If your STR is allowed and profitabe, Great! 

This is generally necessary in any commercial real estate deal as a lender is your least expensive investor - meaning their interest rates are significantly less than what your private investors want.

or show the property to interested tenants and ask them to apply if they meet the criteria?

We were able to work a deal in the last 2 weeks before it was finalized, we had to pay the max amount of interest for back taxes and water bills and liens on the property.

Any insights would be greatly appreciated!

The rising interest rates have crushed cashflow and made refinancing nearly impossible.

We have some great programs. 

You are losing money every money, and you are possibly losing more because the tenant feels entitled to cheap living.I recommend you increase the rent to the market rate and get paid what you are worth.

I'm not sure how well versed they are in the trust details but it makes sense that it would be due to the step up basis so if there's a way I can approach them to give them a solution to that, that would be great. 

I recommend using RentPrep—it's a great service for running credit and background checks, and, I believe it was bought by Stessa.