In a terrible situation, what should I do?

[Mike Schoeffel]

This is a long and convoluted story, but I'll condense it to the basics. 

I bought my first rental property in Danville earlier this year. The inspection report turned up no issues with the foundation whatsoever. Fast-forward five months. The city inspected the property and found major issues with the joists and joist bands. A contractor gave me a ballpark quote of $30-50K, but said it could end up being much more than that. I don't have that kind of money.

Stack this on top of the fact that my tenants have been terrorizing the neighborhood and stopped paying rent in mid-June and this has been an absolute disaster.

This feels like a worst-case-scenario situation with no good way out. I wanted to get y'all's thoughts on my options. At this point, I'm thinking of taking one of two paths:

1) Attempting to sue the seller or the inspector, though this seems like a drawn out process with little change of success.

2) Selling the house as-is for a major loss. I bought the place for $129K and I'd be surprised if I could even get anywhere close to $50K.

Any insight would be greatly appreciated.