I know she can stop paying on the Promissory Note as it attaches to nothing. 

If your contract states that "time is of the essence", you could have forfeited your right to break the contract and get your EMD back simply by not adhering to the dates specified in the contract.

It’s paid off, I would “like” to leave it that way & maximize the cash flow while paying down the heloc between the rental & other income.  

I am thinking construction loan, but how to pay for it while the construction is going on is a different story.   

Take those profits and pay off the rentals.

Ignore the $1,250 per month because that's your cost of housing, if you didn't pay that on the home you'd have paid that in rent so that's a non factor. 

Or paying off my debt, while I provide them with a nice house to live in instead of an apartment. 

Just sell and pay off that loan or two.

Quote from @Josh Otero: Hi BP community, I know you've got some crazy tenant stories and I want to hear it.I'll go first:1) I was managing a 5 story apartment building and a dog fell off the 4th floor balcony because of the owner not paying attention.

@Juan PerezCongratulations on paying off your first home and transitioning it into an investment property!