There are cheaper one’s in D/F areas but I would be careful as those can create a laundry list of additional issues.

There is some additional information that wasn't mentioned in your post above which sheds a different light on the situation.  1.

If it's a larger debt, I would not offer cash for keys.

It has 3 units, an additional dwelling unit in the garden level, and 2 garage parking spaces (which I've come to realize are quite valuable where the property is). 

Additionally, you may wish to speak with a CPA as to whether or not becoming an S Corp is the right decision – they can assist with reducing self-employment taxes.

I’m in the San Diego area and my husband and I are adding 2 additional rental units to our property. 

I suspect it was two or more months on 1 bill in addition to what we pay for common areas.

I couldn't understand why their credit wasn't better considering their income was what it was and their debts were not unreasonable.

If you feel ambitious, you could try a BRRR strategy adding additional equity to the subject home and then taking equity out of it to pay off either the HELOC or if you decided to the refinance the primary residence. 

Any additional advice is helpful.