Simply put, if they were selling a house for $100,000 without a foundation problem, adding a $10,000 foundation problem reduces the value to $90,000. 

If I were seller, I will have contingency for the life of the loan (10 years) with reducing pre-penalty option.

As for your question about reducing from 3/2 to 2/2 I have also done this successfully in Scotts Addition, we bought a row house on Leigh street that was a 3 bedroom 1 bath and turned the small 3rd bedroom into a walk in closet and a really nice laundry room on the second floor.

If it helps to reduce your expenses and increases your cash flow and in addition to giving you good cash on cash return I say it's the right move.

That will greatly reduce your expenses upfront. 

Any suggestions on the best way to quickly fix this issue and route a nipple from a 90 degree elbow (on the right) to a T-junction (on the left) but without a union/reducer?

Create another LLC that will have the operating agreement to show them as members, their % of equity, rate of return, how often will the distribution will be, how will their principal get reduced, and etc.Consult with an attorney on setting it up.The money will sit in a checking account for the LLC.Make sure you are coding them in the balance sheet correctly to keep track of their contribution when distributing profits, interest, principal, and if you do a cash call for covering expenses that the income can't cover.Different ways to go about it.

If this is not your first deal it may be more beneficial for everyone if you offered them a deal where you evicted the current tenant for a substantially reduced purchase price.

And even if they do, the purchasing power of your defined payout reduces as you age.Social Security has to change how much it pays, when it pays, and/or how much it taxes to stay solvent.

Getting organized will save you time and reduce errors.