What the best way to get these rents to market value without losing our long-term tenants or giving them a heart attack?

You can't only evaluate the ROI across the board because if you don't choose a good property, understand the metrics, and have good cleaners and management support, you will lose quickly in Airbnb.

However buying this house will mean that I will lose all the benefits of acquiring a home with 5 or 10% as a first time home buyer.

Losing a job, pay cut, getting unwell, divorce, job transfer and the rest. 

If you find someone to pay more and break your contract you will just get sued and lose out anyways.

Family and business usually don't mix well and when it comes to family losing money, then it really doesn't do well. 

If that happens early on the person contributing the money loses and the person contributing the work wins out financially.

So you may net a few bucks every month in reality, but on paper you are losing money once you account for the whole picture.

He is an excellent tenant and I don’t want to lose him but understand that people move on.

I've seen more wholesalers lose deals, simply because they didn't have a buyer.