He technically never agreed to pay 50% of the mortgage but he never came up with any other solutions to counter that offer.

The obvious solution here would be to find a short term rental in Nashville, secure new jobs, and then apply for the loan.

Our solution, I think, might be for me to lease the property to the LLC with a triple net lease. 

This is a perfectly acceptable solution and when installed properly works very well.

Admittedly, not the solutions or everyone.

First step would be to discuss with existing lender to see if they have a solution. 

Just a little bit of basic modern remodeling and I'm good to go.

I don't know (recall) if they are in local ordinances but I do recall vaguely seeing some legal / ordinance type of material detailing when it can and cannot be done, regarding building in a way that directs water towards a neigbors property.I don't know Chicago that well, but as a homeowner I would try calling your local building and permit center and see if one of the local inspectors can direct you to the code section to read.I'd do that before anything else because knowledge of those ordinances will arm you / prepare you best to approach the other parties.With regards to the possibility of 'dealing' with the water, I'd be thinking about ways to do that, too - in the event that the above / negotiating an alternative solution is not fruitful. 

I'm not an electrician but with today's demand for electricity to run computers, TVs, appliances, I don't if knob and tube can handle the load of a modern lifestyle.

@Michael Baum gave excellent advice - if it is possible to get a long-term renter so you can make a better return, that seems like a good solution until the market is better.