Hopefully I can help a little.So, the way we think about your question is treating your HELOC payment more as a 'holding cost' that counts against your rehab budget, as more than likely, your HELOC balance should be re-payed back down to zero, once you achieve the rehab and cash out refinance / convert the stuff to the long term fixed rate financing.Part of the benefit of thinking of it this way, is that the HELOC payment is temporary while you use that revolving line of credit. 

House-hacking has many benefits that one can utilize, so you should definitely consider it!

For him to ask the question ‘but why’ to a $40/ month increase ( which is $1.33/ day... a cost of one of those beers he drinks) shows that he has no consideration of your financial responsibilities and/or no appreciation of the low rent benefits that you’ve been giving him.

This is a huge tax benefit.

Is there any benefit for letting the tenant reside there until we have a contract OR would you initiate termination ASAP to mitigate any potential marketing/sale conflicts with the tenant/tenant's family?

Even if you end up taking your focus to different areas of real estate, you can't beat the benefits of what house hacking has to offer.  

No one party is really benefiting to a greater degree to cause a conflict of interest.  

The benefit here is that, while you're paying interest on that loan, you're paying it to yourself and the fees for 401k loans are typically very low ($100-$200 depending on the plan and vendor)

It turns out getting your license helps and is required for retail sales of real estate—go figure—but it does not provide much of a benefit for investing.I then spent hours upon hours on websites like BiggerPockets absorbing all the information I could about investing in real estate.

It is true that every step taken in life is, for the most part, a calculated risk, and we all want to come out ahead while using our wit to benefit ourselves and our families.