Find the potential quite appealing.

That's why there's a lot of appreciation potential here and cashflow.

With big benefit potential of possibly retaining "Graduated" persons who are now highly trained, proficient employees. 

Additionally, there’s always a risk that any pet-related damages could be hidden under furniture or otherwise concealed, potentially leaving us to cover the costs if the security deposit is fully depleted by other expenses (e.g., damages or unpaid rent).

The second option is to sell and house-hack a fourplex, which offers more units, higher potential cash flow, leverage equity, and appreciation potential.

If so, do you have any paperwork that supports the vesting to be able to show a potential lender? 

2.What are the best and most cost-effective solutions for managing this potential long-term issue?

Additionally, have a clear budget, factoring in potential repair costs, and ensure you understand the rules about earnest money deposits and closing deadlines.LLC for Real Estate Investing: Forming an LLC for rental properties can offer liability protection and may provide tax advantages, though the tax benefits are non-existence for rentals.

Mark, For all your complaints about people not contributing good advice here... you know the people you're invested with are still raising money and the fact that they've paused distributions, for any reason, is highly important information to any potential investor. 

On the positive side, it seems like you have a good potential BRRRR that you can use to purchase additional properties.