... simply get more capital upfront (3 months) and require 2 months security (because of the low credit scores). Believe me, they won't want to walk away from that much money ... oh yeah, you'd damn sure better get a lawyer too, speaking of advice!
Sell it for what they give you, real state is nowhere near a bottom. Do it some nice details, put some nice yet inexpensive plants (you can carry them in your car trunk), and other nice, cheap details. Buy DDM (2X Dow Jones) and hold it for two years.
The rental business can be tough for a beginner. I had a 2 unit property when I was in grad school and managed it myself. There are lots of things that could go wrong, or things that you might not be prepared for. It might be better to get a management company. That's what I did after I finished school and moved away from there. They charge 10% a month, and find the tenants, write a professional lease, and take care of maintenance. They have their own prefered maintenance person, but if I wanted I could tell them who my perfered maintenace person is and they will call that person. The fact that the management company gets a cut of the rent means that they have reason to want to get the best price and best tenants possible. I found that when tenants see a non-company, non-professional landlord they are more likely to take advantage: not pay rent, delay on paying rent, leave property trashed, want to move out early. A management company, at least the one I have, are professionals. They know the laws, issues, and procedures. It should also keep you safer from possible liabilities. A tenant is less likely in my opinion to mess with a professional company than with a non-professional person who does not have all the knowledge and tools to get the job done. You might find that hiring a professional management company will save you time, headache, and money.
Sell it to the bank, everyone is doing it these days Seriously though, you can help your tax situation substantially with rental properties. Just get an iron clad lease from an attorney (should not cost more than $300), get advice from your accountant on what you can do to maximize the benefits of having a rental for your own tax situation (actively managing the property yourself allows you much more in the way of benefit than going witha management company and really it isn't hard to do things professionally and the time commitment is minimal so suggest you at least try it before you pay a managemnet fee) and ask for 1st,last, and security and if you can wait get better tenants with a decent score and employment history AND good references from previous landlord. Minimumn rental term 6 months but a year is really best. Take a detailed video of the property condition before in case there is any damage (usually jut cosmetic and cheap to fix). Make sure to make clear that tenants are responsible for mainatence from an approved service person/company and if there is a yard then either include the cost of your own people doing the landscaping (so you don't have any problems with neighbors or city if tenants don't keep up with mowing etc) or specify in the contracts that yard needs to be cut at X intervals. If there is a fireplace have the chimney inspected prior to each new rental. NEVER allow cats. If you structure things correctly upfront, are selective with tenants, and everyone knows what their obligations are under the lease with no chicanary either by the tenant or landlord renting can be relatively problem free and even a rewarding experience and wait until your accountant tells you some of the benefits of being a landlord. Good luck.
How much could the tax benefits be? I don't know, but doesn't sound very significant. 10% of the rent is a little more than 1 month's rent, to have a professional company find your tenants, do a background check, write a proper lease, collect the rent, manage maintenance issues, send you account reports, and do things legally and professionally with years of experience in the field. And then there is the issue of deterence. A management company will help deter tenants from wanting favors, or "slack" which they tend to do if they know you personally. Deter tenants from trashing the place or otherwise breaking their lease, which they might do if they don't fear your ability to report them to credit agencies or to take them to court. It is best to deter these things from happening in the first place. Once it happens it might not be feasible to go to court. If you end up going to court the management company should know the procedures and will be more credible than a landlord who is personally invovled. The management company will probably charge extra fees for court though. In hindsight, I realize that if I had hired a management company from the begining I would not only have avoided labor and headache, but also saved money, not counting money from time spent, but money lost from tenants moving out ahead of schedule and/or trashing the place. The right management company is important too. I interviewed several companies before I hired. They each came over to the property, inspected it, gave me an estimate of how much it should rent for, and their fees. A friend of my dad owned many properties and mananged it all himself for some years. Eventually his tenants gave him so much headache and cost last I heard he was trying to get rid of his properties, which are not easy to sell if they are being rented out. From the stories I heard about his troubles I'm certain that he would have been better served with a management company also.
I wouldn't rent to those people under any circumstances. Trust me its not worth it. I have some renters living next door to me and it seems as though the house has turned into a Fraternity house or 24 hour convenience store. There are cars driving up at all hours of the night and day. No one works next door and these losers stay up all night doing who knows what. I'm thinking that they might be running a meth lab in their basement. With such low credit scores do not take any chances with those people. Its highly likely that they would trash the place if you allow them to move in. The problem with getting renters in your house is getting them to pay ontime or to pay at all. Renters just don't care anything about the property they're staying at. If you ask them to leave nicely they take offense at that and trash your place. The bottom line is just not to take a chance on renters. I'm sure there are a few decent ones, but from my experience most of them are low lives. See if you can get some old people in there. They are usually quiet and they go to bed early. Good luck!!!!
Contrary to what some say, some people have had a problem, but remain decent folks. Do a criminal check, mostly I would require the first and last month's rent, 1.5-2 months security, and a well-structured lease.
Maybe you could advertise it for rent to a level 3 sex offender and the neighbors would burn it down for ya.