For instance, 1 party puts in the cash and gets a "preferred return" on the money, and only after the preferred return gets paid does the person doing the work get a portion of the returns. 

Worst case scenario you can get approved for a conventional loan take it outside of the LLC, fund the loan, and redeed it back after 30-60 days (preferably after 2 months of payments on the new loan).

I saw them out walking their dog, so left a note saying I'd be back the next day to repair some minor things and would prefer they were home.

I would prefer not to have three guys living in this house.

I'd advertise it now anyway, obviously emphasizing the ability for "custom" choices by he buyer, and just proceed with all the basics anyway, and see if a buyer steps up.

@Jennifer Hubbard In a market like that you have a few choices.

Most people prefer gas also for cooking because it heats up quicker.

I've gleaned from BP forums deals ranging from 50/50 no preferred, to 8% preferred with 70/30 going to the investor.

What you put at risk, 3+ years of work and equity gained would be for the hope of further appreciation and that being after wear and tear of a rental, not worth going there in my off hand opinion and after considering the opportunities with your cash proceeds from the sale, that puts renting further behind as a good choice.

I can't give any good insight regarding investing in D.C or the college town, but personally I would prefer the college town.In order to identify a good neighborhood, you need to become familiar with everything around it and how that affects real estate.