Should I continue with existing tenant.

My current properties cash flow nicely but I have little room for error due to continual reinvesting.

No different than people accepting poor service at a place of business by continuing to patronize it and creating a sense of norm around accepting poor service.

Finish your education, get established in a career with a couple of years of employment and use that time to live the most frugal life style possible to save up the cash needed for the necessary DP and reserves.

If so, what information would you give them to make them see things for the business reality of the situation, which is that they're realizing an economic loss every month they continue owning the house?

"Wholesalers" don't have to go through the ethics, fiduciary & legal education that agents do, but they expect to make more money than agents because SNAP flip told them they could, lol. 

It may be some time to get all the parts in place.In the meantime, you should continue to monitor your holding and rebalance or adjust investments as appropriate. 

Additionally I would tell them that since they are good tenants they can stay at your new rental rate, what ever your usually annual increase is, and that they will continue on a M2M since they are such great tenants. 

Now I am ready to continue my journey.

Pretty simple.....They either catch up the late payments and continue making the monthly payments, sell it or it will get foreclosed.