I am thinking of a few things:Sell the house and get the money tax free without capital gains.Buy another house to live in with this money, use the same principle, house that needs reno then live in it for 2 years then sell again.Keep the house, rent it out but get a HELOC loan and buy another house to move into.Please advise the pros and cons of either strategy.

For me, it's the principle. 

Our principle, interest, MIP, taxes and insurance run about $3,300.

But if he puts a renter in for a year he gets the net effect of the NOI and the principle paydown by the renter. 

Generally the loan is in full effect along as she lives in the house. once she moves from the house the Reverse mortgage is called. if the Lady, family and or estate can not settle the loan then the lender will foreclose.Unless your down payment is enough to settle the debt, and you verify that happens I would not enter any agreement on that property. you would risk any principle you put into the venture

Also keep in mind your interest costs will be falling fast that far into your mortgage, because a large portion of your payments are going to principle every month, so your ROI should be improving if rent and taxes remain constant.

I need help determining if this is still a good deal.Numbers:Sale price: $144,900Rehab: $16,000 including new roof (roof is about $8,000 and has 2-3 years left so doesn't have to be done immediately)Down payment (25%): $39,500Debt service: $711 PITI, HELCO payment $326 (interest only would be $118 but want to pay back principle ASAP) .

When you make multiple offers, how do you determine your cash vs. interest only vs principle only values of ARV?

They have not learned the basic principles  of financial management adequately enough to learn how to manage wealth.

At the end of 10 years I'd owe $80K (which I'll pay extra on the principle monthly,so I don't owe anything come balloon time).