as items 1 and 2 above play out some out of state investors wont be able to turn a profit any longer as their margins are already just about too tight. 

You are losing $70/month on the mortgage alone, and without knowing what else your "payment" figure includes, it could be hundreds more in PM fees, property taxes, insurance, maintenance, etc.The refi certainly seems more appealing at a glance but again, if we have to consider the additional expenses listed above you'll still end up underwater.Honestly, it seems like unloading this thing any way you can in order to limit your losses seems like the best play.

How hands off are the tenants (does the Fed Govt handle their clogged toilets) or are they management intensive?

Maybe a section 8 play could work. 

I know it's kind of backwards to invest in properties than further down the line "house hack" but that's just how circumstances played out for me with my current home. 

Neither party has to play games with the other.

@George ChungDepends on number of factors such as how good are your financial records (balance sheet, income statement), how many state returns there are, just to name a couple of the factors in play.

Do I just play the waiting game at this point?

Here is the article: https://www.wsj.com/articles/investors-flock-to-self-storage-rental-housing-as-safety-plays-11583780432?

There might be a play there for little to know money.