issue worked out.

I don't know how to fund this endeavor or what the best choice would be for us.

Please realize that I am not saying your agent will find you a deal in three days...that's foolish especially in an uber competitive market where we are frequently seeing multiple offer situations that inflate strategically priced homes.

I've only made ONE poor choice over the years and nothing on paper will tell you the applicant has no social skills and can't get along with other tenants.

I'm just trying to strategically learn and act to achieve my goals without getting caught in analysis paralysis

Another choice is to partner with some one for the 20%.