The interest rate on a HELOC or Heloan may be better than the personal loan. 

The only other option that comes to mind is to make the improvements and try to achieve favorable rental rates to push the story that 2 BR homes rent for a premium because its unique.

New construction can offer many incentives for interest rate buy downs.

There are many STRs that do quite well in the suburbs of major cityies Off the top of my head, I can think of one of the STRs we manage that is 40 mins outside of Dallas and it has a great occupancy rate.

Check their occupancy, nightly rate and amenities.

As Vince said it is a quick guideline and won't work in most places with current interest rates and house prices. 

You should be able to get up to 80% LTV on a rate term refinance.

I expressed my objection to the rate.

When you sell a property that has been depreciated, the IRS requires you to "recapture" the depreciation deductions, taxing that portion of the gain at ordinary income tax rates.

This person likely has a 30-year fixed rate mortage financed at less than 4.5%.