The advantage at least of this approach is that I could walk away, and although I'd lose my 5% deposit, that would likely be cheaper than being involved in a  long drawn out legal process as I continue to absorb holding costs (taxes/insurance/maintenance, etc.).

The issue comes with financing the rehab:Another loan and then cash-out refi?

If your having issues getting a duplex to work have you tried a 4 unit? 

If you have any idea, please let me know.thanks It sounds like you are in a difficult situation with your tenant.Regarding the issue with the shower, if multiple plumbers have inspected it and confirmed that it is okay to use, then it may not be necessary to spend the $4000 to repair it.

I'm going to assume that their lease is either up or month-to-month and you have the legal right to raise rent now.I'd let the tenant know that they don't need to pay the increased rent and are free to move out.

Ive never hired legal help, would it better to find local or can I look in other parts of nj also since it seems most everything can be done online?

I think the issue is how much is the job? 

I'd keep putting those struggles/concerns out there and in communities like this and you'll find people who can speak to those issues and give you some guidance. 

The issue is that it is considered commercial and most banks now will not lend on STR.Can someone point me in the right direction of who I should contact or where I should explore?

@Sarah Moore This issue is going to be resolved by the law of the state where the LLC was originally formed.