It's hard to harvest equity on these plays, unless you commit, long-term, towards very light leverage, as the only practical ways to benefit from the equity in your portfolio, if you plan to never sell it, only exchange it, for a lifetime, are to spend the cash flow, or cash out refi.

If you have to do an ARM, have a Plan B to pivot if you need to sell or refinance. 

In early 2023, we decided to sell the property as the market had appreciated significantly.

There is a problem, but they always need somewhere to go and will never sell until that is clear and the path is set.

A co-worker of mine is selling her condo (which is not listed on the market) and is allowing me first dibs. 

Is it possible to sell or refinance one unit to pay the other off completely. 

Let's say you did buy the property and the students decided to pay the rent and everything was great... would this property have a good exit if you needed to sell it like this?...

There are way better and safer things you can do with your money.

Give him 60 days to sell or refi the property.  

From the little I know of San Antonio (I am a wholesaler who specializing in selling STRs nationwide) its not a super hot Airbnb market but the amount you expect for rent sounds pretty conservative.