I always tell my clients to put a reminder on their phone to go off monthly to ensure they pay off all debts like this that can cause them to have higher credit scores. 

Their combined monthly income is 3X my rental amount but the man's income is in cash (he is a car mechanic).

To qualify, taxpayers must meet specific criteria demonstrating that they are real estate professionals who materially participate in their rental activities.How to Navigate the Rules:Step 1: Identify your real property trades or businessesHere is a list of activities that are considered to be a real property trade or business:RedevelopmentLeasingConversionConstructionReal property developmentReconstructionOperationRentalBrokerageManagementAcquisitionIf you participate in multiple of these activities, you may be able to combine them making it easier to meet the material participation hour requirements.Step 2: Demonstrate material participation in real property trades or businessesThere are seven tests to determine if you demonstrate material participation.

Same guy handled a triplex rehab (the one with the theft), and that's where he took money that he simply pocketed or used in some sort of Ponzo scheme to pay off other debts (I have no way to know, but the money did not go to contractors or to continue work at the site).

As a generic advice:  I would recommend paying off any credit card debt, or high loans. 

It really comes down to your comfort level with debt and your long-term strategy.

You will be able to take advantage of it in a SDIRA if the syndication also has taken on debt and therefore passes UDFI on to your account. 

AAA is there debt on the existing property?

Ideally completing light renovations like this shouldn't take long and you should  have a low holding cost on the hard money loan (if you used debt) and make a higher profit on the sale or have more flexibility on the payoff when you refinance  Plan on long-term and hold.

If you don't have a good foundation(bad debt paid off, $$ saved up) I would first focus on that.