This creates the potential for deductions and also the ability to defer some of the income into a retirement plan such as a Solo 401(k).You can then use the Solo 401(k) to make passive investments such as holding rentals, private lending, etc. and grow that money in a tax sheltered manner.You are going to give up a good bit of your current income in some fashion.  

If you can show the private lender that you can do this deal, they may be favorably inclined to do future deals with you as well.

I'd look into this option before any sort of commercial loan (which isn't going to have as favorable of terms). 

Should I sell it and use the proceeds as a down payment on our next home (and start my RE investing career with a different purchase on more favorable terms)?

@Joddie PartchThis is one of those things that is "quite probably" safe, but could potentially be viewed as a self-dealing situation.The partnership is not a disqualified party to your plan based on the information you have provided.You already have an existing relationship with the partnership, so there is no assumption that you are personally gaining their accounting business as a result of loaning them money.I would assume that you will provide accounting services associated with the partnership's investment in this commercial property, but there should not be any issue with that so long as there is no favor or benefit conferred in either direction due to the fact that your plan would be lending to them.  

But if it's purely a cashflow investment you're looking at, I would keep looking or offer a price where the numbers are more in your favor.

I’ve been in these situations in the past and, fortunately, had most of the “cards” in my favor.  

Also, the rent to owner ratio is not favorable for owner occupants.

Two nights ago the only house I manage that I don't own (favor to my GF) had a large fire causing large amounts of damage. 

Philly is competitive, but lots more options and the math can usually work out more in your favor.