The insurance adjuster plans to do his assessment either today or Monday.

You could also ask since he does not want to pay for the Phasr 1, would he be willing to adjust the price by $2500

Learning to adapt to the adjustable market is now what I do.

Or should I rethink my strategy and make some adjustments somewhere in my process so that I can stay competitive?

Assuming you don't care what the rate is or what fees are charged or if it's an adjustable rate mortgage, you can get a mortgage with way less paperwork in the future.

If you are in-line with them, keep adjusting your advertising and rental price until you get solid applicants.

Prices will (slowly) adjust. 

When it changes so much that real estate investors will no longer have a place in our society we will all adjust  believe me. 

With 7 years left on primary the cash rent value not adjusted for inflation is 1,750,000.If the next tenants will only pay 20 a foot then you can lose money.

The text of the contract as it relates to obtaining financing reads: (b) This Contract is contingent upon Buyer obtaining approval of a conventional FHA VA or other ______________ (describe) loan within _______ (if left blank, then 30) days after Effective Date (“Loan Approval Period”) for (CHECK ONE): fixed, adjustable, fixed or adjustable rate in the Loan Amount (See Paragraph 2(c)), at an initial interest rate not to exceed _______ % (if left blank, then prevailing rate based upon Buyer’s creditworthiness), and for a term of _______(if left blank, then 30) years (“Financing”).