So now we cover utilities for both units and the new tenant pays a higher amount too on the back unit to cover all the utilities with a great profit.  

It’ll cover you in case there are any disputes.I know it’s tough, especially when other tenants are being affected, but it sounds like you’re handling it as calmly and professionally as you can.

We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.

Can try to reposition to Class B, but neighborhood may impede these efforts.Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years.

Can try to reposition to Class B, but neighborhood may impede these efforts.Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years.

My broker could not find any other carrier to cover a rental condo. 

Just the fact that it's a townhome means there's 1 or 5 or 50 just like it, so I can't picture what could be so unique about it unless the OP is fleecing the seller and he knows it, and the seller has just realized that which is why he doesn't want to sell.

The biggest thing with this is if something major happens are you legally covered if the unit is illegally rented. 

All rents you get from this property has to go back into the SDIRA but if you get a 20 year mortgage (that the rent can cover) and can pay the rental off by age 65 you will have turned that $90K into several hundred thousand’s of paid off real estate.

Instead of evicting them, i was thinking is there some way that I could rent it back to him for very cheap (mainly to cover just the taxes/ insurance) ie 2k a year rather than the going rate of 2k a month for similar properties.