I also recommend you discuss this with your tax advisor.There are many other alternative asset classes to invest SDIRA funds into. 

The materials charge was $180, and from Google I'm reading that a 400% markup on parts happens sometimes.

The strategy involves using the HELOC for a flip to generate fast cash, reinvesting profits into long-term rentals, or exploring alternative ventures like short-term rentals or partnerships.

Alternatively, consider a cash-out refinance to access equity without triggering capital gains or explore a 1031 exchange to defer taxes by purchasing another investment property.This post does not create a CPA-Client relationship.

Are you estimating that building will be more profitable with the higher material prices and the added challenges of getting a certain type of financing together with the time constraints to minimize holding costs? 

Alternatively, transferring the property to a revocable trust provides income for your parents, avoids probate, and keeps you as a beneficiary, but it doesn’t allow for a 1031 exchange and could trigger gift tax.Focus on aligning the structure with your goals, whether for immediate reinvestment or estate planning, and ensure compliance with Connecticut laws.This post does not create a CPA-Client relationship.

@Matt Huber I think you know your answer already Direct real estate ownership should compensate you appropriately why else be in the alternative space.  

Just wondering if there are good internet guides out there to help new investors understand steps in renovations and lay out scopes of work and materials needed so we don't miss anything?  

<<I could alternatively leave it as an "open" loft, no powder room -so 1 bedroom/1bathroom + loft..... 

If traditional banks aren't providing favorable terms, consider alternative lenders like HML or PML.