If it is someone you know you can give them a straight return as if its a loan - can provide a lower interest rate to provide upside - it really depends on the lender and what are they concerned with and what is their risk profile. 

Depending on the loan product, you may be able to exclude business debt once the business has paid the debt directly for 12 months.The income and losses related to the operation of the entity will affect the income side of your DTI (like Jay explained) if you own 25% or more of the entity.

HELOCs on rentals are rare, and depends on where you are located.

Sounds like you need to have a relationship with a couple of good contractors, 40k for vinyl siding sounds high, what was the material cost.  

I am slightly confused about your numbers, though...is the $215/SF the construction cost? 

Multiple people including myself have tried to caution him of the the true costs but he's been repeatedly dismissive and has made it clear we give him motivation and he wants to prove us all wrong (whatever that means). 

Today it has good cash flow (~$6k/month using 49% expense ratio) and is up ~$1m above costs.  

It depends on what you want to invest in.

We then will either sell or keep it as a STR depending on what makes more sense for us. 

It really depends on where and what you are looking to do.