You need to take into consideration CA state taxation that does not always follow the Federal rules.

Usually, DCR is considerably more important when analyzing a building.

What do you think I should do, and what are some of the considerations if I renew or don't renew the lease with them? 

If you and your partners have agreed on the above, and other key considerations, it should not be that much work for an attorney to prepare your operating agreement.Again, I'm biased and I'm sure there are plenty of successful partnerships that were fine without an Operating Agreement vetted by an attorney. 

Certainly a lot of considerations but they don't make them like that anymore.

@Jimmy Au if it was me I would rather refi a rental than my primary irregardless of interest rate, LTV and tax consideration.

It sounds like its more of a timing issue than anything but regardless there should have been some consideration of taxes when the property changed ownership.

@ Jason Crowe if you property vent the garage part it should take that floor out of the rating consideration.

Probably a good time to sell student housing if the values haven’t dropped considerably already.

But I do know of big landlords who would work with such folks but the risk has to be decreased considerably by cash down such as the entire lease paid up front.