After looking at your post, I realized it's probably necessary to have a dedicated real estate attorney handle this issue for me since it's serious and I might make a mistake big enough that probably will cost me too much money to fix.

And, be sure to reinspect the property to ensure that the problem has been fixed.  

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.

For fix-and-flip pros, BRRRR enthusiasts, and wholesalers alike, the landscape looks different than it did just a couple of years ago.For flippers: What’s your approach to finding end buyers in this market?

As someone who's relatively new to the Fix-N-Flip business, I'm fortunate to have a mentor guiding me, he's successfully completed 37 flips to date.

If you like your job, and your goal is to create long term wealth through equity then keep the property, fix it up over time, and in the future you will be able to rent it out for profit.

@Helena Goyvaerts rate for a 30-year fix would be at least 8.5% with some points (1% of loan amount).Most DSR lenders have a minimum credit score requirement from the applicant.

In a situation where you were doing an arbitrage (renting it from the owner, then yourself re-renting it to someone else) your costs to renovate/fix it up while you're using it would be able to be capitalized and depreciated by you once your rental was in service (available for rent to others). 

I would fix up the garage and live in it myself (DADU) and rent out the house.

It's a turnkey property I found on RentToRetirement, so It's pretty much already fixed up.