She is still living in the property and paying rent but they're both showing interest in signing a new contract to live at the property individually.

I would love to hold on to these houses but all signs point to selling and taking the tax hit. 

@Michael S. whatever you choose to do I sure hope you consult with an attorney and have your contractor sign a clearly stated operating agreement outlining the work expected, deadlines for said work and payment schedule based on checks and balances from you also outlying your obligations as well. 

Agreed, just the fact that you are having this question is a bad sign of your lender.

Do you sign any contractor agreements with scope of work?

@Ricardo Cristobal A long time realtor in Charlotte told me last week that there are signs that the market could be turning downward.

Sold for a huge profit though.The way I see it, operations matter a lot (tenant selection and management).

I have contract signed.

If you weren't walking away I'd tell her the property is not going to be rented again until you do major reno, but if she signed a big long lease you'd discuss a hotel for her and her kids.That whole paragraph is reason enough to walk away.Let me run the rental numbers real quick off of what your provided.......OMG.

If no one appears in court, an order in favor of the grantee is signed, and marketable title is created.