However, the "guest houses" that I know of are either used as offices or are actually used for extended family or friends.

I was not aware of the BART being extended out to Fresno that would be a game changer. 

Fully rented at this time, two leases up but already asked to extend.

The current tenant has 2 years left on the lease and part of our purchase agreement is, if the tenant does not extend another 5 years or more the seller will have to buy back our property, if we choose to sell it back.Here is where I need the advice.

I use to have liability extended from my personal policy to my rentals but was recently told that this wasn't actually legit, that they had made a mistake.  

If you do extend, you should do so with a contingency for that unit not being vacated and left in good condition, broom clean.  

I'd add an air vent through the block first and build up the ground around the perimeter and extend gutters to ensure good drainage like Deanna alluded to.

I just wanted to get some other opinions on this.I have have a condo that I rent to a tenant with a small dog and the neighbor has contacted me a couple times complaining about my tenants little dog barking for extended periods of time.  

Also consider purchasing an one year extended warranty.

You will be much less extended and be in a better position at the end of the seasoning period for your LT lender (particularly with your credit).