@Kunal Lakhwani I agree with everything @Owen Rosen is stating and would add most policies will have a clause stating if it has been vacant for more than 60 days, then Theft can be excluded.At the end of the day, only an agent who can review your current policy can advise on how your policy will respond.

Any advise please.

The sellers don’t want to return the earnest money, creating more problems.If anyone has experience with this, could you advise on legal options?

The 2 beneficiaries can secure & record a lien on the property for their monetary contributions to balance out the percentages of ownership upon inheritance. 

If that doesn't yield any results, I would advise you to lower your expectations for high leverage. 

Any advise / feedback suggestions would be helpful in the future to safe guard here. 

I have spoken to a RE attorney 10 miles away in "town" and he advised that I send a Termination Notice be first and the owners have to cure their May late payment within 30 days of the served notice (or move out).  

We have decided to start saving, 25k-30k a month (Advised to keep this in MMA's until we're ready to use it to minimize risk) or 300-350k annually, strictly for Multiunit property investing.

That is absolutely sound advise and we will diffidently keep that in mind as we look for our perfect MFH, but we will definitely open up our prospects and consider SFH as well, maybe with a finished basement with separate entrance or consider renting a room or 2 depending on what we find in our search.

Nonetheless, the rules regarding how losses can be used to offset gains can vary by state, so it's advisable to reach out to a professional tax advisor that can recommend solutions based on careful examination of your situation.