$100k left on mortgage, help me save my sister?

[Adam Grant]

Hi bigger pockets, back again,

My sister owns a home in Huntington Beach California, about a mile from the sand. Recently appraised at ~$820k that she inherited from our grandfather. Her and her family have lived in this house and been paying the mortgage for as long as I can remember. They initially were renting from my grandfather and then he decided that he was going to give it to them and just had them pay the mortgage amount.

Household income ~$100k/yr. $40k in debt (2 cars and one credit card that I've convinced them to get a loan through their credit union in order to save nearly 20% on interest).

She wants to move to Phoenix to buy a bigger home for their large family. A friend of theirs built a home in a development that would be perfect for their family for just about $700k, new construction, turn key.

My sister wants to outright sell the house in Huntington Beach and purchase the home in Phoenix to be "debt free". I feel this would be a bad investment as the HB house is a PERFECT house to rent out as an income property. Same floor plan in the same development rents for $3k-$4k/mo.

Help me convince her that selling the house in HB to be "debt free" is a mistake?

Prop 13 tax basis. No capital gain. Biggest no-brainer I've ever seen. 

Help me help her?