After that's under control, focus on increasing income through additional work at your current job, taking on a side hustle, or finding ways to increase income on your existing rental.At the same time, educate yourself.

Here's some input to help guide the decision between selling or renting the property, considering the specifics of the property and the potential additions like the ADU (Accessory Dwelling Unit):1.

Not only do they not repay funds, they claim we owe them additional funding for renovations that never actually happen. 

That would be a helpful addition to your plan as you would further reduce your cost of living.Also don’t forget from that $600 you are planning on getting in cash flow you have taxes, insurance, maintenance, capex, and vacancy to consider.With two homes, you may want to keep that extra $20k as an emergency fund rather than spending it on a third property and then be left with no emergency funds.

In addition, if this was originally an owner occupied house, there are often homestead exemptions where the first  $XX,XXX. of the value of the home aren't taxed.  

These are professionals with additional training and a stricter code of ethics.

If you own a 2-flat with an additional non-conforming garden unit (basement) being rented, and you're considering a cash-out refinance, how will the lender evaluate the rental income?

Additionally, confirm the transfer won’t lead to property reassessment, which could increase taxes.

All this in addition to 6 other lease violations... 

There are also additional costs of operating and maintaining an LLC, like separate bank accounts, annual report filings, tax filings, etc.2.