They have a bigger single family home and a tiny home on the property, but there close proximity and shared driveway present functional problems that are undesirable for guests. 

Lenders stopped allowing rent by the room due to modifications done to the property resulting in functional obsolescence and significant cost to cure in the event there was a default and they needed to foreclose on the home and resell it, given that the main buyer pool for single-family homes are primary occupants. 

If I buy out the first lender, can I foreclose with the total amount due for both loans combined, or will it remain as two separate loans, with only one being foreclosable?

As mentioned by @Chris Mason, Bridge Loans: These short-term loans can provide immediate financing until more traditional financing becomes available or until the property stabilizes and becomes more attractive to lenders.Interest rates and stipulations may be a pain.Out of the box here and requires a few more research, SBA Loans: Small Business Administration loans can be an option, especially the SBA 7(a) loan program, which can be used for hotel acquisitions.I heard someone  mention - Mezzanine Financing: it involves a combination of debt and equity financing, which might appeal to some investors looking for higher returns.

With property insurers’ profitability and trade combined ratios improving, we can expect some relief soon.

Data is sourced from a combination US census, zillow, and realtor

Combine these benefits with GI Bill-funded real estate education to expand your knowledge.This post does not create a CPA-Client relationship.

I have found that it is quite simple to self-manage a portfolio of 30-40 short-term/interest-only loans using a combination of QuickBooks and an XL workbook (1 worksheet "tab" for each loan). 

For example, I mention that every adult must pay a $30 application fee, pass my credit/criminal background, make a combined income of 3x the rent, and whether or not the property accepts pets.

I am getting to the point of wanting to back out due to the 27k combined Closing costs, not including down payment. seems like a I should look into finding a new loan officer.