As an update, I decided to cancel this contract.

I'm sure you've heart the phrase NIMBY - Not In My Back Yard.  

We are now under a due diligence contract for a $190,000 4 plex and planned to refinance the first one to pull the equity out for 20% on this purchase. 

@Ian McKay Hmmm, I'm sure there is always an exception here but a bank's wholesale line of credit (who they sell the loan to) is predetermined via contract before you are even a customer. 

You would usually just flip the contract to another party for a fee.All you would need in terms of documentation is the agreement of sale that would to contain the words "and/or assigns" which would go after your name (since you're putting it under contract).When you find this person to flip it to, you'd add an addendum stating who the new buyer is. 

So far, I've had a little success and have our second rental property under contract. 

Contract, contract, contract.

understand her tax implications. an installment contract may be best. what about heirs?

Do you have a contract drawn up and checked by the lawyers of all parties involved?

@Adam Fansler we found one that we signed a contract with for the 3 homes we bought, we are in the process of renovating the first one so we'll see how we like them, thanks for the additional recommendation.