Either option will increase your allocation to RE equity.

The house is worth about $95-100k in this market in its current condition.

Both have RE values that have increased for 50+ years, just ask someone who passed on an opportunity in the 70' or 80's.    

Other downsides, heater is oil heat, and no central AC (just small window unit), large yard is very overgrown with Himalayan blackberry bushes, and no garage (converted garage to living room space).Upsides: decent condition wood flooring in bedrooms and about half of the living space area, newer vinyl windows in most of the house, outside siding in great shape, roof looks to be in good shape, and the most important upside is the neighborhood, excellent area.FinancialsThere are already multiple offers on the property and they are accepting offers until Monday morning.  

Looking at the outside, it needs work to increase it’s curb appeal.

If they are month to month, have the seller give them notice to vacate and make it a condition of the sale that the unit is vacant at closing.

We know that once we move out, our rents will increase with the other unit opening up.

If they dont like that, you can redo the entire lease, return the entire deposit, increase the rent and the security deposit, and have them sign an entire new lease.I tell me tenants that are roommates that I collect the full rent, how they get it is up to them.  

For month to month tenants in California, you just need to give 30 days written notice if the rent increase will be 10% or less, or 60 days notice if the rent increase will be greater than 10%.

Property is in good physical condition but there have been some expensive repairs and all the utilities seem high to me.