They pay the mortgage and my utilities (essentially living and owning a home for free - in your shoes you would be cash flowing).Then, depending on what you are doing for a job (or college), it'd be good to establish yourself at work and save enough for your rainy day account (savings in case you lose your job) and then start saving more for a rental property.

I would suggest going that route if I were in your shoes.

@Tom Smith If I were in your shoes, I might rent for 6 months and figure out what I wanted out of my living situation as well as where I'm likely to get the best value.

Ideally, the solution will also be something economical    What would you do if you were in my shoes?   

How'd you resolve this and get business back to usual, and what would you recommend someone in my shoes should be looking at as a best course of action?

If I were in your shoes, I'd probably have a frank and friendly with the tenant and talk a big, threat free game, but point out that her lease does not allow for animals and that she did not disclose the animal to you.

Last thing I want to do is put my family in a bind, but fortunately the baby isn’t due till December.What would you do in my shoes?

Imagine being in the other person’a shoes and how you’d want a neighbor to respond.

In your shoes I would keep doing what you are doing by reaching out, and I would also stack up as much as you can and use that for a good down payment a multi-unit or SFR that you can house hack.  

They pay me a percentage, but they save a much bigger percentage by keeping their rents at market rate, getting tenants that pay and don't trash the units, etc.If I were in your shoes, I would cash out the equity on the home and use that for investing.