I just received a letter stating that the only option they would offer me is a short-sale and that I was not eligible for a forbearance since I indicated I was interested in selling the home. 

Repair and replace might be the most affordable option.

ThanksAs many others have said, you have multiple options!

Some examples of strategies and mortgage options that can enhance investment are:- Check with a local credit union to join.

Refi is not an option, my interest rate is 2.75%- when I spoke to a lender, the new mortg if refi'd would be $4,600+ my current mortg is $2.9k3.

Given that the house is a 3/2 with a full unfinished basement, you could explore the option of renting out the basement area separately to maximize your rental income.

A halfway option is to pay a lot upfront and borrow the rest.

Since the likelihood of default is lowered with a condensed timeline (and most borrowers will refinance before the adjustment period) the interest rates on ARM's can be .5-1.5% lower than typical 30 year fixed mortgage options. - Interest only.

My options are to do an owner move in for the non protected tenants and then try to do a ellis act eviction for the protected tenants. 

I have attempted to go the seller financing route, but every seller has declined that option.