Commercial real estate is also another option on the table. 

This means you will get a lower loan amount and that you’re leaving money on the table.  

If you wanted to play hard ball, I would have your attorney demand a concession at the closing table for $3600, the amount of lost rent due to their actions.For what it's worth moving forward, I always have my attorney put an addendum to the PSA that says the following:  Seller agrees that it shall not enter into any new Leases or modify any of the existing Leases without the prior written approval of Buyer prior to closing.I learned the hard way on that one, but now never again.

We also get droughts and the water table is dropping so.....

I know porcelain tile with mortar requires a concrete slab to go on top of, but what options do I have if I do not want to install a concrete slab yet want the ground to remain fairly rigid and solid enough to have chairs, tables, etc?

So-o-o, with that off the table, you could offer "cash for keys" should they agreed to end their lease by a certain date with full return of their security deposit.

@Dylan Roberts, put the 1031 exchange off the table for a bit. 

Still a great deal and I'm bringing $50K in equity to the table vs the ~$35k down payment from the other partner and I'm managing the whole deal.Any advice on how to better structure this?

What if in the upstairs unit only, I put French doors that going from the living area into the back bedroom?

This can help leverage the funds that you're able to bring to the table.)