That put me on the right path of finding the career of my life and led me to meeting the most amazing people who absolutely change my life.

We are W-2 employees with pretty straightforward tax filing at this point. 

At a technical level you have two paths, either 1) combining the bottom and ground floor units into a larger unit as you suggested above or 2) create a third legal unit.

Let me know, otherwise we'll continue down the eviction path."

Many tenants are willing to pay extra for convenience, which could give you additional cash flow without a full rent hike.Reassess Your Portfolio→ If one or more properties have become too burdensome with high expenses, it may be worth considering whether selling and reinvesting in a different market or property type makes sense for your overall portfolio.While raising rents is the most straightforward approach, these alternative strategies can help reduce costs and increase revenue without disrupting tenant relations.If you need help assessing the numbers or exploring financing options to lower your monthly expenses, feel free to reach out → I’d be happy to help!

This is definitely not the path I would take unless the numbers are sweet and STRs are fully legal in the zone your are buying.

So to Bob's point, I hope you see that nothing is "straight forward".  

Respectfully,Zach The best bet is likely to create a new LLC that lays things out in a straightforward but legally strong and standard operating agreement, etc. - LLC doc sets are fairly cheap and easy to create these days (with limited assistance from lawyers) and its much much better to have that cover bases on arrangements like this - it will also fit nicely with financing options - whether you take on debt from a lender in a co-equity situation like your first plan (refinance loan to LLC post rehab?)

The situation seemed straightforward: a family was facing foreclosure on a well-maintained home.

As i continue to pursue this path, I also wanted to put an opportunity out there to any new potential partners.