Hit her with an eviction and minimize the losses now.

I think that what you are trying to do is spot on, minimizing (or negating) your housing expense in order to bolster your saving and investing power.

A hard money lender said I need to have an LLC for the purchase, 15k bank statement for last 2 months and $3,500 minimal fee for loan along with 12% interest on 13m loan.

I look forward to connecting with other agents as well in addition to investors.

We inserted a partition wall in the large addition on the back of the property to create a master suite, and a family den.

This is what I'm looking at:https://chicago.craigslist.org/sox/reo/d/mixed-use...Additional pictures of inside: http://www.inexpensiveproperties.com/index.php?

As long as LTV is 70-75% and I fit other common loan criteria, I should be able to refi with minimal complication.

The home is deemed inhabitable due to the unpermitted garage addition, but there are currently tenants living there illegally. 

Some people (a minority) frown upon debt and preach minimizing leverage.

I agree with most comments above, it is very likely you will have the property in your possession again in a few years, the other issue is, lets say you apply $200/mo of the rent to principal, because the tenant is "renting to own" Fannie Mae, Freddie Mac and FHA do not recognize the additional rent paid to principal for down payment, because they lend on the purchase price, and no matter how you word it, they will not accept $10 or $20K as Down payment for the loan if it was paid to you over time. also if you need to remove them from the property it is possible a judge may see the principal payment as equitable interest in the property, there are many hag ups in this strategy.