Since the owner had some equity in the place we liked the fact that she would probably look to work out a deal with us.

@raman @Raman Bindlish I always keep the security deposit with the property until all tenants have vacated the property, they would need to work out the security deposit monies between the two of them 

If you can withstand a -$50000+ in income, perhaps it may work out if your exit strategy is a long-term rental.

I need a "brain storming work out buddy".I have some experience in several different areas of RE and looking to find a focus. 

I work out of Fowlerville, I'd be happy to meet with you and learn more about what your plans/ interests in investing are.

Have you run the numbers on the property to see it will work out. 

The first floor contained a coffee shop, yoga studio and gym.

The numbers all seem to work out to me living for free and making a little on top of that.However, the one thing worrying me is the kitchen on the main floor is sloped pretty severely.

If the debt is going to be paid off from the cash-out, then the new debt will replace the old debt and it might work out.

If you choose not to accept payment the only way you'd collect is to apply security deposit toward unpaid rent, and then file for unpaid rent in small claims court.In my opinion I'd accept rent at mediation if it was correct payment type and work out something if you want them gone do a settlement agreement, Mutual termination with payment plan until vacated date, get the writ so if they don't comply  you can go forward with the sheriff.