I just want to get financable this year - pay off debt, save some $. 

Here's my take on the decision:First, let’s look at the pros and cons of paying off your current short-term rental (STR):Paying Off Your STRPros:-You Eliminates your largest fixed expense (the mortgage), which increases your cash flow significantly.

In this case even if the project went south and you broke even or even lost money, the equity (debt) you used would still be covered by the income you are earning on the rental property. 

Refi after construction.These numbers consider only the portion of costs of the HEL attributable to the land purchase, not the payoff of the HELOC (which we took out to buy the Seaside condo).Cash In:                     $66,166 (Cash, 1 year of debt service of HEL, debt service of const. loan, furnishing)Amount Financed:      $548,000 (home equity loan + construction loan + closing costs)Total Cost of build:     $614,166ARV:                               $850,000 (or rather "after construction value")Refi                                $637,500 (75% of value + closing costs)                                        Cash Out                       $89,500New payment             $4500/month (54,000/year)Estimated Cash Flow (pre-tax numbers, so actual mileage may vary)airBNB year 1:            $70,000     (net income $16,000)airBNB year 2:            $100,000   (net income $46,000)airBNB year3+:           $120,000   (net income $66,000)ROI (construction year):    0ROI Year 1 of STR:              24.2% ROI Year 2 of STR:              69.5% ROI Year 3+ of STR:            99.7% Did I calculate these ROI numbers right? 

She says she does and it has no debt.. ( I paid 130k for her house).

You can bypass the longer seasoning requirement with a debt service loan. 

But if you're able to figure it out and get it built, you can rent out the units and essentially BRRRR it and pull some/all of your equity out to repay your debts, yourself, and potentially keep the investment cycle going. 

We prefer no debt (we are not from the US originally).

Eliminate debt, establish a budget, and save.

Additionally, since my parents are nearing the retirement age, I'd like to prioritize low-debt, high-cashflow deals.