It is even worse during the pandemic, because the Federal government prohibited eviction, causing larger debt to accumulate.

I haven't seen (or, perhaps, recognized) equity upsides any larger than this.

That being said, since they are a larger family I would suggest to them that they can pay a higher rent and keep the whole house so you don’t have to go to the expense of doing the construction with Tenants in place.

I consider it more of an art to put the contingencies and back up plans in place to exchange out of several properties and into a larger one. 

Being liquid does affect the overall return on the funds; however, the purpose while it is being held is to preserve the capital for a larger investment.

I'll add that I find that these loan types typically require a greater number of discount points to be purchased in order to get to a "near conventional market rate" (i.e. what you'd get on a conventional loan for an investment property at that point in time).So, larger down payment requirements AND larger up front capital required to buy down the interest rate.

I would ask for a larger discount (over $10k) if you are in a tenant friendly state.  

In select larger markets, some agents have the luxury of choosing residential vs commercial, buyer vs seller sides of transactions.

This is when some of the larger nationwide wholesale lending groups come in handy.

Found out it was part of a larger agriculture property and not yet subdivided.