.- Population north of half a million (or if smaller cities roll them all up into one target "market")- Prices at or below median value for the area- Equity north of 35-40% (anything less and there isn't really enough room to sell at a discount)There are a zillion ways to win in this game, it's just a question of what works for you. 

I leased it back to the seller at a discounted rate for one year.

If they are new to the site I don’t immediately discount them, but I wonder if they have staying power or if they are just going to jump in to say their 2 cents and the jump out and never be heard from again.Full disclosure I have only been on BiggerPockets for a year and a half.

Some areas offer a quality asset at a very discounted price that will yield strong returns.

I understand that to sell it I may have to sell at a discount.

That's a 25-30% discount.

We were renting to my step-daughter (no lease) at a discount and I told her she probably needed to move because I needed to rent the house out for $1,600 a month (market rate for this house).

Thanks,CédricHere are the details for both policyA) Statefarm policy: Quote effective date: 04/11/2018Term: 12 Months COVERAGE DESCRIPTION LIMIT/DEDUCTIBLE PREMIUM A - Dwelling - Fire: $ 171,900 $ 222.00A - Dwelling - EC: $ 771.00A - Dwelling - VMM: $ 24.00 Other structures: $ 17,190B - Personal property - Fire: $ 0.00 Deductible: 2% Deductible Fair Rental Value (TDP-017): $ 1,200 $ 65.00 Cap on losses from certain acts of terrorism (TDP-820): Yes DISCOUNTS/SURCHARGES LIMIT/PERCENT PREMIUM Claim history discount / surcharge: $-216.00Volunteer firefighter assessment: $ 0.00 TOTAL TERM PREMIUM $ 866.00(Note I can get 1% deductible for $1,064)B) Lonestar policy [though United P & C (UPC)]

Taking all that great info, then going to a discount brokerage, isn't exactly behavior that encourages agents to be helpful, big picture. 

Though your HOA fee seems reasonable, you still give up control and it can go up or you could get hit with special assessments if it is underfunded.So, if cash flow is not great, and appreciation isn't likely to be great, the only thing that leaves you as a return is mortgage paydown, which is not to be ignored, but will take a LONG time to add up and I think you could do better.So, I'd consider downsizing to a smaller, less expensive house (which sounds like your plan anyhow), where the numbers as a rental would look better, without a HOA, that is cosmetically challenged and maybe a REO so you can buy at a discount and put in some sweat equity, smallest most rundown house in a solid neighborhood, and eventually (maybe if/when the market dips next) turn it into a rental and buy your next place but fix it up and save like crazy in the meantime.