Not sure about state laws for the insurance payout angle but if possible, you can always try and get a contract to purchase for much lower and close after seller receives insurance proceeds, then you can potentially have equity and a deal.But based on your existing numbers, taking it down as you stated would not be a good deal in my opinion and based solely off the info you have provided thus far.

He says I can assume this loan instead of building them into a new mortgage at a way higher interest rate. 

Quote from @Rafael Espinoza: Their credit score is basically non-existent and worthless, and they have no rental history?

Prop 13 limited prop tax increase to 2% per year for existing owners. 

All money received from the tenant and money spend on the properties should go through this company with exceptions such as capital improvement and mortgages.

Having a mortgage on that home might change some of the answers so just be prepared with how much the property is being rented for, what the taxes and insurance amounts are when you reach out. 

I got in when interest rates were great but i took variable and unfortunately the rates have gone up and my monthly payments have gone up almost 1400$ from 2 years ago. the plan was to refinance which is why i took variable but i never did as i was not sure what to do. right now the 3 units bring in a total of $3900 but the mortgage payments, insurance and taxes alone add up to about 4.1k.one of the units is a 1 bedroom where the man who has been living there for 28 years is only paying 580$.my main question is what do i do?

I'd also talk to the lender about mortgage insurance. 

If you are lucky that tenant will want to do something like buy a house later on and need to clear that debt to get their mortgage and then you will get paid.

Account Closed Just for giggles, does contract state that the property will be delivered with clear title, except for the mortgage being taken sub to and the seller carry back?