This is a difficult situation all around and I don’t envy your situation....The fact remains that life happens and you can’t let things out of your control destroy your rental returns.

—If the premises are damaged or destroyed other than by the wrongful or negligent acts of the tenant so that the enjoyment of the premises is substantially impaired, the tenant may terminate the rental agreement and immediately vacate the premises.

Option 2 should be implemented immediately.Get the current owner to post notice now because tenants like that can't be saved.Do you have any extra cash to give them as an enticement to leave ASAP and with destroying the property completely on their way out the door?

You would be farther ahead to find more suitable tenants. 5 kids will destroy the property.

This destroys any fire walls that the building is designed to keep in place.  

What you should be fearing is the reality of what could happen:Say you forget to check the smoke detectors, or forget to put them up in all the bedrooms, or years go by and the battery dies-- huge fire breaks out, destroys you place (if you don't have insurance, it would be a total loss!)  

Check your local laws, but IMO you cant charge a tenant to replace something that has outlived its “life span” for example say you have a stove that has a 5 year lifespan and your tenant destroys it in year 6.

Last thing you want is for a disgruntled tenanted to destroy your rental all because you wouldn’t let them break the lease.

@Jennifer Darby Lack of communication from property managers destroys out of state investing.

The seller does not need to accept the deed, I'd sue for damages and I wouldn't care in the least bit that my buyer was an attorney, in fact, that would just fuel my cause for a seek and totally destroy mission against such a buyer!